Exports improve while PC demand slows

ISRAEL - In Brief 02 Jun 2024 by Jonathan Katz
Geopolitics: President Biden is trying to push for a cease-fire and hostage release in Gaza in a three-stage agreement. The dilemma for Netanyahu remains acute as his far-right coalition partners have threatened to resign if the war ceases before Hamas is defeated. Gantz (National Unity party) is also calling for early elections and has stated he will leave the emergency war cabinet without progress towards cease-fire and a post-war plan for Gaza administration. Israel continues its offensive in Rafah and missiles/drones continue to penetrate Israel from Hezbollah in the North. Hi-tech service exports expanded by 3.6% q/q in Q124 The hi-tech sector raised 2.3bn USD abroad in April-May following 1.9bn in the 1st quarter. Other indicators point to some general economic deceleration, including the BoI Composite Index. Domestic credit card purchases (real, SA) declined by 1% m/m in April (with some further decline in May) as more Israelis are traveling abroad. The level of purchases is still 3% above pre-war level. Slowing investments (in construction especially) has been the main drag on growth recovery. Our inflation forecast has been revised upwards to 3.4%. The shekel weakening last week by 1.1% against the basket. Municipal taxes will go up by 5.3% in January 25. Petrol prices declined by 4.8% early this month. This is in addition to macro drivers such as a fiscal expansionary policy, tight labor market, housing dynamics and supply disruptions. This forecast assumes shekel stability going forward. The bond market: The MoF is maintaining its monthly bond issuance program 15.5bn ILS in June (with four weeks of issuance). Nevertheless, the average duration is gradually s...

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