Large Scale Manufacturing stops signing further contracts in Pakistan

Pakistan’s large-scale manufacturing (LSM) continues to stop signing further contract in immediate future continuously for the sixth month.

The LSM index shrank by 5.63 per cent year-on-year in third month of 2019-20, the Pakistan Bureau of Statistics (PBS) reported on Friday. Meanwhile, during 3MFY20, big industry fell by 5.91pc.

In 2018-19, three LSM sectors recorded a decline of 3.64pc against the target growth of 8.1pc, which the government has set at 3.1pc for 2019-20.

The latest monthly decrease was mainly led by a dip of 21.53pc in electronic products, followed by 4.97pc in chemicals, 7.82pc in petroleum products and 17.87pc in iron and steel products.

Sector wise, production data of 11 items under the Oil Companies Advisory Committee registered decrease of 0.51pc whereas 36 items under the Ministry of Industries and Production shrank by 3.48pc and 65 items by Provincial Bureaus of Statistics 1.63pc.

The lacklustre performance in the industrial sector reflects overall economic slowdown across various sectors in the ongoing fiscal year.

LSM constitutes 80pc of manufacturing and 10.7pc of the overall GDP. In comparison, small-scale manufacturing accounts for just 1.8pc of GDP and 13.7pc in manufacturing.

Data reveal various factors that led to the slowdown including lower Public Sector Development Programme expenditures compared to last year, deceleration in the private construction activities and consumer spending on durable goods.

Automobile prices witnessed multiple upward revisions due to currency depreciations, which kept potential buyers at bay. On a yearly basis, the sector registered sales decline in almost all variants during the second month of this fiscal year.

The production of tractors dipped by 20.32pc, trucks 64.75pc, buses 52.70pc, jeeps and cars 92.98p, LCVs 25.37pc and motor cycles 25.69pc.

Pharmaceutical also suffered due to a considerable lag in regulatory adjustments in prices, which in addition to the weakening of local currency added to the distress of an import-dependent sector.

As a result, the production of syrups declined by 20.21pc, tablets 0.48pc, and injections 6.15pc whereas capsules were up by 3.6pc during the month under review.

Similarly, lower sugarcane output and carry-forward from last year’s inventories further dampened the prospects of sugar industry. Among non-metallic mineral products, cement was up by 5.28pc in September, led by increase in construction activity.

Moreover, production of cooking oil, and tea blended fell by 0.40pc and 14.37pc, respectively. However, vegetable ghee production increased by 0.97pc during the month.