The General Authority for Statistics released its August business indicators on Tuesday, and the pairing to hold onto is this: operating revenues across the covered sectors rose 3 percent on the year while employee compensation rose 6.3 percent. Wages growing twice as fast as revenues would read as a margin squeeze in most economies. Here it reads as the price of staffing an industrial base that is still being built, paid while the top line grows underneath it.
The revenue detail puts finance in the lead. Financial and insurance activities grew 10.8 percent on the year, ahead of manufacturing at 7.7 percent, information and communication at 5.8 percent, construction at 3.2 percent and wholesale and retail trade at 2.2 percent. The finance line is consistent with everything else in the recent data: fund assets past SR1 trillion, bank credit compounding near 7 percent and a market microstructure being rebuilt rule by rule. An economy that intermediates more of its own growth books that intermediation as revenue, and the index is now recording it.
Manufacturing is where the wage story concentrates. Industrial compensation rose 9.7 percent on the year against the sector’s 7.7 percent revenue growth, with construction wages up 4.2 percent. Factories bidding for labor faster than they grow sales is what Saudization quotas meeting new industrial capacity looks like in a wage series: plants arriving on schedule need operators now, and the national labor pool for industrial trades is still being trained into existence. A wage line above a revenue line is sustainable while margins absorb it; the productivity data that follows will show how long the gap can run.
On the month, the index fell from July, a dip GASTAT attributed mainly to a 4.7 percent decline in manufacturing, with smaller falls in finance, communications and accommodation. August is a holiday-heavy month and single-month readings in this series swing; the annual lines carry the signal.
The one genuinely soft number in the release is intake, not output. Building permits fell 19.7 percent on the year to 5,621 in August, while construction revenues rose 3.2 percent and the sector’s activity index has now expanded for five straight months through September. Permits are the intake valve and revenues are the throughput: a sector working down a very large order book can run falling approvals and rising output for a while. The question the permits line opens is whether intake recovers before the book thins, and the October construction print will give the first read.
The forward indicator already leans positive. The Riyad Bank purchasing managers’ index rose to 55.3 in September from 53.8 in August, the strongest improvement in operating conditions since February. Hamza Dweik of Saxo Bank told Arab News the strength of construction and manufacturing matters because it expands productive capacity rather than parking value in financial assets, a distinction the revenue index itself is built to track.
September revenues land in about a month, third-quarter bank results arrive through the next two weeks and the construction print will read on the permits question. The gap between a 3 percent top line and a 6.3 percent wage line is the cost of building an industrial labor force in real time. Whether revenue growth closes it is the next two quarters’ question.