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LSM sector shrinks 3.78pc: PBS

LSM sector shrinks 3.78pc: PBS

ISLAMABAD: The large-scale manufacturing (LSM) sector shrank 3.78 per cent during May from a year ago, the Pakistan Bureau of Statistics (PBS) reported on Thursday.

The contraction came amid dismal performance in the fertiliser, leather, pharmaceutical, and chemical sectors raising fears of large-scale layoffs in the industrial sector.

On a year-on-year basis, the LSM dipped by 3.5pc during the first 11 months (July-May) of this fiscal year falling far behind the 8.1pc target set for the government for FY2018-19.

Sector-wise, production data of 11 items from Oil Companies Advisory Committee registered a negative growth of 1.05pc whereas 36 items received from the Ministry of Industries and Production and 65 items by Provincial Bureaus of Statistics declined by 2.04pc and 0.7pc respectively.

The lacklustre performance in the industrial sector shows the economy is likely to slow down further despite government expectations for the GDP growth to clock in at 3.3pc in FY2018-19.

Slowdown in PSDP spending, construction activities and consumer spending on durable goods affected industrial output

The LSM data reveals various factors which led to the slowdown including lower Public Sector Development Programme (PSDP) expenditures compared to last year, deceleration in the private sector construction activities and consumer spending on durable goods. The effect was more noticeable in the construction-allied industries.

Demand for housing moderated as the price of building materials and cost of financing increased. Certain sector-specific issues also contributed to the decline in LSM.

Automobile prices witnessed multiple upward revisions due to currency depreciation which kept potential buyers at bay. Certain restrictions on non-filers with respect to purchase of cars further dampened the demand in the auto sector.

Pharmaceutical sector also suffered due to a considerable lag in regulatory adjustments in prices. The pricing issue was in addition to weakening of the local currency, which added to the distress of an import-dependent sector. The sector dipped 6.83pc year-on-year during May mainly on account of 12.90pc decrease in the production of syrups, 11.58pc and 1.52 in capsules and tablets respectively.

Similarly, lower sugarcane production and carry forward of last year’s inventories further dampened the prospects of the sugar industry.

In the non-metallic mineral products, cement production was up slightly by 1.17pc in May over same month last year whereas sugar production dipped by 15.11pc during the month.

On a year-on-year basis, the auto sector posted a slight growth in May mainly because of increase in the production of buses which went up by 42.42pc. Tractor production went down by 53.22pc, light commercial vehicles 35.81pc, trucks 56.06pc, jeeps and cars 31.09pc and motorcycles 18.63pc during the period under review.

Decline in the chemical sector was mainly driven by a dip in the production of paints and varnishes by 15.65pc; whereas caustic soda production went down by 13.91pc.

Moreover, production of vegetable ghee, and tea blended dipped by 23.15pc and 16.89pc respectively. However, cooking oil production increased by 2.77pc in May on a year-on-year basis.