August data shows rebound in Saudi economic activity

Saudi Arabia’s economic data for August showed a rebound in economic activity, according to a report. 

The non-oil PMI continued to point to an expansion of activity reaching 56.6 in August, states Jadwa Investment’s Saudi Chartbook for October 2016.
In month-on-month terms, cement sales and production rose by 1.3 and 1.1 million tons, respectively.
According to the report, recently released GDP data for Q2 showed a slower year-on-year growth in overall economic activity. 
Overall GDP growth slowed from 1.5 percent in Q1 to 1.4 percent in Q2.
According to the chart book, annual growth in non-oil GDP returned to the positive territory following two consecutive declines, while oil sector GDP growth came out lower in Q2, reaching 1.6 percent. 
Within the non-oil economy, private sector GDP continued to slow, with nearly all sub-sectors showing a downward trend in growth.
The net monthly decline in government deposits with Saudi Arabian Monetary Agency (SAMA) came out smaller in August. The majority of this decline came from government current deposits. Meanwhile, banks continued to increase their holdings of government bonds (up by SR2.4 billion).
In August, bank claims on the public sector continued to rise, month-on-month. 
Meanwhile, growth in credit to the private sector saw an improvement over the previous month, rising by 0.2 percent (7.5 percent, year-on-year). 
Within the private sector, credit with longer-term maturities continued to show negative annual growth, while growth accelerated in medium- term credit.
Total bank deposits showed a slight increase in August, rising by SR105 million, according to the report. 
This increase came mainly from a net addition to private sector and other deposits, while government deposits fell. The faster growth in credit relative to deposits caused the loan-to-deposit ratio to rise for the fifth consecutive month, reaching 90.8 percent in August from 90.5 percent in July.
Saudi Arabia’s inflation continued to decelerate, reaching 3.3 percent in August, mainly owing to a negative contribution from foodstuffs,stated the report. 
Meanwhile, both housing and core inflation saw a moderate slowdown, impacted by the negative growth in money supply. 
“We expect the recent reduction to public sector workers’ allowances to put further downward pressure on prices in coming months,” Jadwa researchers said in the report.
The report added that Saudi crude oil production remained unchanged month-on-month at 10.6 million bpd in August. 
“We expect some decrease in oil production in the months ahead, to around 10.5 million bpd. Meanwhile, latest available data shows higher oil production and lower domestic consumption helped push up Saudi oil exports to 7.5 million bpd in July,” the report added.
It said that Tadawul All-Share Index (TASI) dropped by 8 percent month-on-month in September resulting in a third consecutive decline in monthly performance.

“Monthly TASI traded volumes were down for the fourth consecutive month, continuing the trend seen during the holiday period, but also due to a risk-off approach by investors prior to Q3 earnings announcements. We do expect volumes to pick up in October,” said the Jadwa report.
The downtrend in the TASI has been mirrored in the decline in the key valuation metric of price-to-earning (PE). PE has trended downwards since May. Although this is partially due to slower trading during the summer months, it also reflects investor caution over expected profitability of listed companies in the near term.
Reflecting the overall performance of TASI, all sectors were down during September. The lack of major events or news items related to listed companies led to almost uniform performance among both the best and worst performing sectors, according to the report.

Source: Arab News