 |
During the period being surveyed, May-August 2011, there was a slowing in the rate of growth in Israel and an increase in uncertainty. This occurred against the background of debt crises in Europe and volatility in the financial markets, the fear of a major slowdown in global growth, continuing geopolitical instability in our region and the effects of the social protests in Israel. |
|
The output gap narrowed and together with the slowdown in the rate of growth and the drop in the rate of unemployment to historically low levels this is perhaps a sign that the economy is at a point beyond the peak of the business cycle. |
|
The export of goods from Israel slowed, due to the dampening of global demand, which was particularly noticeable in the hi-tech industries. |
|
The low rate of unemployment and the slowing of the rate of expansion in employment are indications that the economy is approaching full employment. |
|
Based on fiscal developments until August, the forecasted budget deficit will stand at close to 3 percent of GDP, which is in line with the budget deficit ceiling. |
|
CPI rose at a moderate rate during the period being surveyed, with slower increase prices of owner occupied dwellings (which is not included in the CPI). |
| During the period being surveyed, May-August 2011, there was a slowing in the rate of growth in Israel and an increase in uncertainty. This occurred against the background of debt crises in Europe and volatility in the financial markets, the fear of a major slowdown in global growth, continuing geopolitical instability in our region and the effects of the social protests in Israel. GDP grew by 3.5 percent in the second quarter, while the product of the business sector grew by only 2.4 percent (both figures are expressed in annual terms) and the Bank of Israel’s State-of-the-Economy Index rose by only a moderate amount. |
| The output gap narrowed and together with the slowdown in the rate of growth and the drop in the rate of unemployment to historically low levels this is perhaps a sign that the economy is at a point beyond the peak of the business cycle. With regard to uses, the export of goods declined against a background of slow global demand; the growth in private consumption slowed and consumer confidence declined; and the accelerated upward trend in investment began to level off. This may be evidence that producers feel that there is no longer any need for major expansions in production capacity in view of the expected slowdown in economic activity. |
| The developments by specific industry were mixed: activity in manufacturing stabilized overall, with a slowdown in export-oriented sub-industries and in tourism; in contrast, there was continued rapid growth in commerce although at a slower rate than in the previous period. The momentum in the construction industry continued though there are signs that there is declining interest in the purchase of housing. During the period being reviewed, a number of major policy measures were adopted in the area of housing. The goal of these steps, which were partly motivated by the social protest, is to make it easier to buy or rent a home. |
| Improvement continued in the labor market. The rate of unemployment fell to 5.5 percent, which is lower than prior to the 2008 crisis and is one of the lowest levels reached in recent decades. Employment expanded, primarily in the business sector, though at a slow rate, accompanied by a large increase in the number of those employed in part-time positions and a drop in the number of those employed in full-time positions. The low rate of unemployment and the slowing of the rate of expansion in employment are indications that the economy is approaching full employment. Despite this, there are still no major signs of pressure on wages, perhaps due to the entry of a large number of workers in low-paid jobs and in part-time positions. |
| The export of goods from Israel slowed, due to the dampening of global demand, which was particularly noticeable in the hi-tech industries. Exports to the US fell significantly and exports to Europe were stagnant. The rate of increase in the import of goods started to level off and this encompassed all categories, i.e. consumption goods, raw materials and investment assets. The deficit in the current account grew during the second quarter of 2011. |
| Tax revenues grew moderately and are below the forecasted seasonally-adjusted path, particularly with respect to the collection of indirect taxes. Domestic expenditure (excluding credit) was also below the seasonally-adjusted path, primarily due to the low rate of utilization by government ministries. Based on fiscal developments until August, the forecasted budget deficit will stand at close to 3 percent of GDP, which is in line with the budget deficit ceiling. |
| Prices rose at a moderate rate during the period being surveyed, with slower increase in owner occupied dwellings (which is not included in the CPI) and an end to the prolonged increase in food and energy prices in Israel and worldwide. Inflation during the last twelve months was above the upper boundary of the inflation target range though expectations for the year fell significantly during the period to within the target range. The prices of financial assets fell sharply towards the end of the period being surveyed, simultaneous with the crash in markets worldwide, and the level of risk in the local capital market grew. |
| The Bank of Israel interest rate was raised by 0.25 percentage points to 3.25 percent in May and was left unchanged during the period being surveyed. The average nominal effective exchange rate for the period being surveyed appreciated slightly relative to the previous period and there was less intervention in the foreign currency market by the Bank of Israel. |
| There was a slowdown in global growth, especially in Europe, and in the rate of expansion in global trade. The fears that the debt crises would spread to key countries on the European continent and the downgrading of the US credit rating as a result of the difficulties it is experiencing in reducing its budget deficit led to increased volatility in the financial markets and an increase in uncertainty. The forecasts for world growth were revised downward. |
|
