Wednesday May 31, 2023

LSM output falls for seventh straight month in January

March 15, 2023

ISLAMABAD: Pakistan’s industrial output has persistently slipped in last seven months and it declined by 7.9 percent in January 2023 over the same month a year ago, the Pakistan Bureau of Statistics (PBS) reported on Tuesday.

Independent political economists attribute the downtrend to economic and political uncertainty in the country.

Large-scale manufacturing (LSM) output declined 4.4 percent in July-January FY23, compared to the same quarter last fiscal as costlier inputs due to rupee devaluation, high financing costs, and global slowdown took a toll. Various industries have either shut down their plants or limited the operational hours to the lowest.

However, over the previous month (December 2022), LSM output went up 1.48 percent.

It is interesting to note that since the start of the financial year in July 2022, the output declined by 1.4 percent after continuously growing for the previous 21 months. Earlier, the LSM growth remained negative from September 2019 to October 2020, mostly hampered by Covid-19.

Similarly, in August 2022, LSM was reduced by 0.02 percent, September by 2.7 percent, October by 7.63 percent, November by 6.15 percent, December by 3.51 percent and now in January 2023, it has shrunk by 7.9 percent.

Major sectors that have high weightage in Quantum Index Number of LSM, their output contracted that include textile, food, coke and petroleum products, chemicals, automobile, pharmaceuticals, cement, and non-metallic mineral products.

For the persistent weakness in LSM, domestic factors and the global recession-like situation are to be blamed. Domestically, the high energy costs, rupee devaluation, and the government’s monetary and fiscal policies’ tightening and limiting imports due to a dearth of dollars were major instrumentals for negative growth, which will also affect GDP growth in FY23.

It is to be noted that in FY22, LSM grew by 11.7 percent over FY21, mainly on the back of increasing global demand and favorable government policies to jack up the GDP growth as big industries contribute a tenth to the economy.

To curb the runaway inflation that reached nearly 50 years high in February 2023 i.e. 31.55 percent, the State Bank is increasing the policy rate. Recently it raised the discount rate by 300bps to 20 percent. Since July 2021, the central bank has hiked the discount rate by 1300 basis points from 7 percent to 20 percent now. This has considerably affected industrial activities, as the measures made bank financing costlier.

The statistical bureau data revealed that except for garments and football manufacturing, all other industrial segments showed a negative growth in their output in January 2023 over the same month last year.

On a year-on-year basis, in January 2023, textiles output was down 14.2 percent, pharmaceuticals 23.85 percent, non-metallic minerals 0.18 percent, iron and steel 8.76 percent, chemicals 17.4 percent (of which chemical products output was down 7.74 percent and fertilizer 23.58 percent) over the same month last year.

Similarly, machinery and equipment output also declined by 71.3 percent, automobiles by 60.45 percent, computer, electronics, and optical products by 38.5 percent; furniture 38 percent, wood products by 75.3 percent, tobacco by 11.68 percent, paper and board by 9.4 percent, rubber products 8 percent, coke & petroleum products 1.8 percent, beverages by 0.15 percent, leather products 1.5 percent, and other transport equipment output went down by 27.5 percent over January 2022.

However, a few sectors that showed positive growth included garments up by 32.26 percent, footballs by 27.88, cement by 1.23 percent, and food by 0.04 percent.

Output during July-January FY23 as compared to the same period of FY22 has increased only in wearing apparel (garments) by 44.5 percent, leather by 4.98 percent, furniture by 73.8 percent, and football by 48.26 percent.

Whereas, food output in these seven months declined 1.9 percent, beverages 7.4 percent, tobacco 21.7 percent, textiles 13.2 percent, wood products 67.8 percent, paper and board 3.8 percent, coke and petroleum products 9.86 percent, pharmaceuticals 21.9 percent, rubber products 7.68 percent, non-metallic mineral products 10.2 percent, computer, electronics, and optical products 22.8 percent, machinery and equipment 51.9 percent, and automobiles 34.8 percent.