Karachi: Manufacturing picks up growth amid higher industrial production (+11%MoM)
The large scale manufacturing (LSM) picked up growth in Jan-12 as the industrial manufacturing index rose to 135.9 (+8.22%MoM growth impact) translating into a 8%MoM rise.
According to Arif Habib Limited, however despite the impressive monthly growth the 7MFY12 overall rise in index was a mere 1.26%YoY, over same period last year.
Manufacturing mainly driven by consumer durables
The provincial Bureau of Statistics which is used as proxy for consumer durables rose by ~3%YoY during 7MFY12, compared to industrial production gauged by Ministry of Industries (MoI) which grew by a mere ~0.9%YoY. Given its higher weightage, the overall impact of consumption based goods on growth inched up by 0.7% compared to 0.6% from industrial production. The overall impact of oil based products reduced to ~0.1%YoY.
It seems that the domestic consumption continues to feed in
The consumer durables cycle continues to show a monthly declining trending, down by ~0.9%MoM or by 8% YoY. Arif Habib Limited believes that this is largely due to a slowdown in domestic consumption as a result of higher inflation.
Manufacturers are far more upbeat than consumers
On the flip side, industrial production seems to be gaining momentum and is up by ~11%MoM or ~7%YoY. The rebound is reflected in part by the severity of the preceding decline, which has been a drag on the manufacturing sector due to supply constraints – power shortages and gas curtailment. The problem hasn’t been sorted out as yet, and Arif Habib Limited foresees the issue to prevail in the long-term. Nevertheless, it may also be argued that these constraints and higher input cost have lifted the manufacturing output prices which, is resulting in a misleading figure. Or, it may simply is adhering to its previous cyclical trends.
Major index lifters
Impact wise the food and beverage lead the growth causing an overall cumulative impact of 1.5%YoY. The trend may be reflective of falling domestic food prices which have increased consumption. Nevertheless weightage wise, the textile sector saw a mere 0.03%MoM rise owing to falling cotton prices, this brought about a 0.3% growth impact.
Major index draggers
Production of Steel and iron was down by 20%MoM during the Jan-12, which was followed by engineering products (down by 14%MoM). Although fertilizers sector saw monthly rise of ~19.5%MoM, the sector’s output was down by ~1.4%FY12TD.