Declining LSM growth

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The contraction in large-scale manufacturing (LSM) industries is a matter of concern for the business community of the country as it is feared that the sharp decline in LSM output will heighten the risk of a prolonged economic slowdown besides increasing unemployment in the country.

The purchasing power of people has been adversely affected due to currency depreciation and higher inflation. There are a number of factors which contributed to the slowdown in the growth of LSM including lower PSDP expenditures compared to last year, slowdown in the private sector construction activities and consumer spending on durable goods.

The Automobile prices witnessed multiple upward revisions due to PKR depreciation which held the potential buyers refrained from making booking and purchases. Similarly, certain restrictions on non-filers with respect to purchase of cars further reduced the automobile demand.

Pharmaceutical also suffered due to a considerable lag in regulatory adjustments in prices.

This pricing issue was in addition to weakening of the local currency, which added to the distress of an import dependent sector.

The slowdown in LSM has affected the small and medium industry, SME sector. The small and medium units like auto-part producers who are part of a supply value-chain and sell their goods to the large-scale industry are affected the most because of the ongoing demand contraction for the last one year.

The business confidence is dipping and the job market is weakening and after one year of new Government the uncertainty is still hovering around. Therefore the government must also evolve an index to gauge growth or otherwise of small and medium-sized manufacturing industry where jobs are actually created to get the real picture of the economic slowdown.

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