Recent data points to a more robust Israel economy

ISRAEL - In Brief 20 Aug 2016 by Jonathan Katz

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Economic data released last week suggest fairly strong growth in 1H16 GDP growth reached 2.9% in 1H16 following 2.0% in 2H15. Q216 growth reached 3.7% SAAR and 2.9% y-o-y. Private consumption accelerated to 9.5% SAAR in Q216 on strong durable demand. Industrial exports are up 8.8% in Q2, and investments up 4.1%. IP accelerated to 5.9% SAAR in Q216 from 4.9% in Q1. The PMI in July increased by 1.3 points to 50.1 on strong domestic orders, but weak export orders.Unfilled job offers as a % of the labor force reached an all time high of 3.9% in July. A tightening labor market is supportive of further wage pressure. Today unemployment for July will be published, an important number following the sharp decline in June.Inflation in July surprised on the upside on accelerated housing rental prices. The BOI core inflation index rose to 0.8% y-o-y from 0.6% last month. Nevertheless, inflation expectations among forecasters declined to 0.6% NTM from 0.8% last month. This is due to the strong ILS and further measures approved by the government to decrease the cost of living (increasing competition in several sectors including consumer electronics, perfumes and TV/cable service).Recent robust data and accelerating core inflation reducing greatly the chance for further monetary loosening. This backdrop is shekel positive as well, in addition to strong fundamentals.