Daily Economic Update

Saudi Arabia: Industrial production rises in December. Saudi Arabia's industrial production index rose by a solid 1.3% m/m in December 2024, albeit resulting in year-on-year growth slipping to 2.1% y/y from 2.5% in November. December’s performance was driven by a broad increase in manufacturing activity, which expanded by 1.3% m/m (4.7% y/y), lifted by strong growth in food products (8.8% y/y) and chemicals (4.8% y/y). The non-oil component of industrial production more broadly (which includes manufacturing and utilities) expanded by 4.0% y/y, which jives with the other gauges of economic activity, including the Purchasing Manager’s Index, which in December stood in the high 50s, indicating robust expansion that broadly reflects the ongoing structural transformation of the Saudi economy. More modest 1.3% y/y growth was logged in the oil component of production amid lower petroleum extraction but positive growth in refining output.         

Chart 1: Saudi Industrial Production  (% y/y) Source: GASTAT

Egypt: Two consortia of international energy players are set to invest more than $100mn over the coming 5-8 years. The first consortium consisting of Eni, BP, and Qatar Energy will invest around $100mn to drill 3 exploratory oil and gas wells over a period of 8 years. The other group composed of IEOC and Apex International Energy will invest $17mn to drill 7 wells. Finally, Apache will invest around $60mn for its drilling program in the western desert that is mainly focused on natural gas. Such investments are crucial to increase local production of oil and gas which is well needed to bring down the energy import bill. However, these investments when distributed across the number of years, are still considered small compared to the needed level to deliver in a major difference to local production.

US: Powell reiterates Fed is not in hurry to cut interest rates. Fed chair Powell, in testimony before Congress, reiterated his previous views that the US economy remained “strong overall”, with the policy stance “significantly less restrictive,” and therefore the Fed is not in a hurry to cut interest rates. He emphasized that he would wait for actual implementation of the Trump administration’s tariff and other policies before assessing the bank’s policy stance. He also cautioned about the current unsustainable federal debt path. Overall, Powell’s comments were not very different from his previous messages, and market reaction following his testimony was relatively muted. Meanwhile, escalating fears of a trade war, European Commission President Ursula von der Leyen stated that US tariff actions would “not go unanswered” and “trigger firm and proportionate countermeasures” from the EU. She didn’t provide further details at this point. Trump on Monday imposed 25% new duties on some metal imports from nearly all countries, including the EU, which would take effect on March 12 (media reports previously cited March 4 as the effective date).

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