ISLAMABAD, Nov 2: The rate of rapid growth in prices witnessed in the past year is likely to remain ‘contained’ during the coming months, according to bi-annual ‘Business Barometer’ of Pakistan Institute of Development Economics (PIDE) released here on Wednesday.
The magnitude of increase in prices expected by manufacturing industries during July-December 2011 is less than what the firms experienced during the first half of the year.
Similarly the number of firms that expected an increase during July-December 2011 has also declined. These responses suggest that the rate at which prices have been increasing, is likely to decline slightly, PIDE barometer says.
PIDE says while the trend of increasing prices exhibits some signs of a slight tapering off, the recent improvement in power supply, if sustained would help in increasing the production and sales volume, however, the shortage of natural gas expected in winter tends to dampen the hopes for the manufacturing industries.
The production and sales volume of manufacturing units maintained the pattern of sluggish growth during January-June 2011 and the firms expect that the trend would continue during July-December 2011. The extent of capacity utilisation of the firms also suggests that production and sales trends are not likely to change much during this period.
Wages during the January-June 2011 have increased but only as a matter of annual routine and the increase is not directly tied to the high inflation observed in the preceding periods. This trend shows one of the characteristics that wages do not respond to inflation very quickly.
During January-June 2011 period, 47 per cent of manufacturing industries posted growth in the volume of production with majority of these expecting a modest growth of 10 per cent or less. Seventeen per cent of the firms also registered a growth of more than 30 per cent.
The manufacturing units put the onus of increase in product prices on increase in the input prices.
Eighty-eight per cent of the firms registered an increase in input prices during January-June 2011 with 51 per cent of such firms posting an increase of more than 10 per cent.
The number of firms that expected an increase in the prices of inputs during July-December 2011 is more or less the same that experienced an increase during the first half of the year, however what is important is that only 29 per cent of the firms expected an increase of 10 per cent or more in input prices as against 51 per cent that actually experienced an increase during the previous half of the year, the PIDE barometer says.
According to the barometer, 44 per cent of the firms registered an increase in sales volume while 53 per cent expected their business volume to grow during July-December period. During the first six months of 2011, the capacity utilisation of 33 per cent of the firms was more than their utilisation in first half of the year. A similar number expects to use greater capacity during July-December 2011.