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COUNTRY INSIGHTS

IP accelerates, job market tightens
ISRAEL · In Brief · 18 Aug 2016

Industrial production in Q2 increased 5.9% (SAAR) following growth of 4.9% in Q1. The high tech sector witnessed expanded 14.7% following 4.3% respectively. The non-high tech sector witnessed contraction of 2.2% in Q2 following growth of 4.2% in Q1. The number of workers in industry increased by ...

Growth accelerates in Q216
ISRAEL · In Brief · 16 Aug 2016

GDP growth for the second quarter of this year surprised on the upside, reaching 3.7% SAAR; almost double market expectations. Growth was rather broad based with private consumption up 9.5%, public consumption up 8.7%, exports up 3.8%, residential investments up 2.9% and business sector (non-resi...

Inflation surprises on the upside as housing rental prices accelerate
ISRAEL · In Brief · 15 Aug 2016

Inflation in July surprised on the upside, reaching -0.6% y-o-y (we had expected -0.8%) and 0.4% m-o-m. Granted, this is a seasonally high CPI but the acceleration of housing prices (rental equivalents) to 2.4% y-o-y from 1.9% last month explains the higher inflation y-o-y. Although this is a vol...

A more expansionary fiscal policy could damage credibility if economy slows
ISRAEL · In Brief · 15 Aug 2016

Weekly Highlights: Fiscal policy has become increasingly expansionary since end-2015. Fiscal expenditure increased by 6% per year in 2015 and 2016. Expenditure in the 2017-2018 will expand by 5% per year (nominal). In essence the fiscal expenditure growth cap has been abandoned. The fiscal defici...

​Fiscal policy turns more expansionary
ISRAEL · Report · 11 Aug 2016

The fiscal policy of the present government (and especially that of the MOF Minister Kachlon) has been characterized by fairly high rapid growth in government expenditure as well as tax reductions. This policy commenced in the 2016 budget (as the 2015 budget was only approved in November 2015) an...

Housing prices likely to drift higher next year
ISRAEL · In Brief · 07 Aug 2016

Recent economic indicators point to weak growth of 1.5% SAAR in Q216 (our estimate). Merchandise exports declined while imports increased. Private consumption indicators remain robust but slower than in Q116. Both chain store sales (3.9% SAAR) and debit card purchases (7%) up in Q216. Consumer co...

Weekly Macro Highlights and outlook
ISRAEL · In Brief · 01 Aug 2016

Full employment likely to support wage pressure The labor market in Israel is rapidly tightening, supporting wage pressure.Unemployment declined to 4.8% in Q216.For the 25-64 age group unemployment declined to 4.0% in Q216 from 4.5% in Q1.In June, unemployment declined further to 3.9%.Job growth ...

Labor market rapidly tightening
ISRAEL · In Brief · 29 Jul 2016

In Q216 the unemployment rate declined to 4.8% from 5.2% in Q116 (seasonally adjusted data). Looking at the more important age group (closely followed by the BOI) of 25-64 (excluding soldiers and students), unemployment declined to 4.0% in Q2 from 4.5% in Q1. This age group witnessed an increase ...

​Despite pressure for shekel appreciation, rate hold decision expected today
ISRAEL · In Brief · 25 Jul 2016

Pressure for shekel appreciation mounts The shekel has strengthened by 1.5% (against the basket) since 6.7.16. The shekel is 0.3% away from the strongest level seen this year (in May).This is somewhat surprising as Flug views the ILS as too strong.Nevertheless, we expect rate stability today.The ...

Corporate tax to be reduce to 23% by 2018
ISRAEL · In Brief · 20 Jul 2016

Due to higher-than-expected tax revenues, the MOF annouced a 4bn ILS tax cut in 2017, reducing the corporate tax rate to 24% (currently 25%) and lowering income tax brackets by 2%. A further reduction of the corporate tax to 23% is planned for 2018. In the past few years Israel has maintained str...

​Growth revised upwards in Q116, PMI declines in June
ISRAEL · In Brief · 17 Jul 2016

GDP growth in Q116 was revised to 1.7% SAAR from 1.3% in the previous estimate. The main revision was export growth which currently reflects expansion of 1.6%, up from the 1.1% contraction in the second revision. This was mostly due to the updated CBS survey of service exports, conducted once a y...

No inflation surprises in June, but housing prices troubling
ISRAEL · In Brief · 15 Jul 2016

Inflation in June reached 0.3% m-o-m and -0.8% y-o-y (similar to last month). Inflation was in line with consensus and our forecast. Inflation was influenced by a 2.8% increase in petrol prices (m-o-m) and a seasonal increase in clothing prices (8.3% m-o-m, 1.3% y-o-y). Food prices declined 1.7% ...

Merchandise exports contract sharply in Q216
ISRAEL · In Brief · 13 Jul 2016

Industrial exports (trend data, excluding mining and quarrying in dollar terms) contracted 18.9% SAAR in Q2 following a 21% decline in Q1. The sectors that declined sharply in Q2 include computer components (-62%, impacted by Intel downsizing production) and chemicals (-42%). Without these two se...

Robust fiscal posture in 1H16
ISRAEL · In Brief · 08 Jul 2016

Israel has maintained strong fiscal credibility so far this year. The fiscal deficit in the first six months reached 3.4bn ILS, compared to 3.8n this time last year. The 12-month rolling deficit reached 2.1% of GDP, similar to last month, but down from April's 2.2%. We note that the fiscal target...

BOI: Rate stability with downward growth revision
ISRAEL · Report · 27 Jun 2016

The MPC announced today that policy rates will remain stable in July at a level of 0.1%. The BOI has maintained the present policy rate level since March 2015.

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