The ten-month large scale manufacturing growth number for fiscal year 2015 has settled at 2.94 percent. Thats much less than year-on-year growth of 4.5 percent and 3.9 percent in the preceding two year-ago periods.
If - and thats a big if - production trends in the remaining two months (May and June) have followed their historical average month-on-month declines of 2 percent each month, then the-full year LSM growth number should settle at 3.8 percent. This would be higher than the government's provisional full year number of 2.4 percent but still lower than average 4.1 percent in the preceding two years.
10MFY15 has seen big increases in iron and steel products as well as in automobiles. The demand for former has been strong mostly thanks to infrastructure projects in the public sector. In addition, steel production has also benefited from supply side factors such as Pakistan Steel Mills resuming operations after a government bail-out; and the softening of global steel prices that reduced the cost of imported raw material and helped local production.
Meanwhile, automobile production sub-index raised much because of increase in jeep, cars on account of higher orders from public sector (think Punjab government schemes) and also from private sector as the economy arrives at the shores of stability. But equally important were huge increases in the production of LCVs and trucks - the former a sign of increasing domestic commerce and the latter a sign of public sector infrastructure projects.
However, aside from iron & steel, and automobiles segments, which account for about 14 percent of adjusted weights in the industries basket, growth in most other sectors was muted in 10MFY15 compared to that in 10MFY14.
The production of cotton yarn/cloth - that accounts for nearly the entire textile measurement basket - fell on account of gas and power loadshedding whereas slowdown in Chinese cotton imports also contributed to low growth.
In food beverages and tobacco segment, cooking oil production fell due to import substitution in the edible oil market. Meanwhile, sugar production fell as farmers reduced the area used for sugarcane cultivation due to lower incomes last year.
The electronics segment saw a huge increase (136%) in the production of electric transformer, which puts PAELs stock price boom at KSE in perspective. But while there was a decent increase in refrigerator production, the production of deep freezers fell substantially, and so did that of air conditioners.
The long story, short is that the LSM growth so far has mainly been triggered by public spending on infrastructure; its about time the government lets the private sector take the lead.

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Percentage change in key LSM items
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         Adjusted Weight   FY15      FY14
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Yarn            18.43      0.50      1.71
Cotton          10.22      0.10      0.65
Sugar            5.04     -7.21     10.97
Cooking oil      3.17     -1.73      2.85
Ghee             1.63     -1.27      4.40
Jeeps/cars       4.01     26.40      1.01
Tractors         0.67     43.40    -29.19
LCVs             0.47     44.14     26.42
Trucks           0.30     52.84     32.67
Pig iron         2.25    224.28    -56.29
Refrigerators    0.34     13.49      5.50
Air conditioner  0.12    -12.25     23.94
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Source: SBP calculations based on PBS data