Consumer spending in Saudi Arabia is expected to rise in the second quarter of 2021 as restrictions around social distancing are gradually relaxed, according to Jadwa Investment.
More specifically, Jadwa analysts said they expect a rebound in activity and higher demand in many sectors such as restaurants and hotels and tourism and entertainment as the Gulf kingdom’s vaccine rollout also continues.
Overall, Jadwa expects inflation to average 3.7 percent in the full year of 2021, adding that any unforeseen negative developments related to Covid-19 present an on-going downside risk to consumption and prices.
The latest General Authority for Statistics (GaStat) March inflation release showed that prices rose by 4.9 percent year-on-year, and declined by 0.1 percent month-on-month.
Overall in Q1, prices rose by an average of 5.3 percent compared to 5.6 percent in Q4 2020 with a number of segments contributing to the mild deceleration in prices during the quarter.
While a structural change in the housing market continued to push prices lower in the housing and utilities segment, the food and beverages segment saw a slightly slower rise in prices during Q1.
Meanwhile, education prices continued to decline sharply, by an average of 9.6 percent year-on-year in Q1, reflecting lower fees in light of the full academic year being conducted virtually.
Also during Q1, the closure of some recreational events throughout the kingdom led to a lower level of point of sale transactions versus the same period last year.
Unsurprisingly, the drop was more visible in sectors such as recreation and culture, restaurants and cafes and hotels.
The figures come as business conditions in Saudi Arabia improved at the fastest pace in three months in April as firms increased their headcount for the first time this year.
Non-oil private sector activity grew for an eighth consecutive month and the kingdom’s Purchasing Managers’ Index rose to 55.2 last month from 53.3 in March, remaining above the 50-mark separating growth from contraction.
According to IHS Markit, Saudi Arabia’s business outlook fell to a 10-month low, while job creation improved at the strongest pace since late 2019.
Demand growth picked up for the first time this year amid hopes of easing Covid-19 restrictions and export sales particularly from Asia strengthened.
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