Both business expectations and consumer confidence decline sharply

ISRAEL - In Brief 09 Nov 2023 by Jonathan Katz
October’s Business Sentiment Survey points to a sharp deterioration in expectations for growth next month (November), with this component declining to -23 points from +0.4 in September. The employment expectation component also turned net negative to -14.65 from 1.16. The construction sector is especially pessimistic, as is the hotel and retail sectors. The high-tech service sector (information and communications) is still reporting expectations for modest growth in exports and employment, but much less so than in the previous month. The business sector expects inflation to reach 3.02% in the next 12 months, up slightly from 2.96% last month. Consumer confidence declined sharply to -24 points from -18 in September, approaching Covid levels; especially the expectations for the economic situation of the country. We expect fourth quarter GDP to reflect a contraction of 14% saar, with only a gradual recovery expected in 2024. Slowing growth will suppress inflation pressures and will support monetary loosening, most likely commencing in early January, but we cannot rule out a rate cut as soon as the next rate decision.

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