close
Thursday March 28, 2024

LSM falls 2.02 percent in November as food output decline

By Tariq Ahmed Saeedi
January 20, 2018

KARACHI: Large scale manufacturing (LSM) fell 2.02 percent year on as the sector snapped the growth momentum on slowdown in food outputs, but analysts are still bullish on its uptrend prospect.

Food, beverages and tobacco sector, which has the second highest weight in the manufacturing quantum index, underwent a sharp 22 percent decline in production in November as compared to the corresponding month a year earlier, Pakistan Bureau of Statistics (PBS) data showed on Friday. Analysts said the growth eased because of falling food sector, mainly sugar industry. “Delayed sugar crushing took its toll on LSM growth,” analyst Adnan Sheikh at Topline Securities said.

Sugar production was recorded at 40,000 tons in November as compared to 210,278 tons in the same month a year ago, according to PBS. Sugar mills in Punjab, accounting for more than 60 percent of the country’s sweetener output, had to begin crushing by November 1, but the crushing was delayed as the issues of exports subsidy and buying of surplus stocks by the government put a halt to routine production start. Besides, outputs of almost all key foods, including vegetable ghee, cooking oil, tea and wheat showed downtrend in November over the same month a year earlier. PBS recorded a 6.12 percent month-on-month decrease in LSM growth in November.

The growth might be subdued due to base effect as October’s numbers were impressive 8.77 percent year on year and 5.59 percent month on month.

In November, all the three data collection bodies, including Oil Companies Advisory Council, ministry of industries and provincial bureau of statistics, recorded decline in production.

The bureau, however, registered an upright 7.19 percent of LSM growth in the first five months of the current fiscal year of 2017/18, which is still above the 6.3 percent annual target set by the government.

“The production in Jul-Nov 2017-18 as compared to Jul-Nov 2016-17 has been significantly increased in food, beverages and tobacco, coke and petroleum products, non-metallic mineral products, automobiles, iron and steel products and electronics while decreased in fertilisers and leather products,” PBS said in a statement.

The central bank said LSM experienced a 10 percent growth during the first quarter of FY2018, the highest quarterly growth since FY2009.

“A number of developments explain this performance, for example, better energy supplies, strong domestic demand, rising purchasing power and improved security situation,” the State Bank of Pakistan said in a quarterly report on the economy. Zeeshan Afzal, executive director at Insight Securities expected yearly growth at six to seven percent for LSM sector, which accounts for 80 percent of manufacturing and 10.7 percent of GDP. Sheikh of Topline Securities said gas price issue may affect urea production, “but it could have a nibbling effect on LSM”. “Going forward, I am not foreseeing slowdown in growth as January sugar figure will likely offset the downturn,” he added.

The PBS data further showed that in July-November electronics production recorded the highest increase of 55.7 percent in production, followed by iron and steel (40.38pc), automobiles (24.4 percent), coke and petroleum products (11.62pc), non-metallic mineral products (11.06pc), paper and paper board (6.16pc), food, beverages and tobacco (5.95pc), engineering products (5.18pc), rubber products (5.14pc), pharmaceuticals (3.71pc) and textile (0.62pc).

The sectors that recorded the decrease during the July-November period included wood products (12pc), fertiliser (11.12pc), leather products (4.36pc) and chemicals (0.16pc).