Pakistan’s LSM growth shrinks 5.5pc in Nov 2022

ISLAMABAD: Pakistan’s industrial sector’s large-scale manufacturing (LSM) has shrunk by 5.5 percent in November 2022 as compared to the same month a year ago, with textiles, food, garments, chemicals, automobile, cement, and fertilisers among the affected sectors.

However, over the previous month (October 2022), LSM output went up 3.55 percent, while in five months from July to November 2022, the average output contracted by 3.58 percent over the same period last year, Pakistan Bureau of Statistics (PBS) said on Tuesday.

The government’s policy for curbing inflation with interest rates increases and ‘quantitative tightening’, has made bank financing expensive. Besides, the dearth of dollars and the government’s strict policies for limiting imports have been hard-hitting for the industrial sector. Over the last few months, factories have reduced their operating days/hours, and especially since last month, some have reported the closure of their units on inventory shortages due to the non-availability of foreign exchange to import raw materials.

With the declining industrial output, Pakistan’s GDP could also suffer as this sector contributes nearly a fifth to the economy.

The federal government has also hinted that the growth could be near 3 percent against the target of 5 percent.

The World Bank in its latest “Global Economic Prospects report,” has projected Pakistan’s GDP growth rate at 4 percent for FY23.

Earlier, the Asian Development Bank (ADB) also projected GDP growth at 3.5 percent in FY23 mainly due to quantitative tightening including limiting fiscal spending to control fiscal and external imbalances.

A contraction in demand, together with capacity and input constraints created by higher import prices from the rupee’s depreciation, would reduce industry output.

The government in the federal budget 2022-23 in June had targeted to grow the economy by 5 percent.

July 2022 was the first month in nearly two years when LSM growth nosedived, with LSM output contracting by 16.5 percent over June 2022 and 1.4 percent over July 2021.

The PBS’s latest monthly bulletin on LSM showed the majority of the sectors with negative growth in November 2022. Interestingly, out of 25 industrial categories covered under LSM data, only five showed positive growth that includes garments, leather products, furniture, football, beverages, coke and petroleum products.

But, output of sectors having high weightage in Quantum Index Number of LSM, contracted. These were textile, food, iron and steel, chemicals, automobile, pharmaceuticals, cement, and non-metallic mineral products.

On a year-on-year basis, in November 2022, textiles output was down 22 percent, pharmaceuticals 8.34 percent, non-metallic minerals 13 percent, food 13.6 percent, iron and steel 8.7 percent, chemicals 7.06 percent (of which chemical products output was down 6.15 percent and fertiliser 7.74 percent) and cement output also dipped 12.1 percent over the same month last year.

Similarly, machinery and equipment output also declined 56 percent, automobiles 18.97 percent, fabricated metals 18.4 percent, rubber products 9.3 percent; computer, electronics, and optical products 29.8 percent; wood products 80.5 percent, tobacco 20.25 percent, paper and board 1.7 percent and other transport equipment output went down by 41 percent over November 2021.

A few sectors that showed positive growth included garments up 49.7 percent, leather products 9.84 percent, furniture 36.4 percent, footballs 55.6 percent, beverages 9.97 percent, and coke and petroleum products up 5.26 percent.

Output during July-November FY23 as compared to the same period of FY22 has increased only in wearing apparel (garments) by 51.48 percent, leather 9.84 percent, furniture 99.3 percent, and footballs 59.7 percent.

Whereas, food output declined 7.78 percent, beverages 5.4 percent, tobacco 22.3 percent, textiles 11.45 percent, wood products 63.6 percent, paper and board 2.8 percent, coke and petroleum products 13.6 percent, pharmaceuticals 23.2 percent, rubber products 9 percent, non-metallic mineral products 12.35 percent, computer, electronics, and optical products 17.17 percent, machinery and equipment 41.2 percent, and automobiles 28.7 percent. Besides, the output of fabricated metal was down by 18.23 percent, iron and steel 0.87 percent, and other transport equipment declined by 42 percent over the same period of last year.