Growth in private consumption stalls

ISRAEL - In Brief 28 Jun 2020 by Jonathan Katz

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Highlights of the Weekly Israel Macro Wrap Up 29.6.20Recent data points to a slow recovery as PC growth remains weak:Credit card purchases in the week ending June 22th reflected stability, and are still down 12% compared to the beginning of the year.Google mobility data shows mobility to work is down 13% from Feb 21st.Taking into account unpaid furlough, unemployment is estimated at 21% in May, and possibly 15%-16% in June.The Bank of Israel’s Composite Index of the Economy declined by 1.8% m/m in May and by 8.4% saar in March-May. The coincident indicator is somewhat problematic due to the lag time of several components.A similar index (Melnix Index) declined by 11.7% in the past two months.FX: The shekel appreciated modestly last week. In April, Israeli savings institutions purchased a net 1.1bn in the FX market, slowing sharply from 10.3bn in March. In April, Israeli institutions’ total exposure to assets abroad reached 26.4%, while FX exposure reached 16%. Demand for FX by institutions is highly correlated to market movement. Monetary policy:We have a rate decision coming up next week (6.7.20). At the moment we do not expect any shift of policy or lower rates. The Bank of Israel could stress that bond purchases will be accelerated.The Bond Market: Long yields in Israel continued to decline last week, likely supported by steady Bank of Israel bond purchases. Politics: As the July deadline approaches for moving forward with Israel’s annexation of part of the West Bank, it appears that politicians are less enthusiastic about this policy at the moment, especially at a time that Israel must deal will the damage from the Covid-19 virus, which also appears to be spreading...