PIDE's Business Barometer launched: economy seems to have weathered floods

The economy appears to have braved the devastating blow of the unprecedented floods of August 2010 and a sense of moderate optimism seems to have re-emerged despite the less availability of energy. However, the consistent increase in the cost of production has the potential to keep this optimism intact.
This was the crux of the 8th Business Barometer launched by Pakistan Institute of Development Economics (PIDE) here on Monday. The view emerged from responses of the firms regarding expected change in production and sales volume, capacity utilization, employment level, inventory and prices of inputs.
PIDE's Business Barometer, a biannual feature, captures the expectations of business enterprises along with their business activity, prices and other constraints. This issue of the barometer covers the expectations of the firms for January-June 2011. The survey, for the purpose, was conducted by a research team of PIDE in March 2011. The broad trends contained in the PIDE's business barometer are: almost half of the firms posted a modest increase in their business volume during July-December 2010 and the firms also remained moderately optimistic about the growth in business volume during January-June 2011.
Capacity utilization also shows changes that correspond to the growth in production and sales volume. Prices of the final products of a large majority of the firms registered an increase of more than 10 percent primarily due to increase in the cost of production and the firms expect that the trend of increase in prices will continue during January-June 2011. Though the firms have indicated the availability of energy as a constraint to doing business still this does not seem to have significantly impacted the production volume at an aggregate level. One reason could be that the energy constraint having become persistent, the firms have made some alternate arrangements like the use of generators and adjustment in working hours.
The alternate arrangements, of course, add to the cost of production. The firms also feel that weak demand and the high cost of capital are the other major constraints to doing business. The conclusions drawn in the barometer are based on a randomly selected sample of firms, mainly manufacturing, listed at Karachi Stock Exchange.