JS Securities Limited – JS Research (31-10-2019)

Karachi, October 31, 2019 (PPI-OT): LSM down for nine months in a row; declines 7.06% YoY in Aug-2019

Large-scale manufacturing (LSM) recorded a 7.06% YoY drop during Aug-2019, which marks the ninth consecutive month of YoY decline. Sequentially, LSM declined by 4.08% MoM, whereas cumulatively, LSM declined by 6.04% YoY during 2MFY20.

Within major sectors, (1) Automobiles, (2) Iron and Steel Products, (3) Pharmaceuticals, (4) Food, Beverages and Tobacco, and (5) Coke and Petroleum Products witnessed a sharp reduction in growth during the month on YoY basis. On the other hand, Electronics, Fertilizers and Engineering Products recorded growth during the month compared to last year.

Latest data shared by the Pakistan Bureau of Statistics (PBS) shows that Large Scale Manufacturing (LSM) declined by 7.06% YoY during Aug-2019. Declining LSM has become the norm, as LSM has now declined for nine months in a row given the broader economic slowdown which is evident from across the board dismal performance of various industries. Among the major categories of LSM, the leading underperformers during the month were Automobiles (down 32.8% YoY), Iron and Steel Products (down 17.7% YoY), Pharmaceuticals (down 16.8% YoY), Food, Beverages and Tobacco (down 16.7% YoY) and Coke and Petroleum Products (down 10.0% YoY).

On the other hand, Electronics (+67.8% YoY), Fertilizers (+15.6% YoY) and Engineering Products (+38.6% YoY) recorded growth during the month. Sequentially, LSM declined by 4.08% MoM, whereas cumulatively, LSM declined by 6.04% YoY during 2MFY20. We would reiterate that the LSM performance is likely to remain subdued in the immediate term given the prevailing stabilization measures undertaken by the authorities to put the economy on the path of sustainable and balanced growth.

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