Saudi non-oil sector continues expansion

RIYADH — Saudi economy slowed in April, with the non-oil PMI sliding back to near record lows, but continued to point to an expansion in the non-oil economy, Jadwa Investment said in its report. Cement sales and crude steel production came out negative in both year-on-year and monthly terms. The report said “in April, the net monthly change to government accounts posted its first increase in four months, rising marginally by SR1.4 billion. The increase was mainly due to a net addition to government current deposits, while both the government reserve and government projects accounts posted net withdrawals.” Annual growth in bank claims on the public sector rose by 88.3 percent in April, mainly owing to the large sovereign bond issuance to banks during the month. According to the report, quarterly data on net new credit to the private sector showed that commerce was the largest recipient (SR15.9 billion), while finance and manufacturing saw declines by SR1.4 billion and SR2.1 billion, respectively. Brent rose by 13 percent mainly because of oil outages from Canada and Nigeria which saw around 1.5 mbpd being temporarily unavailable to global markets Inflation reached 4.2 percent in April, posting a marginal slowdown from 4.3 percent in March. The report attributes this to a slowdown in the housing component, while prices of foodstuffs accelerated. The acceleration in food prices includes both international and domestic seasonal factors. Brent rose by 13 percent and WTI by 14 percent month-on-month in May. According to the report, this is mainly because of oil outages from Canada and Nigeria, which saw around 1.5 mbpd being temporarily unavailable to global oil markets. Saudi crude production was flat month-on-month in April at 10.2 mbpd. Latest data, based on the report, showed that Saudi crude exports averaged 7.6 mbpd in Q1 2016. According to the report, speculative activity linked to the appointment of a new governor at the Saudi Arabian Monetary Agency (SAMA) drove up the one year US dollar/riyal forward rate in May. The US dollar strengthened after comments from the Federal Reserve hinted at an interest rate hike in the next month or two, it added.