Arab Today, arab today kingdom’s imports up 44 in june
Last Updated : GMT 01:44:06
Arab Today, arab today
Arab Today, arab today

Kingdom’s imports up 4.4% in June

Arab Today, arab today

Arab Today, arab today Kingdom’s imports up 4.4% in June

Riyadh - Arabstoday

Saudi Arabia\'s incoming economic data signals that nonoil sector growth has been moderating after blistering growth last year and early this year. The nonoil sector had witnessed a record growth due to government expansionary fiscal policy which included one time large transfer payments to households and many social benefit schemes. The growth in the sector had accelerated by 3 percent from 5.3 percent in 2010 to 8.3 percent in 2011. As the base effects kicks-in in the second quarter of this year, growth is expected to be lower especially in the absence of same large transfer payments to the households, according to a report by Al-Rajhi Capital. HSBC PMI for Saudi Arabia eased to 58.1 in July, lowest since December 2011 on back of slower growth in production and new orders. Another indicator which signals slower growth in nonoil sector is foreign trade data. Import growth slowed down 4.4 percent year-on-year in June compared to 15.4 percent year-on-year in May. Note that average growth in import was 31.7 percent in Q1, 2012 which slowed to 13.4 percent in Q2, 2012. Nonoil export also declined in June. However, consumer side of the nonoil sector seems to be doing well as signaled by point of sales (POS) data which shows increase in sales and number of transactions. Average monthly value of POS increased from SR9.4 billion in Q1 to SR10.6 billion in Q2. Further, accelerating credit growth also supports positive views on the nonoil sector. Therefore, it is likely to be moderation only rather than any significant slowdown, the Al-Rajhi Capital report said. Inflation Inflation sharply plunged in Saudi Arabia in July to near three-year low. The inflation index increased 4 percent in the month compared to 4.9 percent in June. This is also the fastest moderation in Saudi inflation (by 0.9 percent) in a month since July 2009 when inflation had declined by 1 percent (from 5.2 percent in June to 4.2 percent in July) in a month. The sharp moderation also brought the inflation level to the lower boundary of the medium term range of 4 percent-6 percent. Moderation in inflation is more visible when compared to the prices at the end of 2011. The inflation index has moved up just 1.6 percent in the first seven months of 2012. The moderation was broad based as almost all subcomponents of the inflation index eased. The notable decline has happened in \"Other expenses and service\" category which was close to double digit in starting months of the year. It sharply declined to 1.8 percent in July. Note that the category has 13 percent weight in the inflation index. Price rise in another heavyweight category in the index - food and beverages - also moderated to 4 percent despite the second half of the month being part of holy Ramadan. Al-Rajhi Capital said holy month of Ramadan generally witnesses spike in price levels especially in food category as demand for these items increases. On monthly basis, the price increase in the category was 0.4 percent. We believe that the rise in food prices during the month of Ramadan will be reflected in August data also as two third of the Ramadan fell in August. Another large category in the inflation index — rent, renovation, fuel and water —remains slow in moderation. The price index in the category increased 8.3 percent in July. It remains the fastest rising category in the inflation basket and thus remains largest contributor in inflation. Rent increased 9.2 percent whereas home repair increased 5.5 percent compared to a year ago. There was hardly any price movement in other subcategories. Al-Rajhi Capital expects inflation to remain around 4 percent in August and decline again in later months of the year. The Kingdom\'s inflation is expected to average 4.7 percent for the entire year of 2012. Foreign trade Foreign trade data reflects slowing global growth and some moderation in Saudi Arabian economy, particularly in the nonoil sector of the country. The preliminary foreign trade data released by Central Department of Statistics and Information (CDSI) shows that export declined by 7 percent year-on-year in June. On the other hand, import grew by 4.4 percent year-on-year in the same month. Petrochemical export remains the dominant constituent of the nonoil export with share of almost 37 percent in the total nonoil export in June. Total value of petrochemical export was SR5.31 billion during the month. It was followed by plastic which had 30 percent share in total nonoil export with value of SR4.31 billion. Thus, these two sectors constitute two-third of the total nonoil export. On import side, machinery, appliances and electrical equipment constituted the largest share of 27.2 percent in total import. The total value of import for this category was SR12.05 billion in June. Another large category of import has been transport equipment which has 17.5 percent share with SR7.75 billion value of import, the Al-Rajhi Capital report said. On quarterly basis, the average growth in export and import also point slowdown after peaking in the third quarter last year. Average growth in the nonoil export plunged to 9.3 percent in Q2 compared to 19.5 percent in Q1, 2012 and 26 percent in Q2, 2011. From arabnews

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