The shekel continues to appreciate sharply

ISRAEL - In Brief 19 Nov 2023 by Jonathan Katz

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Geopolitics: Israel’s ground operation into Gaza continues, as do sporadic missile fire into Israel from Gaza, but at a much slower pace. The Israeli army is consolidating its control on northern Gaza and is proceeded slowly to deal with the massive tunnel network. Sporadic low-level fighting with Hezbollah continues, without signs of escalation. Economic data: In October, the number of job vacancies declined by 18% due to the outbreak of hostilities and evacuation of a large population in the South and the North; the pace of recovery is expected to be gradual. October’s CPI came in as expected (0.5% m/m, 3.7% y/y). Core inflation moderated to 3.5% from 3.6% with both housing (rental) prices and non-housing services moderating. Q323 GDP growth reached 2.8% with 1.8% growth in private consumption, 1.2% growth in investments, 5.9% growth in public consumption and more importantly: 8.8% growth in exports. Export growth is the shining light in Q3, as this trend could continue on the back of a more competitive shekel. Despite recent shekel appreciation, the level of the shekel remains rather competitive, which will support export growth going forward. Industrial exports increased by 13% saar and high-tech service exports increased by 4.7%. Real time data regarding credit card purchases for the last week reflects a significant improvement in consumption of goods, restaurant, and leisure/educational services as well as pharma. Tourism remains way low. FX: Last week the shekel continued to appreciate by 2.8% against the basket of currencies Expectations for a limited war in Gaza has fueled this Shekel rally, in addition to positive global equity markets (and weaker dollar) “fo...