Israel Weekly Macro Wrap Up 25.6.23

ISRAEL - In Brief 25 Jun 2023 by Jonathan Katz

---

Politics: Although the political environment remains uncertain, the worst-case scenario of replacing the committee to appoint Supreme Court judges with a majority of coalition representatives no longer appears to be on the table. Last week, two new members were appointed to the committee from the Lawyer’s organization, both non-coalition figures, strengthening its independence. Other judicial measures are still on the table, such as limiting the ability of the Supreme Court to overrule government decisions in cases when they are deemed “unreasonable”, but these measures are less significant and less controversial. The level of terrorism in the Territories spiked last week, and Israel is expected to increase its targeted military operations, but we do not see this as a “game changer”. In short, political uncertainty continues, but at a lower intensity than previously. The labor market remains tight and at full employment. Unemployment remained stable at 3.6% (seasonally adjusted data) while the rate of participation in the labor market improved slightly to 64.2% from 64.1%. More people are looking for work than previously and finding employment (therefore the unemployment rate remained stable). A tight labor market is supportive of wage pressure and therefore some inflationary pressure, especially in the service sectors. Recent economic indicators have been mixed. On the positive side, the Business Sentiment Survey reflected steady expansion, industrial exports increased in April-May; and manufacturing expanded by 2.0% saar in February-April (high-tech sector especially), following a contraction of 2.1%. On the other hand, private consumption has been decelerated. Reven...