Somewhere along the sit-ins and the floods and what not, the LSM numbers were announced. Pakistan Bureau of Statistics said that year-on-year LSM growth stood at 1.14 percent in July 2014. This, compared to 4.13 percent year-on-year growth last year suggests last years growth euphoria has tanked.
But then the month-on-month numbers aren terribly bad. According to PBS data, July LSM fell by 2.5 percent on month-on-month basis, which isn too bad when compared to historical trends. The LSM index usually rises November onwards and starts tapering in the last quarter of fiscal year and remains range bound till the end of first quarter of the ensuing fiscal year.
Be that as it may, the months to come don look so good for LSM growth on two if not three accounts. At the one end, the risk comes from the power deficit. With circular debt troubles sneaking back again, power shortfalls have begun to emerge, and thereby putting the LSM growth story at risk.
At the other end, while credit supply to private sector hasn started tapering off as yet, the recent pace and rates of government borrowings may bring back crowding out into the limelight again, which can risk the LSM too. (See: How bad is the fall in private sector credit? Published October 1, 2014) (Also see: T-bills? No thank you! Published October 3, 2014)
The third - and yet unverified - factor is the impact of the political uprising. Theoretically, keeping other things constant, political spending on rallies, sit-ins and other elements of campaigns should result in increased demand for goods and services and therefore increase production. But thats theory. The reality may be different for
number of reasons, where one reason could be supply chain bottlenecks (thanks to road blocks) that forces factories to go slow.
One will have to look at PBSs August and September LSM number before confirming or refuting these accounts. But sadly, given the lag in Pakistans data releases, we won know about the first quarter performance until 45 days after it ends.
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