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LSM sector posts 8.36 percent growth in July-September

By Tariq Ahmed Saeedi
November 19, 2017

KARACHI: Large scale manufacturing (LSM) sector posted a decent growth of 8.36 percent year-on-year for the first three months of the current fiscal year on uptrend in oil output, strong auto demand and growing appetite of steel in infrastructure uplifts, official data revealed on Saturday.

“The production in Jul-Sep 2017/18 as compared to Jul-Sep 2016/17 have been significantly increased in food, beverages and tobacco, coke and petroleum products, non-metallic mineral products, automobiles and iron and steel products while decreased in fertilisers,” PBS said in a web note.

The growth rate paced much higher over 1.88 percent year-on-year rate recorded in the July-September period a year ago, according to Pakistan Bureau of Statistics (PBS).

PBS calculates trend in LSM that accounts for 80 percent of manufacturing and 10.7 percent of GDP through statistics provided by Oil Companies Advisory Council (OCAC), ministry of industries and provincial bureau of statistics.

Ministry of industries, measuring output trend of 36 items, recorded the highest 10.02 percent growth during July-September FY2018.

Provincial bureau of statistics, counting production of 65 products, registered a 3.41 percent increase, while OCAC, logging outputs of 11 oil and petroleum products, recorded a three percent rise during the three-month period.

Government set a LSM growth target at 6.3 percent for the fiscal 2017/18.

Analysts said the target is achievable considering the trend during the last fiscal year when the LSM posted a 5.7 percent growth.

They said restriction on furnace oil-based power plants would not be affecting industrial production in the short-term. Government banned power production from furnace oil plants as they are expensive, but the cut is feared to affect oil refinery operation that meets up to 40 percent of local oil demand.

“Usually, demand of electricity happens to drop 8,000 to 10,000 megawatts in the winter and government-owned generation companies that operate with low efficiency are preferred to be shut down during the season,” Adnan Sheikh, an analyst at Topline Securities.

Sheikh said increase in liquefied natural gas would improve industrial production in the long-run as the industry is encouraged to ramp up activities on lower tariff rates.

PBS data showed that iron and steel production soared an enormous 47 percent in the first three months of FY2018, followed by automobiles (29.43pc), engineering products (25.97pc), engineering products (25.97pc), coke and petroleum products (13.74pc), food, beverages and tobacco (10.12pc), leather products (9.95pc), paper and board (9.8pc), wood products (6.78pc), chemicals (4.73pc), electronics (2.67pc), pharmaceuticals (2.12pc), rubber products (1.28pc) and textile (0.68pc).

Fertiliser sector witnessed a 5.84 percent decline in production in the period under review.

LSM output increased 2.51 percent for September over the same month a year ago and decreased 7.83 percent if compared to August 2017.

In September, iron and steel production posted a 41.72 percent increase, followed by engineering products (41.55pc), automobile (26.53pc), coke and petroleum (8.5pc), chemicals (7.93pc), paper and board (6.06pc), food, beverages and tobacco (3.67pc), rubber products (2.96pc), textile (0.88pc) and leather products (0.19pc).

Pharmaceuticals, wood products, electronics and non-metallic mineral products recoded decrease in output by 15.27 percent, 8.15 percent, 3.52 percent and 1.38 percent, respectively, in September. Fertiliser production fell 16.6 percent during the month.

While sales of diammonium phosphate tremendously grew almost fourfold month-on-month and nearly threefold year-on-year to 384,000 tons in September, urea off-take considerably 81 percent month-on-month and 40 percent year-on-year 179,000 tons on seasonal effect during the month, Taurus Securities said in a report.

In September, urea production slid 16 percent month-on-month and 14 percent year-on-year to 433,000 tons.