The business sector is increasingly pessimistic

ISRAEL - In Brief 07 May 2023 by Jonathan Katz
The business sector is increasingly pessimistic The Business Tendency Survey reflects fairly steady growth in April, but the expectations three months ahead declined sharply to reflect basically no growth. The expectations for employment also declined. The high-tech service sector is expecting a slight decline in exports in the coming month, and employment demand is slowing sharply. This sharp decline in business expectations is likely to support monetary caution in the next rate decision (depending on other factors as well). Wage growth slows Private sector wages increased by 0.6% m/m (sa) in February and are up 4.6% y/y, slowing from 5.1% last month. High tech service sector exports increased by 4.2% m/m in February. Inflation: We revised our May CPI down to 0.6% (from 0.7) with petrol prices remaining stable and dairy products moderating their price hike to around 9% (from 16%). This impact will be felt in June as well. Monetary policy: The next rate decision (22.5) will be impacted by April’s CPI print (released 15.5) and Q123 GDP growth (released 16.5). GDP growth in Q123 (excluding taxes) likely to reach 2.5%-3%. GDP growth will be impacted by modest private consumption growth, residential investments, and modest export growth (relative to imports). Headline GDP growth is likely much lower (1.5%) due to the decline in new vehicle imports which surged in Q422 (before higher taxation kicked in). Taxes on imports are factored into total GDP growth, although the BoI (and economists) tend to strip this volatile out. FX: the shekel as stabilized (against the basket) since the halt in the judicial overhaul. We could envision the shekel appreciating assuming this issue s...

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