What a relief! It appears that large scale manufacturers have finally begun to find their feet. Data released by the Federal Bureau Statistics shows production went up 5.5 percent month-on-month in February.
That might ease some pressure off the mandarins shoulders. But if credit is any guide, they can only rest for a bit, for there are miles to go before they sleep.
Central bank data says Rs36.9 billion was loaned to private borrowers in the third quarter, down nearly 80 percent from what was loaned in the first three months of the current fiscal year.
Of that, some 66 percent or Rs24.5 billion was taken for the purpose of investment in securities - leaving little for businesses and individuals.
Textile millers paid off Rs19.4 billion on a net basis during the third quarter, including the retirement of Rs12.9 billion by spinners. In March alone, spinners settled their loans worth Rs6.9 billion - their biggest retirement in ten months.
Quite unsurprisingly, average yarn production during Jan-Feb was down to 237235 metric tons, from average production of 241086 MT in the preceding six months.
Credit for commerce and trade is equally depressing. Traders, wholesalers and other middlemen paid back Rs10.2 billion worth of debt during the quarter ending March.
But one that stands out striking in March numbers is that auto financing is back in green. Consumers took as much as Rs3.7 billion in March, their first net borrowing since September 2008.
This gives a clue that perhaps auto production would continue to drive the recovery in LSM numbers, possibly paved by growth in cement output.
But unless the energy issue is resolved, any recovery would likely be jaundiced.
The ongoing energy crisis has hit a triple-hit combo on Pakistans economy: one, frequent power outages that increase cost of production and lowers output at the same time.
Two, the inevitability of a hike in electricity tariffs. This will also increase cost of production while lowering output simultaneously, just as labourers and businessmen take their anguish to the streets.
And finally, circular debt, owing to which average production of petroleum goods in Jan-Feb dropped nearly ten percent from its average output in the preceding six months.
If this syndrome continues in the remaining part of the fiscal year, it can potentially check LSM recovery, while at the same time grinding our oil-heavy import bill. But thats not the way to curtail the trade gap, is it?
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PRIVATE SECTOR CREDIT OFF-TAKE
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Rs (bn) 1QFY10 2QFY10 3QFY10
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Loans to Private Sector (79.7) 181.4 12.4
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Of which
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Textiles (8.1) 60.3 (19.2)
Commerce and Trade (10.4) 16.3 (10.2)
Consumer Financing (16.7) (11.7) (11.9)
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Source: SBP.
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