GOING by the emerging macro indicators, it seems that the hard times for the economy will not be over any time soon despite a few marked positive trends.

The falling foreign investment as well as exports, double-digit inflation, highest interest rates in the region and energy crisis continue to cast a shadow over the economy. But in some areas like revenue generation, farm production and workers remittances positive trends are clearly visible.

Large-scale manufacturing (LSM) regressed about two per cent (1.86 per cent to be precise ) in April, the latest month for which data has been released though it registered over one per cent growth in ten months of this fiscal year.

Production of kerosene oil, lubricants and jute batching oil were up in ten months compared to the same period of last year.

Output of sugar surged 12 per cent. Other industries which exhibited some expansion between July 2011 and April 2012 included paper and boards, cement, buses, jeeps and cars, light commercial vehicles and motorcycles.

Manufacturing of vegetable ghee, tea blending, wheat and grain milling and pharmaceutical manufacturing also experienced increased activity. But at the same time industries recording a fall in production included LPG, high speed diesel, phosphoric fertilisers, iron and steel products, woollen and carpet yarn, leather products, chemicals, paints and varnishes, deep freezers and TV sets.

Despite sluggish growth in industries, tax authorities have reported a big 25 per cent increase in revenue in eleven months. But they are still short of Rs321 billion to meet the full fiscal year target of Rs1952 billion. The newly appointed chairman of the Federal Board of Revenue, Mr Mumtaz Haider, is optimistic about such a big collection in just 30 days of June but some of his colleagues admit that this is too big a task to achieve.

Monthly CPI inflation fell to 1.1 per cent in May from 1.8 per cent in April. A substantial cut in domestic fuel prices announced in mid-June may keep up this trend to some extent thereby offsetting the negative impact on the price-line of three per cent rupee depreciation during last month.

Meanwhile, the rupee has remained relatively stable in the first three weeks of June—and has even regained part of its lost value. With the growth in home remittances remaining strong, those who had amassed dollars earlier sold them for profit-taking by the end of May. Such inflows finally found their way into the banking system through foreign exchange companies.

Another important aspect of a sharp decline in the rupee value last month is that this month exporters have realised the overdue export bills of millions of dollars while the opening of import LCs has somewhat slowed. This should reflect in external trade data for June which should be out in July.

Whereas the central banks of India and Pakistan kept policy rates unchanged in their monetary policy reviews this month, the Chinese central bank made a surprise 25 basis points rate-cut to accelerate industrial output and economic growth. Since 15 per cent of our total imports originate from China, any move by the Chinese authorities to make industrial production cheaper, would increase our imports from there tilting the bilateral trade further in favour of Beijing.

Pakistan’s overall imports’ bill in dollar terms rose about 3.6 per cent in May over April and export earnings declined by almost the same percentage. But in eleven months to May export earnings fell about four per cent whereas imports bill grew 12 per cent.

The ongoing energy shortages at home, depressed demand in eurozone countries and competitive edge of low interest rates and lower cost of production in India, China, Bangladesh and Sri Lanka are key reasons for decline in exports.

Foreign exchange earnings of textile sector, which account for slightly more than half of total exports, declined by about ten per cent between July 2011 and May 2012. Mohsin Aziz, chairman All Pakistan Textile Mills Association, holds gas and electricity shortages and high interest rates responsible for this.

Despite India’s lifting of a three-year-old ban on export of coarse rice and about 25 per cent depreciation of the Indian rupee in eleven months to May, exports of non-Basmati rice rose four per cent to $1.162 billion though there was about two per cent dip in export volumes. Exports of Basmati rice fell seven per cent in quantity and by more than three per cent in foreign exchange earnings. Rice exporters are still targeting earnings of more than two billion dollars this fiscal year.

Exports of jewellery, a non-traditional item, shot up 105 per cent to $745 million in eleven months to May, primarily because of increase in gold prices, exporters’ deeper penetration into well-established markets of the Middle East and their quick entry into such non-traditional markets like Bangladesh, China, Central Asian states and North Africa.

As the external sector indicators deteriorate making the importance of import-substitution all the more obvious, state-run oil marketing company PSO has entered into an agreement with local refinery PARCO to get more than usual supply of petroleum products from the latter. If all goes well, PSO’s enhanced reliance on domestic supply of POL products is expected to cut Pakistan’s fuel oil import bill by $130 million.

Meanwhile, the exit of Yousuf Raza Gilani and dissolution of his cabinet after a Supreme Court verdict and installation of a new prime minister have generated a debate on future outlook of the economy. Most business leaders have sounded cautious optimism but underlined the need for the new PM to address such core issues as energy crisis, deteriorating law and order and political instability.