Large Scale Manufacturing (LSM) data comes with a considerable lag and has of late only stamped the worst fears. The LSM index as tracked by the PBS went down 11.59 percent year-on-year in February 2023. On a cumulative basis, for 8MFY23 – LSM is down 5.55 percent. Barring the peak Covid period in 2020, this is the steepest fall in at least 14 years – on both counts. February 2023 marked the eighth month running, where LSM recorded negative growth. This has probably never happened before – like most other things in the country these days.
For February 2023, of the 22 LSM categories containing 123 items, only a solitary category of beverages registered positive year-on-year growth. Soft drinks and mineral waters may struggle to maintain the growth trajectory beyond February 2023 – as the mini budget taxation measures came into effect leading to significant retail price increase in subsequent months.
On a cumulative basis, the growth story is restricted to only four sectors, three of which are new entries in the rebased LSM – namely wearing apparel (readymade garments), footballs and furniture – fourth being leather. The PBS uses the export quantities in these cases as LSM readings, and readymade garments have a considerably high weight of 6 percent. The growth has come down to 35 percent – gradually on a downward slope in the last six months, March export numbers are out – and it has tapered down further – with year-on-year growth confined to 11 percent, down from an average of 45 percent between July-Jan.
Furniture exports with just 0.5 percent weight in the LSM basket make the second largest contribution to overall LSM growth. For context, Pakistan’ average monthly furniture export barely exceeds million dollars. The pace of furniture export growth has also tamed in the last two months – with March numbers down year-on-year basis. Footballs with an even lower share have so far stayed steady – and may soon be only the second category outside of wearing apparel – with positive growth.
Everything else tells a sorry tale – from air conditioners to electric fans, from motor cars to motor pumps, from steel rolls to cement, from fertilizer to wheat, from cigarettes to HSD, and from cotton cloth to tea. Each sector has its separate tale but is a fair reflection of the dire straits Pakistan finds itself in. March imports at under $4 billion tell more of the same is in order for rest of the fiscal year – as paucity of dollars will keep the supply line disturbed. Eroding purchasing power at home is there to make sure LSM for FY23 may well give Pakistan’s poorest reading in decades. To think that FY22 ended with a 12 percent LSM growth. Surely, this has been a year to forget on all counts.
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