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The Large-Scale Manufacturing (LSM) rebound seems to be continuing unbated. January 2021 saw the highest monthly index value at 175, registering 9.1 percent growth year-on-year. The 7MFY21 LSM growth at 7.85 percent was also backed by the highest ever Jul-Jan cumulative index value.

The growth continues to be led by the food, beverages & tobacco, responsible for nearly half the cumulative 7.85 percent growth. Early sugar crushing due to government directives has surely played its part, evident by a 44 percent cumulative growth year-on-year. Sugar production so far in the season has raked in highest ever monthly production numbers for three straight months.

While the industry maintains the production will be significantly down in February and March, channel checks suggest that Pakistan may well be on course for 15-20 percent increase in sugar production. Granted, the growth will come down, and March may reflect negative growth, but on a cumulative basis, sugar is still likely to be the leading contributor towards the food group. Mind you, sugar has the highest weight in the food, beverages & tobacco category.

Outside of textile, cement has the single largest weight of 5.3 percent in LSM, and a strong double-digit growth makes it the second biggest contributor towards cumulative LSM growth. February cement numbers have ensured continuation of the upward trend, and the growth north of 20 percent remains in- tact.

The overall LSM recovery also seems to be more broad-based than earlier, as the number of items reporting positive growth has significantly increased over the months. For January, 60 percent of LSM items returned positive growth – which is up from 50 percent when at the start of FY21. More importantly, most of the items in the negative growth territory, have considerably lower weights than the ones in the positive zone.

It goes without saying that the LSM growth would be significantly higher than what the authorities had forecasted at the start of the fiscal year. On the pretext that the remaining five months of the fiscal year return the highest monthly index values, the once unthinkable 15 percent growth in FY21 could well be on the cards. But of course, there will be corrections and hiccups from now till the year end. But the low base will come into play in the last quarter, and even a modest performance, would surely take the LSM growth to double digits.

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