Businessmen highlight business issues in survey

[Naveed Yaseen]

PIDE’s business barometer survey
Energy crisis, low demand major constraints
Saturday, June 06, 2009
ISLAMABAD: Business tycoons have highlighted energy shortage, low demand, high cost of capital and inappropriate regulatory environment as the major constraints to their business during July-December 2008.

Planning Commission’s Pakistan Institute of Development Economics (PIDE) conducted a business barometer survey, a biannual feature that captures expectation of firms listed on the Karachi Stock Exchange.

The survey’s results were released on Friday. Two broad conclusions drawn from the survey results which shows that the economic activity, during January-June 2009, after registering the downturn in the past six months (July-December 2008), is likely to remain, more or less, at the level of the previous half of the year, and slight taming of the price spiral observed in recent months, will continue in the coming periods, at least to the extent that manufacturing sector contributes to aggregate prices.

Firms’ expectations for January-June 2009 regarding change in their capacity utilization, production volume, sales volume, inventory levels and investment activity are mixed. These mixed expectations, when coupled with discouraging actual results for July-December 2008, force to remain conservative in forecasting the change in level of business. Production volume, the survey states, is likely to remain, more or less, at the level achieved during July-December 2008. Respondents’ expectations regarding the production activity during January to June 2009 are mixed. Though 43 per cent of the firms expect that their production volume would increase in the next six months, but almost the same percentage of respondents expect no change in their production volume, while another 16 per cent fear a decline on this count. Given these mixed results, “we expect that aggregate production volume will remain more or less unchanged during January-June 2009.”

Aggregate capacity utilization of the manufacturing firms is likely to remain at the levels achieved in the first half of the fiscal year 2008-09. There is only a marginal positive difference between the utilisation levels achieved by the respondents in the first of FY 2008-09 and the capacity utilisation expected during the second half of FY 2008-09.

Moreover, majority of the firms expect no change, or worse still fear a decline in their sales volume in the international market. The respondents’ expectations regarding domestic and international sales, put together, cast a more or less static sales volume. The large majority of the respondent firms experienced a decline in their domestic sales volume during July-December 2008 (62 per cent). Now only 19 per cent of the respondents expect that their sales will decrease during January-June 2009.

However a significant percentage (35 per cent) of respondents expects no change in their sales volume relative to the previous half of the year forecast, in aggregate, for January to June 2009. The results regarding expected change in inventory levels are again mixed with a percentage as large as 46 per cent expecting no change in inventory levels with another 20 per cent fearing an increase in inventories held during JanuaryñJune 2009. —MH

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