EDITORIAL: The latest Large-Scale Manufacturing (LSM) growth figures released by the Pakistan Bureau of Statistics (PBS) reveal a growth rate of 1.59 percent in November year on year and 3.63 percent compared with the previous month – October 2023. Four rather startling observations are in order.
Firstly, the data shows an appreciable rise in LSM output, which as per December Update and Outlook 2023, uploaded on the Finance Division website, was documented as registering negative 1.40 percent in October 2022 compared to negative 4.08 percent in October 2023 (a rise in negativity by a whopping 191 percent), and negative 1.67 percent July-October 2022 against negative 0.44 percent in the comparable period of the current fiscal year (an improvement sourced to July to September 2023 data of a positive 0.68 percent growth).
What was baffling was that in spite of this 191 percent decline in LSM in October 2023 against the same month in 2022 the December 2023 Monthly Update noted that there are “signs of potential recovery in the industrial sector reflected positive trends in high frequency indicators.”
What these high frequency indicators were, was not elaborated on though the country’s incumbent economic team leaders, the Caretaker Finance Minister and the Governor State Bank of Pakistan, have persistently been claiming an uptick in output.
Secondly, July-November 2023 LSM growth is shown as negative 0.80 percent which implies that compared to July-October growth rate of negative 0.44 percent, the negativity has risen by 82 percent if November last month is added to the first four months of the current year.
Thirdly, inexplicably the automobile sector as per the PBS registered negative 66.07 percent in November 2023 against negative 52.93 percent July-November 2023 or a rise in negativity and is cited as an item that registered growth.
And finally, it is also relevant to note that as the pressure to show an improvement in macroeconomic indicators rises on the economic team leaders, a lack of synchronicity of data becomes increasingly evident.
Former Finance Minister Hafiz Pasha with reference to July-October 2023 LSM data pointed out that the combined performance of the textile sector and the industry producing wearing apparel with a weight of 24 percent in the Quantum Index of Manufacturing (QIM) contributing 30 percent to sector employment data has a problem: “PBS estimates reveal that there was a big decline in the first four months of 2023-24 in the output of cotton yarn and cloth.
This is confirmed by a corresponding fall in the volume of exports. However, there is a problem with the estimated increase in production of garments. This is estimated at 26.5 percent in the QIM. There is a much less growth in the volume of exports of garments at 5.6 percent. The export and the production figures are the same for July-November 2023-24, but differ for 2022-23.”
Data released by the International Monetary Fund in its 11 January 2024 press release notes private sector credit (a major input for LSM) percentage change by 2.3 percent in 2023 when compared to the 2022 figure of 17.4 percent and is projected to rise by 5 percent this year.
True that last year’s growth provides a very low base; however, the 5 percent growth rate for this year will present a considerable challenge, given the government’s reliance on unbudgeted domestic borrowing which would further crowd out private sector credit.
We would urge the relevant state operated data gathering entities to ensure integrity of their statistics as they are a critical component of taking informed executive decisions that are timely and therefore have the potential to minimise the negative fallout, if any.
Copyright Business Recorder, 2024
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