Political crisis to hurt growing LSM, warn analysts


Having shown a robust 4 percent growth in FY14, the Large Scale Manufacturing (LSM) is likely to be set back by the ongoing political turmoil in the country, warned the analysts.

According to Pakistan Bureau of Statistics (PBS), the LSM witnessed the growth because of circular debt settlement and other business-friendly steps of the government.

“However, going forward, we expect the LSM growth to remain subdued mainly on account of worsening energy situation, ongoing political turmoil, restrictive monetary policy on the back of IMF pressure and poor law and order situation,” said InvestCap analyst Irfan Saeed.

The PBS recently reported the quantum index of the LSM having posted a cumulative growth of 3.95 per cent YoY in FY14 against the growth of 4.3 per cent YoY in FY13.

The overall output of LSMI posted an increase of 3.95 per cent YoY in FY14 as all three constituent indices witnessed a positive growth.

Largest contribution was evident from the ministry of industries (M/I) index with a share of 2 per cent in overall growth followed by Provincial BOS and OCAC indices with contribution of 1.44 per cent and 0.5 per cent respectively.

However, when compared with May’14, all three indices experienced a negative growth in January 2014, taking the overall output to decline by 2.74 per cent MoM. M/I Index fell down by largest 3.2 per cent with a contribution of 2 per cent in overall drop.

Fertilizer sector, the heavyweight contributor to industrial production, witnessed a YoY growth of 18.6 per cent in FY14 with a cumulative impact of 0.82 per cent in overall index.

Fertiliser production grew mainly on account of better gas supply to fertilizer plants in FY14 as compared to last year. Other manufacturing items with major contribution to this index include paper and board, textile and iron and steel products with cumulative impact of 0.42%/0.39%/0.17%YoY in FY14.

A detailed analysis of BOS index reveals that the highest contribution to this head came from food and beverages group with cumulative impact of 1.52 per cent in overall index growth of 3.95 per cent.

“We attribute this growth to rising consumption habits and mounting population of the country,” said the analyst. The index further beefed up by leather and chemical products with a share of 0.2 per cent and 0.16 per cent respectively in total growth, he added.

On the oil front, the index rose by 8.4 per cent YoY in FY14 with impact of 0.5 per cent in overall LSM growth.

This growth primarily ascribed to 11 per cent YoY increase in HSD production and 9.5 per cent YoY rise in FO production, said Irfan.

In addition, he said, a 5.6 per cent YoY jump in MS production and 12.2 per cent hike in Naphtha production also supported the OCAC Index growth.

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