Signs of slowing growth; growth pessimism regarding a cease-fire

ISRAEL - In Brief 06 May 2024 by Jonathan Katz
Geopolitics: Expectations regarding a possible cease-fire continue to shift from some optimism to recently more pessimism, as Netanyahu refuses to agree to the end of the operation and total withdrawal from Gaza. Israel is preparing for an operation in Rafah, or at least pressure Hamas to agree to more acceptable cease-fire terms. Meanwhile missile barrages continue in the North. Recent economic indicators appear mixed The latest Business tendency survey (April) points to steady growth (below pre-war level) but less optimistic regarding growth and employment in the coming month. High tech service exports in February remained stable m/m and are up 4.4% y/y. The sector continues to expand but at a slower pace than in 2022. In March, unemployment remained low and steady at 3.3%. “broad” unemployment declined to 4.1% from 4.4%. Credit card purchases in March increased by 1.5% m/m. Real-time data point to further expansion of 1% in April; 6% above pre-war (Q323). On the other hand, the BoI composite index declined by 0.05% both in February and in March and remains 2.5% below pre-war levels. The average wage (trend) increased by 8.6% y/y in March (total workers). Wage growth appears broad-based. The minimum wage hike in April will contribute to further wage pressure (and inflationary pressure as well). FX: The shekel appreciated last week by 2.4% against the basket of currencies (2.6% against the dollar), on the back of optimism regarding a possible cease-fire. Generally positive equity markets abroad is also shekel supportive. In April, high-tech companies raised over 1bn USD abroad, following 1.6bn in the 1st quarter. This is a positive print suggesting FDI is improving. I...

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