LSM growth exhibits massive decline on lower PSDP spending

ISLAMABAD: The Large-Scale Manufacturing (LSM) declined by 2.93 percent during July-March 2018/2019 in contrast to growth of 6.33 percent during the same period last year. The target for this year was 8.1 percent, said Economic Survey 2018/2019 released on Monday.

“The present trend suggests that full year LSM growth will remain below the target by a wide margin,” according to the economic survey.

Year on Year (YoY), LSM growth witnessed sharp decline of 10.63 percent in March 2019 as compared to increase of 4.70 percent in March 2018.

There are a number of factors which have contributed to the negative growth in LSM.

These include lower Public Sector Development Program (PSDP) expenditures compared to last year, muted private sector construction activities and lower consumer spending on durable goods amongst others.

This was more noticeable in construction-allied industries. Demand for housing moderated as the price of building materials and cost of financing increased. Moreover, additional tax measures further restricted the real estate market.

Certain sector-specific issues also contributed to the decline in LSM. Automobile prices witnessed multiple upward revisions due to PKR depreciation which made the potential buyers refrain from making booking and purchases.

Certain restrictions on non-filers with respect to purchase of cars further dampened the automobile demand.

Pharmaceuticals also suffered due to a considerable lag in regulatory adjustments in prices.

This pricing issue was in addition to weakening of the local currency, which added to the distress of an import dependent sector.

The industry specific data shows that electronics recorded highest growth of 23.70 percent, wood products 15.21 percent, rubber products 3.47 percent, engineering products 9.54 percent, leather products 0.97 percent and fertilizers 4.50 percent.

The industries which recorded negative growth during the period are; Iron & Steel 11.00 percent, Pharmaceuticals 8.40 percent, Automobile 7.58 percent, Coke & Petroleum products 6.00 percent, Food Beverages & Tobacco 4.69 percent, Chemicals 3.94 percent, Paper & Board 3.86 percent, Non-metallic mineral product 4.96 percent and Textile 0.30 percent.

The Mining and Quarrying sector declined by 1.96 percent during Jul-Feb FY 2019 in contrast to the growth of 7.7 percent during the same period last year. Chromite, Magnesite, Rock salt, Barytes, Ocher and Crude oil posted a positive growth of 228.69 percent, 159.63 percent, 12.65 percent, 22.15 percent, 19.12 percent and 0.47 percent respectively.

However, some minerals witnessed negative growth during the period under review such as Coal 25.42 percent, Natural gas 1.98 percent, Sulphur 40.72 percent, Calcite 91.49 percent, Soap stone 13.12 percent, Marble 4.66 percent and Bauxite 30.82 percent.

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