The General Authority for Statistics published its detailed second-quarter national accounts on Tuesday, and the headline held: real GDP contracted 4.7 percent from a year earlier, with oil activities down 24.8 percent. The news is in the revision underneath. Non-oil activities, first reported growing 0.6 percent in the August flash estimate, grew 0.9 percent on the fuller count. The overall contraction narrowed a tenth from the flash’s 4.8 percent. The war quarter’s second reading found half as much growth again in the economy’s civilian half.
Revisions of this kind are not noise. Flash estimates are assembled from partial indicators and filled in with assumption; detailed estimates replace the assumptions with survey returns from firms. When the number moves, it reports which way the guesswork was wrong. This one moved up, and the direction matters more than the size: through the quarter in which the Kingdom’s Gulf export terminals were effectively cut off, the domestic economy was doing modestly better than the first estimate could see.
Where the Growth Sits
The sector detail explains where the extra growth was found. Community, social and personal services expanded 4.1 percent year on year, the fastest of any activity. Finance, insurance and business services grew 3.3 percent. Agriculture added 2.6 percent, real estate 1.6 percent, and construction and transport each grew just under 1 percent. The finance line is the one to pause on: a quarter of disrupted trade routes should be a bad quarter for banks, and it was not, because the growth engine of Saudi banking has shifted to domestic balance sheets, mortgages, project lending and fee business that do not transit any strait.
The expenditure accounts carry the policy story. Government final consumption rose 5 percent year on year, the counter-cyclical stance recorded in the national accounts rather than announced. Private consumption grew 0.8 percent. Exports fell 24.6 percent while imports fell 14.8 percent, and the gap between those two numbers is the quarter told in trade: export volumes absorbed the war’s cost while domestic demand kept buying. An economy whose households and government had stopped spending would show a very different import line.
Volumes, Not Dollars
The caveat from the flash estimate still governs the detailed one. Real GDP counts volumes, and the 24.8 percent fall in oil activity is, to a first approximation, a measurement of rerouted geography: barrels that could not reach Gulf terminals, less the pipeline capacity that carried exports west. Prices have run far above last year’s levels throughout the closure, so the fiscal accounts will not mirror the volume series. Oil subtracted 5.4 percentage points from annual growth in the accounts; what it subtracted from revenue is a smaller number that the budget documents will eventually state.
The third quarter is already reporting, at higher frequency. The purchasing managers’ index read 53.1 in July and 53.8 in August, a six-month high. The construction index read 55.4 in August, a fourth consecutive month of expansion. If the surveys are right, the sequential dip in non-oil activity that the flash estimate recorded was a pause rather than a trend, which was the question that release left open. The numbers to watch next are the third-quarter flash in late October and the pre-budget statement, which now has the delicate task of reconciling a volume recession with a price windfall in a single fiscal narrative.