Saudi economic growth drops to 3.8% in Q2

Updated 25 September 2014

Saudi economic growth drops to 3.8% in Q2

DUBAI: Saudi Arabia's economic growth eased to an annual 3.8 percent in the second quarter of 2014, the lowest rate in a year, because of a slowdown in the oil sector, official data showed on Wednesday.
But the first-quarter growth rate for inflation-adjusted gross domestic product was revised up to 5.1 percent - the fastest pace since the third quarter of 2012 - from an initial reading of 4.7 percent.
On a quarter-on-quarter basis, GDP dropped 3.1 percent in the second quarter, the biggest fall since the quarterly data series began in 2010, after a 4.1 percent jump in the previous quarter, the figures from the Central Statistics Office showed.
Saudi Arabian economic growth is usually at its most robust early in the year, when the weather is favorable and few public holidays halt work; GDP then regularly falls in the second quarter from the previous three months.
Growth in the hydrocarbons sector, which accounts for almost half of the $748 billion Saudi economy, slumped to 2.5 percent year-on-year in the second quarter from 6.1 percent in the previous three months, the data showed.
The Kingdom exported just below 7 million barrels of oil per day in May-July, the lowest amount since September 2011, according to the Joint Organisations Data Initiative (JODI), because of weak global demand. The Kingdom burns more oil domestically in the summer to satisfy growing demand for cooling, which has been eating into exports.
Saudi oil production may ease in the second half of this year since crude oil prices have decreased to around $96 per barrel and as the region exits the summer period of peak demand.
"We think that the second half will see a lower (GDP) growth than 4.5 percent...because of the lower contribution of the oil sector," said Fahad Alturki, head of research at Jadwa Investment in Riyadh.
Growth of the non-oil private sector edged up to an annual 4.7 percent in April-June from an upwardly revised 4.6 percent in the previous three months, a sign that the impact of labor market reforms might be starting to subside.
"Momentum in the private sector continues, indicating that despite a decline in oil production, the non-oil private sector as well as state spending could help the Kingdom easily achieve the economic growth target of 4 percent in 2014," said Abdulwahab Abu Dahesh, a Saudi economist.
Around a million foreign workers left Saudi Arabia last year after a crackdown on visa irregularities as a part of labor reforms aimed at putting more Saudi nationals into jobs. This dampened consumption and production in some sectors.
"The situation is definitely improving. And because of the year-on-year growth, we will see less of that impact in the third quarter and fourth quarter," Alturki said.
A Reuters poll of analysts in April forecast Saudi economic growth would ease to 3.8 percent in 2014 from 4.0 percent last year and then accelerate to 4.3 percent in 2015.


General Motors and workers union contract expires, increases risk of strike

Updated 27 min 17 sec ago

General Motors and workers union contract expires, increases risk of strike

  • Union officials told General Motors they would let the contract lapse just before midnight Saturday
  • A strike by 49,200 union workers would bring to a halt GM’s US production

DETROIT: The four-year contract between General Motors and the United Auto Workers has expired as negotiations on a new deal continue.
Union officials told GM they would let the contract lapse just before midnight Saturday, increasing the risk of a strike as early as Sunday night. Union members working Sunday were to report as scheduled.
But there was a wrinkle. About 850 UAW-represented janitors who work for Aramark, a separate company, went on strike Sunday after working under an extended contract since March of 2018, the union said.
The strike covered eight GM facilities in Ohio and Michigan. Although UAW workers at GM are supposed to work, it wasn’t clear early Sunday whether the rank-and-file would cross their own union’s picket lines. GM said in a statement that it has contingency plans for any disruptions from the Aramark strike.
UAW Vice President Terry Dittes said in a letter to members that, after months of bargaining, both the union and GM are far apart on issues such as wages, health care, temporary employees, job security and profit-sharing.
The union’s executive leaders and a larger group of plant-level officials will meet Sunday morning to decide the union’s next steps.
The letter to members and another one to GM were aimed at turning up the pressure on GM negotiators.
“While we are fighting for better wages, affordable quality health care, and job security, GM refuses to put hard working Americans ahead of their record profits,” Dittes, the union’s chief bargainer with GM, said in a statement Saturday night.
Kristin Dziczek, vice president of the Center for Automotive Research, an industry think tank, said the union could strike at GM after the contract expires.
“If they’re not extending the agreement, then that would leave them open to strike,” she said.
But GM, in a statement Saturday night, still held out hope for an agreement, saying it continues to work on solutions.
“We are prepared to negotiate around the clock because there are thousands of GM families and their communities — and many thousands more at our dealerships and suppliers — counting on us for their livelihood. Our goal remains on building a strong future for our employees and our business,” the GM statement said.
A strike by 49,200 union workers would bring to a halt GM’s US production, and would likely stop the company from making vehicles in Canada and Mexico as well. That would mean fewer vehicles for consumers to choose from on dealer lots, and it would make it impossible to build specially ordered cars and trucks.
The union’s executive board was to meet early Sunday to talk about the union’s next steps, followed by a meeting in Detroit of plant-level union leaders from all over the country. An announcement was scheduled for after the meetings end.
If there is a strike, it would be the union’s first since a two-day work stoppage at GM in 2007.
The move by the union also comes as it faces an internal struggle over a federal corruption investigation that has touched its president, Gary Jones. Some union members are calling for Jones to step down while the investigation continues. But Friday night, union leaders did not remove Jones.
Union officials surely will face questions about the expanding investigation that snared a top official on Thursday. Vance Pearson, head of a regional office based near St. Louis, was charged with corruption in an alleged scheme to embezzle union money and spend cash on premium booze, golf clubs, cigars and swanky stays in California. It’s the same region that Jones led before taking the union’s top office last year. Jones has not been charged.
On Friday, union leaders extended contracts with Ford and Fiat Chrysler indefinitely, but the pact with General Motors was still set to expire Saturday night.
The union has picked GM, which is more profitable than Ford and Fiat Chrysler, as the target company, meaning it’s the focus of bargaining and would be the first company to face a walkout. Picket line schedules already have been posted near the entrance to one local UAW office in Detroit.
Talks between the union and GM were tense from the start, largely because GM plans to close four US factories. The union has promised to fight the closures.