LSM growth speeds up 9.44pc in January to highest in nearly a year

KARACHI: Large scale manufacturing (LSM) sector posted a gigantic 9.44 percent year-on-year growth in January on increasing cement and steel consumption and rising auto sales, official data showed on Friday.

Pakistan Bureau of Statistics (PBS) data showed that large-scale industries grew 13.58 percent in January over December 2017, while LSM growth was recorded at 6.33 percent during the first seven months (July-January) of the current fiscal year of 2017/18. LSM growth stood at 3.45 percent for July-January period of FY2017.

Analysts said the uptrend indicated that actual annual number would surpass the LSM growth target of 6.3 percent set for the current fiscal year.

“Services and agriculture sectors are not showing significant growth and so we can expect that LSM will play a primary role in increasing GDP size,” Ahsan Mehanti, chief executive officer at Arif Habib Commodities said. LSM accounts for 80 percent of manufacturing sector that contributes 13.5 percent share to GDP. Government is eying six percent economic growth for FY2018 as against 5.3 percent in FY2017, which was a decade high.

Mehanti said Chinese-pledged infrastructure developments are leaving positive impact on industrial activities. “So far $15 billion have been invested in CPEC (China-Pakistan Economic Corridor) projects and that investment reflects in rise in cement and steel consumption.”

In July-January, iron and steel production rose around 34 percent, followed by automobiles (21.23 percent) and non-metallic mineral products (12 percent). “The three heads have the highest cumulative growth impact,” Adnan Sheikh, assistant vice president at Pak Kuwait Investment Company said. “Non-metallic mineral production mainly grew on robust cement numbers.”

PBS data showed that cement production soared 23.5 percent year on year in January and 12.3 percent in the July-January period as Cherat Cement and Lucky Cement added their cement production capacities.

Sheikh, however, said LSM growth was hampered by seven percent lower fertiliser production due to plant closures amid high liquefied natural gas price and low urea retail price, along with delay in sugarcane crushing. “This led to nine percent lower sugar production, though it may recover in remaining months.”

PBS said the production in July-January 2017/18 as compared to the corresponding period a year earlier have been significantly increased in food, beverages and tobacco, coke and petroleum products, pharmaceuticals, nonmetallic mineral products, automobiles, iron and steel products, electronics and paper and board while decreased in fertilisers and leather products

All the three data collection authorities registered increase in production during the first seven months of FY2018. Provincial bureau of statistics, counting production of 65 products, recorded 4.84 percent growth in July-January.

Ministry of industries, measuring output trend of 36 items, recorded 6.62 percent increase in production in the July-January period, while Oil Companies Advisory Council, logging outputs of 11 oil and petroleum products, measured 9.45 percent rise in output.

The State Bank of Pakistan said the large-scale manufacturing sector has also been performing well, as it experienced a 10 percent growth during Q1FY2018 – the highest quarterly growth since FY2009.

“The performance was encouraging as, barring fertiliser, all segments contributed positively,” the central bank said in a report. “While cement and steel industries benefitted from the ongoing infrastructure and construction activities, production of white goods was aided by the rising domestic demand.”