Markets remain unfazalled by early elections

ISRAEL - In Brief 26 Jun 2022 by Jonathan Katz

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Politics: Israel is headed towards elections in the fall. This is unfortunate with the major downside on reform implementation, but fiscal credibility expected to be maintained. Markets appear unphased by further political instability. Economic indicators continue to point to fairly steady growth In February-April, total revenues from all sectors expanded by 4.5% saar, slowing somewhat from 6.9% in the previous three months. Manufacturing increased by 9.1% in Feb-April, mostly high-tech manufacturing which increased by 15.4% saar. Business sector debt increased by an annual rate of 22% q/q in Q122. Usually, increased debt is a positive indicator for business optimism. 55 thousand new jobs were created in May. The employment ratio is back to pre-Covid levels. Job vacancies declined slightly in May, but remain 50% above pre-Covid levels. Job vacancies in the high-tech sector declined slightly in May, but remain elevated. This is encouraging in light of this important driver of growth. At a recent conference, Gov. Yaron sounded optimistic that the high-tech sector will continue to expand, albeit more modestly. Housing starts surged in Q122, but housing completions remain weak, supportive of higher rental prices. There is a record 160 thousand units currently under construction. The PMI increased by 1.4 points in May to 52.6 on stronger orders. Inflation: Lieberman is seeking to reduce the tariff of petrol even further, but this could be judicially problematic as we head into elections. With global oil prices declining we revised out July CPI forecast to 0.4% (from 0.5%). If tariffs are reduced further; July’s CPI is expected to be 0.2% m/m (too early to factor this in our...