LSM growth declines

The momentum in large-scale manufacturing (LSM) growth, seen in last fiscal year, was upset in the initial months of current fiscal year, as Cumulative LSM production declined by 2.3 percent during July-November of FY11 compared with 0.5 percent in July-November FY10.
According to SBP report, YoY LSM growth turned negative in August 2010, for the first time in 11 months and remained in the negative in the following four months. A decline was expected in the initial months of FY11 after heavy rains and floods, which particularly affected construction, petroleum refining, cotton textiles, and agro-based industries, it added.
The report said that current decline was principally driven by temporary disruptions and raw material shortages caused by unfavourable weather. Particularly, construction activity declined partly owing to cutbacks in public development expenditure, production came to a stop in the country's largest refinery due to inundation, and the textile sector had to face raw material shortages for yet another year. "The damage to road networks and power infrastructure also impeded overall industrial performance, and it is expected that continued strength in private aggregate domestic would support positive growth in manufacturing", the report said.
The external sector had a mixed effect on local industry, as export demand declined for cement, pharmaceuticals, and electric fans, as Pakistani manufacturers lost ground in some of the export markets captured in the past two years. On the other side a gradual demand recovery in the US and Europe provided a boost to the leather and textile sector with the export receipts of the latter growing largely as a result of the sharp increase in prices of cotton, it said.