Recent economic indicators are mixed; tightening still expected to continue

ISRAEL - In Brief 21 Dec 2022 by Jonathan Katz

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Hi-tech exports slow Hi-tech service exports declined in October by 3.5% compared to the level in Q3 (following growth of 3.6% q/q), and are down 2.4% y/y. Hi-tech services have been a major economic growth driver in 2020-2021 and appear to be decelerating as global hi-tech investments slow as well. This will most likely push the CA surplus lower in 2023, which will be less shekel supportive. Job vacancies decline, but labor market remains tight Job vacancies declined sharply in recent months (sa) to 141.7k in November from 144.7k in October after peaking at 150.2k in August. This is a welcome trend although the level of vacancies is still high compared to pre-Covid (95-100k). The labor market remains tight, but there are signs of some modest loosening. Housing completions remain below demand Housing completions remain fairly low despite strong residential starts in recent years. Completions reached an annual 49.5k in Q322, declining from 57.6k in Q222. The annual demand for new housing is estimated at 60k-65k (according to population growth and immigration), therefore pressure for higher housing (rental) prices will continue in the short run, at least from the supply side. Housing starts have surged to an annual pace of nearly 71k in the first three quarters of the year, following 63.6k in 2021. The number of active housing units under construction is at an all-time high of 164.6k. We expect housing completions to increase significantly in 2023, and support a moderation in housing rental prices factored into the CPI. PMI declines on softer export orders and production The PMI declined in November by 4.6 points to 49.0, reflecting contraction in activity. The export or...