Saudi industrial output posted its strongest growth in months, with the Industrial Production Index (IPI) jumping 10.4% y-o-y in November, according to the latest data (pdf) from state statistics agency Gastat.

What’s (actually) behind the numbers: On paper, it appears to be a broad-based rally, with oil output rising 12.9% y-o-y, manufacturing up 8.1%, and non-oil activities growing 4.4%. However, a closer look at the manufacturing numbers suggests that the “diversification rally” is still running on hydrocarbons. The manufacturing sub-index’s growth was driven almost entirely by petcoke and refined petroleum products (up 14.5%) and chemical products (up 10.9%).

True non-oil manufacturing actually declined, with electricity, gas, steam, and air conditioning supply slipping 4.3% y-o-y.

The breakdown

The mining and quarrying sub-index — which dominates the IPI — gained 12.6% y-o-y. This was underpinned by a substantial increase in oil production, which hit 10.1 mn bbl / d in November, compared to 8.9 mn bbl / d a year earlier. On a monthly basis, the sector saw a modest 0.5% uptick.

On the utilities front: Electricity, gas, steam, and air conditioning supply activity dropped sharply by 28.6% m-o-m, as November’s colder weather reduced the load on the grid. Meanwhile, water supply, sewerage, and waste management rose 10.2% y-o-y, but fell 3.1% m-o-m.

Why it matters

While oil activities are surging, the broader industrial diversification push is facing a digestion phase, evidenced by monthly declines in electrical devices and non-metallic products. This suggests that the headline numbers are currently masking a more cautious cycle in private sector investment for non-energy manufacturing.

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