LSM outperforms Indian manufacturers

Industrial sector grows 8 percent in Nov on improved energy, reforms

KARACHI: Industrial growth posted a staggering eight percent growth in November 2016, beating the market expectations, a minister said on Thursday, suggesting the sector will play a key role in economic expansion during the current fiscal year.

Muhammad Zubair, minister for privatisation said the economy has come in the stabilisation mode, restoring investor confidence following an ease in energy and security situations and soft interest rate scenario.

The Pakistan Bureau of Statistics (PBS) in its latest data showed that the large scale manufacturing (LSM) sector grew 8.02 percent in November 2016.  Industrial growth remained at 4.75 percent in November.

Overall LSM output surged 3.24 percent during the first five months of the current fiscal year of 2016/17 over the same period a year earlier, PBS data showed. The government eyes 7.7 percent LSM growth for the current fiscal year. Last year, the industrial growth at 6.80 percent surpassed the target of 6.4 percent.

LSM accounts for 10.9 percent of GDP and 80 percent of all the manufacturing activities. Pakistan outpaced neighbouring India in terms of industrial growth in November as New Dehli’s core sector recorded 4.9 percent year-on-year (YoY) growth in November, slower than the previous two months: 6.6 percent in October and 5.01 percent in September.

Zubair said economic indicators were not as good as the government would have expected because of security and energy crises. “But, now we have come out of the mess and economy has been stabilised,” the minister said. “Momentum will continue with the ease in political confrontation in January.”

Analysts attributed the significant industrial growth to improving business climate, reforms-led investment recovery and improvement in energy supply.   “Optimism is improving. Both local and foreign investments are rising,” said Mohmmed Sohail, chief executive officer at Topline Securities. “Especially, now banking sector is aggressively lending to private sector.” PBS data showed that almost all the key industrial sectors posted growth in November.

Textile output rose 0.23 percent, food, beverages and tobacco (25.46pc), pharmaceuticals (9.12pc), non-metallic mineral products (9.15pc), automobiles (11.35pc), iron and steel products (20.64pc), fertilisers (4.88pc), electronics (9.82pc), paper and board (6.25pc) and rubber products (1.41pc), coke and petroleum products (3.92pc), chemicals (1.37pc), and engineering products (18.91pc). Only leather sector and wood products fell 7.81 percent and 95.43 percent, respectively in the month under review.

Sohail said construction sector, both led by government projects related to China-Pakistan Economic Corridor and private sector, will take the growth to the new heights.  Automobile sector is attracting new investments, which will augur well for the LSM and its contribution to GDP, he added. “I think the full year number will be more than the five-month number.”

Zeeshan Afzal, analyst at Insight Securities said textile, automobile and electronic sectors have further room for growth. “Textile industry cheered the incentives package and is expected to turn up abnormal growth,” Afzal said.

The sectors showing increase during July-November 2016/17 included textile (0.02pc), food, beverages and tobacco (3.78pc), pharmaceuticals (7.64pc), non-metallic mineral products (10.48pc), automobiles (5.57pc), iron and steel products (14.53pc), fertilisers (4.37pc), electronics (14.52pc), paper and board (3.76pc) and rubber products (0.47pc).

The sectors, posting decrease in the period under review, included coke and petroleum products (1.68pc), chemicals (3.60pc), leather products (17.85pc), engineering products (5.86pc) and wood products (97.08pc).

Ministry of industries, which measures production of 36 products from various industries, registered 6.66 percent YoY and 4.89 percent month-on-month (MoM) rise in November. Oil Companies Advisory Committee, which monitors outputs of 11 petroleum products, recorded a minor 0.25 percent YoY increase and 0.18 percent MoM decrease in November.     Provincial bureau of statistics, which calculate output changes of 65 items, registered 1.11 percent rise in November 2016 over November 2015 and 0.05 percent increase over October.