Old base or revised, April year-on-year or 10-months year-on-year, Large Scale Manufacturing (LSM) has continued the steady run. Without being exceptional, the 10 percent year-on-year growth for 10MFY22 continues to outline the breadth of industrial activity improvement. Indices, both cumulative and monthly have been recorded at highest-ever levels. There is not much to complain. Not yet, at least.
Based on the old base of 2005-06, the LSM growth has remained a progressively steady trend throughout 10MFY22 – growing at near 7 percent year-on-year. More than three-fourth of the 123 items recorded in the revised LSM methodology, have shown year-on-year growth. This has progressively increased over the year – up from just over 55 percent items posting growth at the start of second quarter.
As expected, April’s LSM growth is spearheaded by sugar production. Recall that sugar crushing in 2020 had been forced earlier than usual, which meant towards the tail-end, the numbers dried. The 2021-2022 sugar crushing season started around usual time, aided by record sugarcane production – leading to 39 percent year-on-year growth in refined sugar output. April’s growth is much higher – at 332 percent year-on-year. Despite less than 1 percent share in season’s total sugar output, with the second highest weight in food index behind wheat, it contributes the most to overall LSM index for the month.
On the apparel side, garment exports with a sizeable 6 percent weight in LSM grew over 100 percent year-on-year. Garment exports more than doubled year-on-year to 6.3 million dozen pieces in April 2022. The value of exports went up by only 43 percent year-on-year, which once again exposes the overly simplified and flawed methodology adopted in the revised LSM tabulation.
For May 2022, the garment sector is likely to lead the LSM charge, as just released export numbers show readymade garment export quantities up by a massive 159 percent year-on-year. The export value is up 65 percent. The unit value is down from $8 a piece to a little over $5 per piece. Another matter how the entire readymade garment export quantities should fall under LSM – when there clearly are various cottage industries involved.
Same goes for footballs and furniture, which will show 95 percent and 323 percent year-on-year growth in next month’s LSM. With a combined weight of 0.8 percent – that will be enough to arrest any double digit slide in cement or pharmaceutical. One will gradually get used to of the shortcomings, but it is early days, and the sheer magnitude of change in export quantities is worth mentioning, every month. Things have only started to turn sour post April, and LSM growth may soon face the music. With interest rates at multiyear high, energy tariffs to go up soon, slowdown in global demand (which will also take care of the export quantities) – LSM growth is likely to be checked as soon as Q1 FY23. Last time, Pakistan faced a current account crisis of (almost) similar magnitude – LSM budged. Can it be second time lucky in even tougher circumstances?
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