Saudi Arabia’s Industrial Production Index Sees Growth in Manufacturing Sector
Official data released by the General Authority for Statistics revealed that Saudi Arabia’s Industrial Production Index (IPI) experienced a 1.6 percent increase in July compared to the same month last year. This growth was primarily driven by a surge in manufacturing activities, with the Kingdom’s IPI reaching 106.2 points for the month.
Manufacturing of Chemical Products and Food Items Lead the Way
The rise in the manufacturing sector was propelled by a 4.6% increase in manufacturing activities, particularly in the production of chemical products and food items, which saw a significant surge of 5.7 percent and 10.1 percent, respectively. These developments are crucial for Saudi Arabia as it aims to diversify its economy and reduce its dependence on oil, in line with the goals outlined in Vision 2030.
Impact of Oil Production Cut on Mining and Quarrying
While manufacturing activities saw growth, mining and quarrying activities experienced a 0.8 percent decline year on year in July. This decrease was attributed to Saudi Arabia’s decision to cut oil production to 8.9 million barrels per day, in accordance with OPEC+ agreements. The reduction in oil production led to a 1.1 percent decrease in the index for oil activities, while non-oil activities saw an 8.2 percent increase.
Stabilizing the Market with Oil Production Cuts
To stabilize the market, Saudi Arabia extended its oil production cut of 500,000 barrels per day until December 2024. Despite the decrease in oil activities, electricity, gas, steam, and air conditioning supply activities recorded an 8.2 percent year-on-year increase in July, while water supply, sewerage, waste management, and remediation activities rose by 1.1 percent.
Month-on-Month Trends Show Growth in Manufacturing and Mining
On a month-on-month basis, manufacturing activities increased by 1.7 percent, driven by a 3.3 percent rise in the production of coke and refined petroleum products. Additionally, mining and quarrying activities saw a 1.3 percent increase in July compared to June, with both oil and non-oil activities showing positive growth trends.
Importance of the Industrial Production Index
The IPI serves as an essential economic indicator that measures changes in industrial output based on production surveys. The recent data highlights the resilience of Saudi Arabia’s manufacturing sector and its role in achieving the country’s economic diversification goals.