LSM growth stuttering

Barely managing to remain in the positive zone, LSM statistics for the month of May have scraped together a 1.26 percent increase over July-May 2010-11, with the industrial output growing by 1.46 percent during May, when compared against the same period last year. The steady contraction in the overall industrial productivity and output has been evident in the declining growth trends of the LSM industry which, save for a record six percent growth witnessed during February 2012, has largely remained sluggish and lackluster throughout FY12. Mays production tally also failed to measure up against last months statistics with output declining by a further 0.06 percent as the indices monitored by the Ministry of Industries generally fared worse than average and declined by 3.47 percent over last month. Iron and steel production as well as coke and pig iron output were the major factor behind this decline, witnessing steep growth degeneration of 25.26 and 6.99 percent respectively as a result of the low capacity utilisation ailing Pakistan Steel Mills. In the wake of security concerns, political infirmity and back-breaking energy crises, fiscal policy changes aimed at revitalising the LSM industrys growth prospects have only been able to do so much. Reduction in duties on certain items meant to put a lid on raw material prices aided the manufacturing sector. Automobiles, fertilizer and cement industries were amongst few sectors that witnessed positive growth of 1.16, 0.95 and 2.69 percent respectively year-on-year. Thriving consumerism also brought good news for the food, beverages and tobacco sectors; having a combined weightage of 12.37 percent, which increased by 6.44 percent. As a result indices monitored by the Provincial BOS ended at 139 points, up four points from the same month last year. The textile sector, with a hefty weightage of 20.91 on the other hand managed a mediocre performance at best. Beset by severe gas curtailments, the industrial output managed a slight improvement of 0.45 percent over July-May 2010-11. Going forward, production output for Pakistans highest earner of export revenue can only be optimised through unobstructed availability of power to the sector. Added to this, there is greater need for removal of financing barriers which will allow easier investment into machinery and equipment leading to movement into high end value-added products. Overall, the historic trend for a narrow manufacturing base has meant that Pakistan is a victim of lack of product and export diversification with the industrial sector not having witnessed any major structural overhaul in the last few decades. Unless the current trends are changed, LSM growth will remain slow and stuttering in the foreseeable future.

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                                         Growth
                                       (%) FY12
Items                       Weights  (July-May)
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Textile                        20.9         0.4
Food, Beverages & Tobacco      12.4         6.4
Coke & Petroleum Products       5.5        -7.0
Pharmaceuticals                 3.6         7.8
Chemicals                       1.7        -2.9
Automobiles                     4.6         1.2
Iron & Steel Products           5.4       -25.3
Fertilizers                     4.4         1.0
Electronics                     2.0        -7.9
Leather Products                0.9         0.7
Paper & Board                   2.3        22.9
Engineering Products            0.4       -11.2
Rubber Products                 0.3       -24.9
Non Metalic Mineral Products    5.4         2.7
Wood Products                   0.6        -0.9
                               70.4        1.26
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Source: PBS