Large scale manufacturing (LSM) grew 5.38 percent during the last fiscal year of 2017-18.
Steel and cement production continued to scale up on development spending, official data showed.
Pakistan Bureau of Statistics (PBS) data showed that iron and steel production recorded an impressive 21.78 percent growth in fiscal year 2018, while non-metallic and mineral output, including cement, rose 11.04 percent.
LSM growth, however, remained much below the annual target of 6.3 percent. It might be due to impact of the last month in which LSM posted a marginal 0.51 percent growth year-on-year, but the sector fell 8.3 percent during the month as compared to the previous month of May.
This trend is evocative of last year when overall index of May was more than June. Ramazan factor might also have dampened the upshot.
Businessmen are looking forward to new government which recently took charge that how it deals with much sought-after tariffs restructuring demand to leverage LSM, which accounts for 80 percent of industrial sector, to fetch economic dividends.
Pakistan Business Council said the government has to reconsider its policies of keeping gas tariff low for domestic consumers and high for industrial users. After all, jobs are to be created by industrial sector.
In July-June, fertilizer sector was the big looser on pricey and interrupted gas supply. Fertilizer output slid 9.88 percent during the last fiscal year.
Three major fertilizer manufacturing plants, namely Agritech, Pakarab Fertilizers and Dawood Hercules remained shut-down round the last year due to gas conundrum.
The cement sector recorded growth of 4.48 percent in July-June over the last year.
LSM’s growth drivers in the first half of the current fiscal year were vegetable ghee, soft drink, electric motors, TV sets.
These were of course in addition to phenomenal growth in cigarettes, construction-led sectors and automobile.
Performance in the latter two sectors continued throughout the year as public sector development program and CPEC related expenditure had a positive impact on manufacturing sub-sectors such as steel, cement and automobiles.
Steel for instance has benefited not only from increase in construction activities triggered by the PSDP and the CPEC, but also from the imposition of anti-dumping duty on finished steel products, housing schemes in private sector, and a surge in automobile demand.
The surge in automobile demands was such that it forced local assemblers to produce in double shifts and makes investments in de-bottlenecking activities.
The sugar industry was not able to capitalize on record sugarcane production as the crushing period got delayed mainly due to the row between growers and millers over price.
While the third and fourth quarter fiscal year 2018 did see some recovery in sugar production, the damage had already been leading to a 6.85 percent fall in this year’s production compared to a whopping 38 percent growth in fiscal year 2017.
Cigarette production grew phenomenally after the government introduced a third tier in Federal Excise Duty and initiated a crackdown on illicit trade that benefited the formal cigarette industry.
However, cigarette production slowed in the last quarter; in fact, it posted 62 percent decline in June 2018.
The high based affect begun to set in. That affect should stabilize the growth in cigarette production in fiscal year 2019
The key challenge for the PTI is this. How to make LSM growth broad based because in recent years growth has mostly relied on a handful of sectors.
Production growth in export-oriented LSM sectors – notably textile and footwear – remains downright poor.
Lack of broad-based growth and weak performance of export oriented LSM sectors scratch away the polish from an otherwise relatively better LSM performance in the last two years.
LSM posts nominal growth in July 2018
Large scale manufacturing (LSM) sector posted a marginal 0.50 percent year-on-year growth in the first month of the current fiscal year of 2018-19, yet it decently grew 6.99 percent compared to June, official data showed.
Pakistan Bureau of Statistics (PBS) data showed that engineering products recorded the highest growth of 13.18 percent in July compared to the corresponding month a year earlier, followed by electronics (11.74 percent), auto (9.75 percent), rubber products (8.31 percent), coke and petroleum products (6.14 percent), paper and board (4.67 percent), food, beverages and tobacco (3.24 percent), leather products (1.19 percent) and non-metallic mineral products (0.53 percent).
