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Consumption-led growth goes up

Updated February 22, 2014

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The consumer financing, led by car purchasing and personal loans, rose to Rs237.5bn. - File Photo
The consumer financing, led by car purchasing and personal loans, rose to Rs237.5bn. - File Photo

KARACHI: Consumption has gone up during a year which helped the manufacturing sector grow faster as indicated by the growth of large scale manufacturing, higher liquidity for private sector and significant rise in consumer financing.

A report issued by the State Bank on Friday showed that consumer financing went up by Rs25 billion from January 2013 to January 2014.

The consumer financing, led by car purchasing and personal loans, rose to Rs237.5bn. The details showed that loans provided for car purchasing went up by Rs11.4bn to Rs57bn during the same period.

The higher consumption helped the manufacturing sector grow faster than previous five years.

The growth rate of LSM during the first six months of the current fiscal year was 6.7pc which is highest in the last seven years, reported the State Bank on Friday.

The LSM average growth of last five years was just 1pc.

“In 2007, the LSM growth was 9.6pc,” said a report of the Topline Securities.

Alone in December 2013, LSM grew 13.2pc year-on-year while it grew by 24.3pc in December verses November 2013, said the report.

Another report of the State Bank showed that private sector has accelerated its effort to use banks’ money for trade and businesses.

The private sector has so far borrowed Rs273bn from banks between July 2013 and Feb 7 which is much higher than Rs109bn borrowed during same period of last year.

Private sector borrowing in FY-13 was minus Rs19bn while in FY-12, the borrowing was Rs235bn which means that seven months borrowing is even higher than the last two years.

However, banks are still not ready to participate in the growth of housing sector which recently witnessed significant growth.

Banks’ supply of liquidity to housing sector slid during the last 12 months to Rs38bn from Rs39bn.

Since saving rate is the lowest in the region, housing sector despite its high potential to grow, failed to meet the demand.

Bankers say risk is high in the housing sector.

Bankers said that low government borrowing from scheduled banks provided space for the private sector which is still too low as demand is high.

“Most of the banks’ money for private sector has gone for working capital,” said a banker, indicating that role of banks’ money in recent growth in manufacturing sector is relatively limited.