Initial signs of growth deceleration

ISRAEL - In Brief 19 Jul 2020 by Jonathan Katz

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Highlights of Weekly Israel Macro Wrap Up 20.7.20: Recent data suggests that growth has taken a downturn in July: Credit card purchases declined by 5% in the first two weeks of July. The Google Mobility Index points to declining activity in shopping/leisure as well as going to work. The Poalim PMI index did increase by 6.5 points to 45.0 in June, but still reflects contraction. Although unemployment in the first two weeks of June declined to 12.2% from 21% in May, a business sector survey on July 8th points to a retreat to around 14%. The trade deficit declined by 22% q/q in Q220 as imports declined more sharply than exports. Inflation reached -0.1% m/m (-1.1 y/y) in June, according to our forecast. Core inflation remains higher negative: -0.5% y/y. We are forecasting inflation of 0.4% in the next 12 months. Monetary policy:The protocol of the last rate decision (two weeks ago) will be published today. It will be interesting to note the vote for rate stability, whether 5-1 (as in the last rate decision), or quite possibly 4-2. We expect a generally pessimistic tone, which explains the decision to launch a corporate bond purchasing scheme. The bond market: The long end continues to be fairly anchored on YCC, we expect domestic bond issued to average 13bn ILS per month until end-year. The MoF issued 0.5bn Euro of debt last week. FX:The shekel remained stable against the basket last week, weakening against the Euro by 0.6% but strengthening equally against the dollar. The Bank of Israel appears intent on prevent any sharp appreciation. In May, the share of foreigner ownership of government bonds increased to 6.4% (from 5.2% in April), most likely the result of Israel join...