LSMI: Food, Automobile and Fertilizer boosted the index

January 15, 2021 (MLN): Strong recovery in economic activity continues across the country as Large-Scale Manufacturing (LSM) data for Nov’20 once again has posted highly encouraging numbers.

LSM output recorded an impressive double-digit growth of 14.46% YoY during the month mentioned above, while on a monthly basis, LSM rose by 1.4% on the back of recuperating Economic Stability and low base.

This brought the cumulative growth in LSM output to 7.4% during 5MFY21 compared to 5MFY20.

The growth during the month of Nov’20 was led by Food and Automobiles sector as they posted growth of 57.6% YoY and 44.5% YoY respectively followed by fertilizer (12% YoY), Chemicals (11% YoY), Paper & Board (10.2% YoY), Fertilizer (9.2% YoY), Pharmaceuticals (7.7% YoY), and Textile (3.1% YoY).

A whopping surge in the Food Beverages and the Tobacco industry was attributable to higher production of wheat by flour mills to meet the domestic supply shortage.

The growth witnessed in Fertilizer production was due to 6.6% and 30.6% YoY rise in Nitrogen and Phosphorus fertilizers which can be attributed to the provision of subsidy to RLNG based urea plants, better gas flows to EFERT, and resumed production of NP by Pak Arab Fertilizers, a report by Foundation securities cited.

The remarkable growth in the textile sector was led by cheap auto financing and rising consumer spending amid a low-interest-rate environment as Jeeps & Cars, Tractors and Motorcycles all witnessed an increase in production by 72%, 57.84%, and 20.1%YoY, respectively. As per the report, the Automobile segment’s demand will remain upbeat with higher volumes due to a surge in auto financing and healthy competition amongst players, going forward.

Increase in Textile production, Non-Metallic Mineral Products, Pharmaceuticals and Paper and Board provided further support to LSMI. Post covid-19 outbreak, the textile sector continued to post growth in production on the back of strong international demand as well as improving competitiveness compared to other regional exporters.

The jump in Non-Metallic Mineral Products is attributable to the rise in Cement and Steel demand due to improving macro factors and the increased activity in the construction sector. Looking ahead, the revival of private sector projects, dams targeted construction and expected increase of commercial bank lending to the construction sector would provide support to domestic demand, the report said.

Going by the report, the growth in Pharmaceuticals was largely a result of increased exports and the positive impact of a crackdown against counterfeit products. Whereas, the rise in Paper and Board production can be ascribed to an increase in Food Beverages and Tobacco production and commercial activity post-lockdown.

While the industries that contracted during the month were mainly in lower weighted categories which include; Wood products (-58.8% YoY), Leather products (-40.5% YoY), and Engineering products (-26.7% YoY).

On a cumulative basis, during 5MFY21 out of 15 major industries, 10 posted positive growth while the rest of the 5 industries' witnessed a decline. The sector-wise performance revealed that the production in Food, Non-Metallic Mineral Products, Pharma, Paper & Board, Chemicals and Fertilizer sectors have surged by 21.28% YoY, 20.6% YoY, 12.95% YoY, 10.61% YoY, 9.95% YoY and 6.59% YoY respectively during Jul-Nov FY21, compared to the performance in Jul-Nov FY20.

On the other hand, the dismal numbers were witnessed in Woods, Leather, Engineering, Electronics and Steels industries as their production dropped by 65%YoY, 43% YoY, 32.62% YoY, 18% YoY and 3.69% YoY respectively during 5MFY21.

Looking ahead, the growth in LSMI out is expected to remain upbeat on the back of multiple factors such as Pandemic induced low base effect, recent export growth in the heavyweight textile sector, accelerating manufacturing operations and new investments. Furthermore, if this positive trend continues in the coming month, it will help in achieving the annual economic growth target, besides creating jobs.

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Posted on: 2021-01-15T17:31:00+05:00

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