Not so rosy growth in LSM

Large scale manufacturing numbers finally turned positive in January, after a much-painful wait. That should bring smiles on some faces. But a closer look shows that the LSM sector isn really marching towards the elixir of prosperity.
Data released by the Federal Bureau of Statistics show that of the list of items that showed positive year-on-year change in the first seven months of the current fiscal year, only a few formed a part of the real industrial base or were otherwise employment-heavy businesses in themselves. Prominent in these were; producers of Jeeps/cars/LCV, cotton yarn/cloth and hydrochloric/ sulphuric acids.
The whole of the more important business segments - such as producers of kerosene oil, HSD, motor spirits, soda ash, caustic soda, cement, glass, pig iron, coke, paints, deep freezers, and other electric appliances like fans, bulbs, and motors - saw a decline in the first seven months.
Some of this decline can be attributed to the energy problem. And the onset of summertime power loadshedding, the scheduled rise in electricity tariffs and the rise in global crude oil prices suggest that LSM would continue to struggle on that account in the months ahead.
The supply credit on the other hand is also likely to stay damp squib. Consumers aren demanding enough credit to stoke industrial demand, whereas the government is expected to continue elbowing out the private sector - despite chances of relatively better fiscal position after the recent presidential ordinance.
Whatever spike was seen in the private sector credit off-take between October-February is likely to subside.
Thats because the textile sector - that took about 45 percent of total advances between October-February - is likely to start repaying the funds back, which were borrowed mostly for working capital requirements anyway. Besides, with cotton prices seen nearing the short-term peak, the sectors credit demand may not be significant.
The credit situation coupled with the seasonal month-on-month decline that typically marks the LSM index in the last quarter of every financial year, may keep the cumulative LSM index from rising too steeply in the remaining part of the year.