THE robust growth in large-scale industrial output since July last year has generated a kind of economic optimism across the country. Figures from the Pakistan Bureau of Statistics for large-scale manufacturing output during March show that the large industry expanded by a robust 22.4pc year-on-year. This hefty increase in the LSM index, however, is because of low base effect on account of lockdown restrictions imposed last year to stop the spread of Covid-19. Going forward, we may even see a higher growth in the LSMI, thanks again to the low base effect. The low interest rate environment is also likely to help sustain growth in industrial production. Still, it may be noted that the LSMI has posted negative growth on a month-on-month basis for two months running. In March alone, the LSM output contracted by 7.7pc owing to the decline in sugar, wheat and grain milling, diesel, etc.

Even though LSM has posted year-on-year growth of 9pc from July to March, the declining month-on-month output underlines the fact that industrial recovery has been narrowly based as it is driven mainly by automobiles, construction, textiles, food and pharmaceuticals. In other words, LSM growth indicates the revival of economic activities in the country but also remains weak and is dependent on only a few sectors. The economy is recovering but not creating enough jobs. The rapid spread of infections in recent months and the slow roll-out of the Covid vaccine have again added to the uncertainty about the future. If this third wave of pandemic lingers, or is followed by a fourth one, it will be devastating for the nascent and fragile economic recovery seen in the last few months. A Dun & Bradstreet survey shows consumer confidence sliding on pandemic concerns and worries over loss of jobs, shrinking purchasing power and rising price inflation. It is only a matter of time before declining consumer confidence starts to infect the investors’ sentiments unless the spread of the disease is contained fast and effectively.

Published in Dawn, May 17th, 2021