FAISALABAD (December 08 2006): The infrastructure industries index, which measures the performance of seven industries, ie electricity generation, natural gas, crude oil, petroleum products, basic metal, cement and coal, has recorded a 26.2 percent growth in industrial sector of Pakistan.

According to official sources, the index is composed of energy-related industries (83.5 percent share) and construction and allied industries (16.5 percent share), which is a leading indicator of the performance of industrial sector.

The index recorded 26.2 percent growth in 2006 financial year as against 11.3 percent growth in 2005 financial year. The production of electricity and coal accelerated to 12.8 percent and 13.7 percent respectively during the FY06 compared with 10.3 and 2.6 percent growth respectively last year.

The positive impact of these two industries was offset by the deceleration in the production of natural gas, cement and petroleum products and fall in the production of basic metal and crude oil production. In terms of end-use categorisation of industrial production (basic, consumer, intermediate and capital goods), a deceleration is evident in all categories during FY06.

Encouragingly, capital goods group witnessed a marginal slowdown and grew by a strong 26.9 percent during FY06. This relatively strong growth came from higher production of electronic items such as transformers, meters and engineering products eg diesel engine, shuttles and bobbins.

Strong growth in capital goods suggests that growth momentum in other categories is also likely to accelerate in FY07. The second highest increase was registered under the category of consumer goods in FY06 for yet another year, on the back of a sustained rise in income, declining prices of electronics as well as availability of consumer financing. In particular, despite a slowdown in consumer durable goods, this group recorded a strong growth of 31.3 percent in FY06 as compared 40.8 percent growth in FY05.

This strong growth in consumer durable is mainly contributed by electronics and automobile industries due to consumer financing, and an evident weakening is entirely owed to rising interest rates on consumer financing. Given still strong aggregate demand and private spending, growth in consumer goods is likely to remain reasonably good.

The basic goods category showed some resilience, witnessing a deceleration of only 1.6 percent in FY06. Within basic goods, electricity generation (by both Wapda and kesc), marble, coal etc witnessed higher growth rates during FY06 as against in FY05.

The impact of this was offset by slowdown in the output of some chemicals eg hydrochloric acid, sulphuric acid and fall in the production of crude oil and coke. In FY06, the growth rate of 4.9 percent in the output of intermediate goods is lower than 16.8 percent growth in the corresponding year, mainly on account of a fall in the production of metal industry and cotton ginning.

Moreover, growth in production of textile related chemicals and natural gas also witnessed deceleration during FY06. Although, intermediate goods showed a dismal performance, it is likely that the growth would pick up in FY07 since the declines in both metal and cotton ginning appears to be temporary.

Copyright Business Recorder, 2006