EDITORIAL: While any good news about the economy is always more than welcome, it can sometimes become a little difficult to keep track of some of the trends exhibited by Large Scale Manufacturing (LSM) industries. That latest upside, which the prime minister celebrated as proof that the economy is indeed moving in the right direction, is 4.8 percent year-on-year LSM growth in July-September 2020. And according to the provisional Quantum Index numbers, LSM grew 7.65 percent in September 2020 compared to September 2019 and 10.9 percent against August 2020. That is really very impressive, especially when the downward drag of the pandemic is taken into consideration. This bit of news even helped the stock market stay in green for the day after a number of erratic sessions and the numbers seem to suggest that fiscal as well as monetary measures to stimulate the economy, to take advantage of the country's lead in handling the first wave of the pandemic, are working. The federal ministry for planning did not help clarify matters at all when it indicated that LSM had grown seven percent from July to September and 10 percent y-o-y this September.
Maybe in the excitement and hurry to win points for the government, even though there was really no need for such a thing especially from the planning ministry, they mixed the numbers or maybe they know something that the Pakistan Bureau of Statistics (PBS) doesn't. Either way the uninvited comments didn't exactly help explain what is really happening in the manufacturing sector. Just as recently as August, the month before September, LSM growth had slowed down to 1.2 percent as eight out of 15 major industries recorded negative growth. And if it hadn't been for a very pleasant surprise just the next month, the government would right now be reconciling with the fact that any hopes of a fast recovery from the slowdown were simply misplaced. So somebody should take the trouble to explain just what miracle happened in that one month. Yet even the August slowdown would look impressive if you just take a look at LSM performance in the last fiscal, when it contracted by more than 10 percent. Now, even though the government is breathing a sigh of relief, a fair bit of skepticism seems to be justified considering how wildly growth in this sector can swing between positive and negative numbers.
Until the government explains the sudden growth in LSM in a more detailed manner, especially when its own senior ministers are adding to the confusion, it is only natural for people to draw their own conclusions. If celebrating cyclical spikes in sectors that are known to fluctuate is meant as a feel-good factor for people already suffering the effects of a very weak economy, it is not very likely to do the trick. Most people aren't as impressed by numbers, which they know governments to manipulate to look good, as they are by performance that can be seen. Besides, right now they are far more concerned about making ends meet when prices are so high, jobs so scarce, and then there is the scare of the coronavirus staging a very vicious comeback to the country. And if it is meant to attract and encourage investment, both foreign and local, in sectors that seem to be expanding impressively, again there are better ways of approaching the issue. For serious investors are hardly ever noise traders and are never just lured by headlines. Most of them know how to read these numbers very well to begin with and the few that can be disappointed in case the government's claims are not backed by their due diligence don't tend to vouch for your word in the market place in future.
If the government's push and the central bank's concessionary lending regime has really turned LSM around, then the government must explain which industries are leading the charge and exactly what to expect and when. Such things will clarify more than the expected performance of one very important sector for the rest of this fiscal. They will also shed light on the likely GDP growth figure at the end of it. And if the growth is really as impressive as all the headlines and tweets are suggesting, then every effort must be made to protect and nurture it because the second wave of the coronavirus has finally reached Pakistan in full force and much harder times are just around the corner.
Copyright Business Recorder, 2020
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