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COUNTRY INSIGHTS

Present investment flows do not support a major shekel depreciation
ISRAEL · Report · 05 Nov 2018

Several economic indicators and surveys point to steady and fairly robust growth in Q318. Robust growth and a tight labor market are rate hike supportive, if inflation continues to be within target. We cannot rule out a rate hike on November 26, despite the fact that the MPC will be without an of...

The tightening labor market and weaker shekel (if it continues) are rate hike supportive
ISRAEL · Report · 29 Oct 2018

The labor market continues to tighten, with job vacancies up, supportive of wage/inflationary pressure. Israeli savings institutions were net purchasers of 0.5bn USD in August, slowing from 1.1bn in July. Our inflation forecast stands at 1.1% in 2019, with the main risk coming from a weaker shek...

Housing demand improves, but prices decline slightly
ISRAEL · Report · 22 Oct 2018

Despite a slight upward inflation surprise in September, core inflation remained stable at 0.8% m/m. We expect inflation to reach 0.9% NTM, assuming a slightly weaker shekel, wage pressures’ pushing service prices higher (mostly rentals), and stable oil prices. Despite a modest pickup in housing...

The trade deficit expands further in Q3
ISRAEL · Report · 15 Oct 2018

In Q318 the trade deficit increased by 26% q/q. * Manufacturing exports declined by 3.0% q/q. * Imports of consumer goods increased by 2.0%. * Imports of raw materials increased by 2.1%. * The trade deficit reached 7.7bn in Q318 following 6.1bn in Q2. The CA surplus is expected...

Rate hold expected today on low core inflation and strong shekel
ISRAEL · Report · 08 Oct 2018

Despite the lack of data due to the holiday season, the little data we have points to some improvement following a weak Q218. - The BoI composite index increased by 0.36% m/m in July-Aug. - Debit card purchases increased by 5.1% saar in June-August. - Manufacturing is up 2.4% m/m in July, f...

The CA surplus continues to decline, but FDI remains strong
ISRAEL · Report · 24 Sep 2018

The current account surplus continues to decline while net FDI remains robust. Housing completions increased sharply in Q218, supportive of subdued rental prices. Non-housing credit growth is slowing and is likely to restrain household spending. With the shekel strong and the inflationary environ...

Lower-than-expected inflation and shekel appreciation are likely to postpone tightening
ISRAEL · Report · 17 Sep 2018

The most recent policy rate statement signaled a slightly more hawkish stance, noting the beginning of inflation entrenchment within target. Meanwhile, PC indicators point to slowing household demand for domestic goods. The shekel has appreciated since the rate decision, which is likely to make a...

The MPC signals that tightening could be approaching
ISRAEL · Report · 04 Sep 2018

Recent economic indicators point to slowing PC demand domestically, supporting a low inflation environment. The last policy statement had a somewhat hawking bias. Although a rate hike cannot be ruled out this year, much will depend on the shekel and inflationary trends. It is more likely to occu...

Following a weak Q218, a modest improvement expected in Q3
ISRAEL · Report · 27 Aug 2018

Most economic indicators underline soft growth in Q218, but some modest acceleration is expected in Q3. Despite the BoI criticism, fiscal credibility is expected to be maintained and fiscal adjustments likely following the 2019 elections. Most factors are pointing to modest inflation: shekel appr...

Housing rental price moderation is supportive of low inflation
ISRAEL · Report · 20 Aug 2018

July's CPI surprised on the downside due to moderating housing rental prices. With core inflation hovering at around 1.0% y/y in coming months, we do not envision a rate hike before Q119. Zoom In: Underlying GDP growth in Q218 is within the 2.5-3.0% range, a rate likely to be maintained in ...

A downward GDP growth surprise is likely in Q218
ISRAEL · Report · 13 Aug 2018

Wage growth appears to have moderated in recent months, which is supportive of modest inflation. Israeli institutions continue to purchase FX but at a modest pace, less than the CA surplus and FDI. The fiscal deficit is likely to surpass the fiscal target of 2.9% of GDP this year. Zoom in: ...

Credit upgrade likely to be positive for markets/shekel this week
ISRAEL · Report · 06 Aug 2018

Israel's credit upgrade to AA- (S&P) will support some modest shekel appreciation and lower bond yields in the short run, but this is likely to be temporary. We see some slack in the labor market, with the number of unemployed moving higher and job vacancies lower. The bigger driver of inflation ...

Soft growth in Q2 will not facilitate early tightening
ISRAEL · Report · 30 Jul 2018

Recent economic indicators point to some slowing of growth, especially private consumption. We expect Q218 GDP to reach 2.5%, a low print that could complicate a rate hike decision in the near future. Our inflation forecast has been updated: 0.2% m/m in July, 0.3% in August, -0.2% in September an...

The factors that contributed to higher inflation are expected to moderate
ISRAEL · Report · 23 Jul 2018

The labor market remains tight, but recent data point to a modest decline for new workers. We think inflation expectations in the bond market are skewed to the upside, providing some value in Shachar bonds. Zoom In: The two main factors (housing and food) that supported higher core inflation ...

Inflation enters the target range, but BoI expected to be patient
ISRAEL · Report · 16 Jul 2018

June's CPI (0.1% m/m, 1.3% y/y) surprised on the upside on higher food and housing prices. Inflation is set to accelerate to 1.7% y/y in July-August, while core inflation remains much lower, posing a dilemma for the Bank of Israel. The MPC is more likely to remain patient before deciding to tight...

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