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June 13, 2021

LSM posts sequential decline, gigantic growth in April

 
June 13, 2021

ISLAMABAD: Large scale manufacturing (LSM) posted 6.99 percent month-on-month decline in April third time in a row with analysts terming the downtrend as seasonal.

Pakistan Bureau of Statistics (PBS) data on Saturday showed that LSM continued sequential declines of 7.66 percent in March and 4.15 percent in February.

“It is seasonal and same trend has been seen in the past too,” said Mohammed Sohail, CEO of Topline Securities. Sugarcane season always gives a boost to LSM number and since it is not harvesting season the industry gets a deflating impact.

Year-on-year, LSM posted a hefty 68.1 percent growth in April and that was clearly due to base-effect. The last year’s April was the beginning of economic shutdown. The industrial production was largely closed during the month.

LSM that makes 80 percent of industrial sector in Pakistan posted 12.8 percent growth in the first 10 months of the current fiscal year, according to the PBS.

PBS didn’t present month-on-month analysis for April. For July-April, all the three data collection authorities registered increase in production. Ministry of industries, measuring output trend of 36 items, recorded a 9.89 percent increase in production. Provincial bureau of statistics, counting production of 65 products, logged 2.05 percent growth. Oil Companies Advisory Council, logging outputs of 11 oil and petroleum products, measured growth of 0.91 percent.

The government acted sanely to refrain from comprehensive lockdown after fiscal deterioration at the early last year exacerbated the economy under correction and caused 0.5 contraction in growth and 10.2 percent decline in LSM production.

The popular stance led to a sharp economic recovery later and the results started to appear since late last year, propped up by monetary stimulus and administrative measures.

While the growth for the current year was estimated at 4 percent, the number could be revised up considering the industrial growth, Finance Minister Shaukat Tarin said on various occasions. In July-April, textile sector with highest weight in the LSM index grew 13.1 percent, while food, beverages and tobacco grew 11.4 percent, according to the PBS.

The budget for the next fiscal year is positive for textile sector, according to Topline Research.

Removal of additional custom and regulatory duties on 164 tariff lines related to textile industry will help improve margins. Removal of additional custom duties on 152 tariff codes will bring down costs of raw materials and improve international competitiveness of textile businesses. Tariff structure has been rationalised on cotton, polyester and man-made fiber value chain. Normalisation of sales tax on raw cotton and ginned cotton may result in higher input adjustment for textile companies and may enhance working capital requirement of the companies, it said.