Economic indicators point to Saudi Arabia’s sustained growth

Saudi Arabia’s economic indicators last July point toward a sustained developmental growth in the Kingdom, Jadwa Investment said in its Saudi Chartbook for this month.

It said the economic data for July was strong with the non-oil PMI expanding at the fastest rate since September 2012. Consumer spending also remained robust.

Cement production and sales declined on the back of seasonal trends, but also due to changes in labor market.

Moreover, total bank deposits hit a new all-time high above SR1.5 trillion for the first time in July. The prospect of higher interest rates in the U.S. has pushed the annual growth of time and saving deposits to a six-year high.

However, bank lending to the private sector slowed slightly in July, which seems to be related to seasonal factors during the summer rather than a change in risk appetite.

There were also unusually sharp movements in the maturity profile of outstanding debt.

Nonetheless, year-on-year inflation inched down in July, continuing the flat trend in the previous three months, although this trend hides some sharp movements.

Besides, non-oil exports rebounded in July owing to greater production of petrochemicals and plastics. In contrast, imports fell for the second consecutive month in June.

Yet the disappointing economic results from Germany and France resulted in the euro dropping in August.

The Saudi stock market though remained resilient, with the main stock index TASI increased by 8.8 percent, month-on-month, in August as the prospect of opening the stock continued to buoy investors’ confidence.

Average daily turnover jumped by 45.6 percent in August, the largest rise in more than two years.

In August, the TASI’s price-to-earnings (PE) valuations increased to 21.3, moving further away from the two-year average of 16.5. In terms of sectoral performance: In August, banks performed much better than other sectors, Building & construction was boosted by developments in a major national projects, but seasonality negatively affected hotels.

Brent fell 3.6 percent to $101 per barrel. WTI dropped marginally to $97.9 per barrel. A rise in the trade weighted dollar is negatively affecting oil demand.

In July, Saudi crude production rose above 10 mbpd for the first time since September last year as seasonal domestic demand picked up.

The economic data for July was strong with the non-oil PMI expanding at the fastest rate since September 2012.

Consumer spending also remained robust, with cash withdrawals from ATMs hitting a new high. Cement production and sales declined on the back of seasonal trends, but also due to changes in labor market.

The overall non-oil Markit/HSBC PMI registered 60.1 in July, the fastest rate of expansion since September 2012.

The value of cash withdrawals from ATMs was at an all-time high in July and 8.3 percent greater than July 2013.

Cement production and sales dipped further in July following regular seasonal trends. Year-to-July production and sales were 6.8 and 7.5 percent below the same period of last year, respectively.

This article was first published in Saudi Gazette on Tuesday, Sep. 02, 2014.