The sectors, which recorded decline in production, included wood products (55.64 percent), pharmaceuticals (10.8 percent), fertilizers (6.81 percent), iron and steel products (2.77 percent), chemicals (2.44 percent) and textile (0.50percent).
Barring the provincial bureau of statistics, two other data collection authorities registered increase in production in July compared to the corresponding month a year ago.
Oil Companies Advisory Council (OCAC), logging outputs of 11 oil and petroleum products, measured 6.14 percent rise in outputs during the month. Ministry of industries, measuring output trend of 36 items, recorded a nominal 0.31 percent increase in output. Provincial bureau of statistics, counting production of 65 products, logged a 0.33 percent year-on-year decline in July.
The provincial bureau of statistics registered downward trend in production of vegetable ghee, cooking oil, tea, wheat and grain milling, juices, syrups and squash, woolen cloth, knitting wool, upper leather, ply wood, soaps and storage batteries in July compared to the same month a year earlier.
OCAC recorded double-digit growth in kerosene oil (84.6 percent), liquefied petroleum gas (49.14 percent), motor spirits (17.74 percent), and diesel oil (12.16 percent). Production of jet fuel, Jute batching oil, solvant naptha and petroleum products, however, fell year-on-year in July.
Ministry of industries recorded rise in auto production with buses (36.71 percent), trucks (34.38 percent), light commercial vehicles (15.59 percent), jeeps and cars (13.06 percent) and motorcycles (1.84 percent).
Production of nitrogen and phosphate fertilizers decreased 7.22 percent and 3.64 percent, respectively.
LSM declines 3.33pc in August 2018
The large-scale manufacturing (LSM) recorded negative growth of 3.33 percent year-on-year in August. The decline in big industrial production in August has caused panic that economic growth in Pakistan may slow down. July posted a somewhat increase of 0.5 percent year on year by missing the target of 6.3percent percent year on year.
The negative growth is primarily due to drop in production of petroleum products 13.96 percent, followed by non-metallic mineral products 13.91 percent, automobiles 12.82 percent fertilizers 9.98 percemt, pharmaceuticals 6.86 percent, iron and steel products 5.1 percent, chemicals 0.42 percent, textile 0.1 percent and wood products fell 57.98 percent, respectively, during the month in review.
LSM sector constitutes 80 percent of manufacturing and 10.7 percent of the overall GDP. In comparison, small-scale manufacturing accounts for just 1.8 percent of GDP and 13.7 percent of manufacturing. Production data of 36 items received from the Ministry of Industries and Production showed a negative growth of 3.27 percent in August.
On the other hand, 65 items reported by the provincial bureaus of statistics posted slight growth of 0.96 percent. 11 items received from the Oil Companies Advisory Committee contributed negatively 1.02 percent to LSM decline during August.
Industry-specific data showed that engineering products recorded the highest increase of 10.30 percent, followed by food, beverages and tobacco products 9.83 percent, paper and board 7.72 percent, electronic products 5.48 percent, leather products 2.19 percent, and rubber products 1.23 percent.
In the automobile sector, the production of all vehicles entered negative growth in August, compared to the same period a year ago.
Tractors went down 16.41 percent, jeeps and cars 4.85 percent, motorcycles 19.46 percent, light commercial vehicles 8.42 percent, trucks 40.89 percent and buses dip by 18.18 percent during the year under review.
Decline in the chemical sector was mainly driven by paints and varnishes, which recorded a drop of 3.19 percent, whereas caustic soda went up by 15.59 percent.
In pharmaceuticals, syrups, tablets capsules and injections went down by 4.42 percent, 7.34 percent, 11.5 percent and 9.47 percent, respectively. In non-metallic mineral products, cement posted a negative growth of 14.10 percent.
Food, beverages and tobacco segment posted a decline across the board in the second month of the current fiscal year.
6.11 percent decline was recorded in cooking oil production, followed by blended tea 2.91 percent, wheat and grinding mill 2.08 percent. A meager growth of 0.39 percent was recorded in vegetable ghee.