PC growth slows but business sentiment improves

ISRAEL - In Brief 09 Oct 2016 by Jonathan Katz
Several indicators are pointing to slower PC demand. This follows rapid growth of 10% SAAR in Q2. Slower growth in June-Aug is apparent in chain store sales, retail trade, consumer imports and debit card purchases. The Poalim consumer confidence index declined 3.1 points in September but remains relatively high. Nevertheless, PC growth is expected to reach in 3.5% in 2017. This is supported by real wage and employment growth as well low rates. PC growth will remain an important economic driver. Steady domestic demand is supportive of increasing inflationary pressure.Average wages increased by 2.3% SAAR in May-July following 3.2% in the previous three months. Wage growth is expected to accelerate due to tight labor market and minimum wage hikes (July 16 and January 17). The number of employees increased by 1.9% SAAR in May-July.The CBS business sentiment survey points to improvement in September, especially in industry and retail trade.The BOI purchased 575ml USD of FX in September. The follows no purchases in August. The ILS has appreciated by 2.9% YTD against the basket of currencies.We revised our inflation forecast to 0.9% NTM (from 0.7%) on the back of higher energy prices and modest shekel weakening in October.Some escalation in the South has occurred with more missiles fired from Gaza and Israel retaliating. We do not expect this to lead to a major confrontation.Rumors persist regarding the Labor Party joining the present coalition and forming a unity government. Private consumption slows in Q3Following rapid growth in private consumption of 10% SAAR in Q2, the first two months of Q3 point to some deceleration. This trend is apparent from several economic indicat...

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