April 15, 2021 (MLN): Amid the third wave of Covid-19 pandemic, Pakistan’s Large-Scale Manufacturing (LSM) output has slowed down to 4.85% YoY during the month of February 2021, while on monthly basis, LSM output contracted by 4.15%.
This brought the cumulative growth in LSM output to 7.45% YoY during 8MFY21 compared to 8MFY20.
The slowdown in the LSM production has been witnessed since January’21, prior to this, LSM output was showing encouraging numbers as it posted strong double-digit growth for two consecutive months Nov-20 and Dec-20.
The latest data on LSM production issued by PBS shows that eight out of 15 sub-sectors in LSM rose during the month of Feb’21. Coke & Petroleum, Automobiles, Non-Metallic Minerals, Pharmaceuticals, Chemicals, Food, Beverages & Tobacco and Textile were the major sectors with increased output levels of 42.7%, 26%, 11%, 10.6%, 15.5%, 3.5%, and 3% YoY, respectively.
On a cumulative basis, during 8MFY21 out of 15 major industries, 8 posted positive growth while the rest of the 7 industries witnessed a decline. The sector-wise performance revealed that Non-metallic minerals, Food, Beverages & Tobacco, Automobiles and Chemical were the major sectors with increased output levels of 21%,16%, 15% and 13% YoY respectively during the 8MFY21.
On the other hand, the major dismal numbers were witnessed in the Wood, Leather, and Engineering industries as their production dropped by 51% YoY, 40% YoY, and 30% YoY, respectively during 8MFY21.
According to the report by Taurus Securities, the growth in Petroleum products during the month was due to increased production of Diesel Oil, High-Speed Diesel, and Motor Spirits which was up by 1.75x, 81%, and 55% YoY, respectively. While Solvant Naptha’s production went down by 23%YoY.
The surge in Automobile production was due to an increase in LCVs/Jeeps & Cars/Tractors/Motorcycles as they posted growth of 37%, 37%, 42%, and 17%YoY, respectively. However, production for Trucks showcased a decline of 17%YoY. In the coming months, the demand for Automobiles will remain upbeat with higher volumes due to a surge in auto financing and healthy competition amongst industry players.
The rise in Food, Beverages & Tobacco production can be attributed to higher production of wheat, soft drinks, and juices, as they witnessed a growth of 66%, 4%, and 12% YoY, respectively.
Meanwhile, the Textile sector also continued its growth momentum in production on the back of robust international demand and improving competitiveness versus regional exporters.
Going forward, the report projects that LSM Index will continue its uptrend mainly due to the low base effect (lockdowns imposed last year) and the month of Ramadan which will trigger food production.
In particular, the construction and automobile sectors are expected to lead the growth, supported by consumer segments like Food and Textile. However, tightened tax reforms under the upcoming FY22 budget would be a downside risk to LSM as it may increase the cost of production for the manufacturing industry.
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