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The Industrial Production Index (IPI) was down 4% y-o-y in June 2024 on the back of a decline in mining and quarrying activity — the index’s heaviest-weighted component, according to a General Authority for Statistics (Gastat) report (pdf). The IPI analyzes survey data to show changes in the volumes of industrial production across the Kingdom.
Activity in the mining and quarrying sectors — which account for 61.4% of the overall IPI — fell 11.3% y-o-y, driven by a reduction in oil output which was down to 8.8 mn bpd in May 2024.
IN CONTEXT- Mining activity in the Kingdom has been ramping up as of late, with the Industry and Mineral Resources Ministry granting 20 licenses in May and offering up the “ largest mineralized belts ” to be tendered in Saudi last month. The ministry announced plans earlier this year for an incentive program to encourage exploration, with gold and phosphate in particular focus, among other materials. The nation’s untapped mineral resources could be worth as much as USD 2.5 tn, or 90% more than the last forecast in 2016, officials said in January.
Oil vs non-oil: The oil activities index fell 8.5% y-o-y due to the oil production drop, while the index for non-oil activities grew 8.6%, supported by an increase in all non-oil economic activities.
REMEMBER- The Kingdom continues to cap its oil production as part of its ongoing agreement with OPEC+ to voluntarily cut oil production, but there are indications that the cuts will start to be phased out by the fall.
Meanwhile, the sub-index for manufacturing climbed 7.4% y-o-y on the back of a 5.3% boost in coke and refined petroleum products manufacturing and 9.2% growth in chemicals manufacturing. Manufacturing accounts for 35% of the overall IPI, making it the second-weightiest component after oil and minerals. The latest IPI report shows that manufacturing activity in the Kingdom rose in June for its sixth straight month, Aleqtisadiah notes.
Utilities were up across the board: The sub-index for electricity, gas, steam, and air conditioning supply activity was up 10.2% y-o-y, while that of the water supply, sewerage and waste management, and remediation activity inched up 1.7% y-o-y, rebounding from a 0.2% y-o-y dip recorded in May.
