JEDDAH — Economic activity in Saudi Arabia recorded a seasonal slowdown in July, in line with the usual pattern around the Eid Al-Fitr holidays, the latest edition of the monthly Chartbook from Jadwa Investment revealed Tuesday. The net withdrawals from government accounts with SAMA fell to its lowest point in 10 months with all three main government accounts recording small net monthly changes. This led to a further reduction in the monthly withdrawal from foreign exchange reserves. The Saudi unemployment rate fell slightly to 11.6 percent as the economy created new jobs at a faster rate than the expansion in the Saudi labor force. However the growth in the number of Saudis outside the labor force grew at a higher rate leading to a decline in the participation rate to 40.4 percent. Inflation remained unchanged at 2.2 percent. Markets globally saw further declines in August largely caused by the devaluation of the renminbi and bearish investor sentiment fueled by concerns over China's continued growth. TASI performance was further affected by the drop in oil prices. Although average turnover edged up in August, it is still below the year-to-date average in most sectors. The weaker performance of the TASI during August saw price-to-earnings (PE) drop below the two year average for the first time since January 2015. The TASI is currently still at a premium to most regional markets, which also witnessed sell-offs during the month, whilst dividend yields remain in-line with emerging markets. All 15 sectors saw negative performances in August as investor selling was felt across most of the market due to negative sentiment. Media was one of the worst performers but transport and building & construction also struggled. Continued growth in global oil supply and concerns over demand combined to push Brent prices down by 18 percent, month-on-month despite an upward spike towards the end of the month. Saudi crude production in July averaged above 10 mbpd and we see this elevated level of output continuing for the rest of the year. The competition for global oil market share is becoming intense, as witnessed by an increase in output from Iraq in July. Latest data shows that global oil demand will pick up in 2016. In July, inflation remained unchanged, year-on-year, at 2.2 percent. The housing segment was the major source of inflationary pressure in July as it rose to 3.6 percent, year-on-year. Jadwa's measure of core inflation recorded a slowdown, pushed down mainly by a rapid deceleration in the recreation and culture segment. In the first quarter, the Kingdom's current account recorded its first deficit since Q1 2009, reaching –$10.5 billion, mainly impacted by lower oil export revenues. The Kingdom's trade balance remained in surplus at $14.6 billion with both exports and imports falling. The deficit in the services account continued to shrink. — SG
