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COUNTRY INSIGHTS

We expect the BoI policy rate forecast to remain 0.5% at end-19
ISRAEL · Report · 09 Jul 2018

Wage growth moderated in April, and the number of new workers has slowed considerably, both factors supportive of moderate inflationary pressure. The BoI policy rate forecast (with today’s rate decision) is likely to remain dovish, with the first rate hike pushed out to Q119, with one more hike i...

The shekel will react next week to the BoI macro forecast
ISRAEL · Report · 02 Jul 2018

Recent PC indicators points to some softening of PC demand, which supports weak inflationary pressure, although service prices and housing rentals are expect to contribute to inflation. The market has started to price in a rate hike later this year (we think Q119) but much will depend on the dire...

We expect the first rate hike in March 2019
ISRAEL · Report · 25 Jun 2018

Household demand appears to be slowing, due to slowing consumer credit growth. Residential housing starts decelerated in Q118, which is expected to keep housing inventory tight, supporting higher housing prices, especially rentals. Zoom In: The MPC will be patient before tightening, probably n...

Weekly Macro-Economic review
ISRAEL · Report · 18 Jun 2018

Inflation in May was in line with consensus, but the acceleration of housing rental prices poses a risk for higher inflation. External fundamentals are less shekel positive than in the past, with the CA surplus reaching 2.2% GDP in Q118, down from 3% in 2017. We expect inflation to reach 1% NTM, ...

Some shekel weakness likely in upcoming summer months
ISRAEL · Report · 11 Jun 2018

Wage growth accelerated significantly in Q118 and is supportive of some inflationary pressure. The fiscal deficit remained subdued through May but is likely to reach the 2.9% of GDP target by year-end. Zoom in: We expect some shekel weakness in the coming months, which is likely to boost infl...

Policy tightening unlikely without a significantly weaker shekel
ISRAEL · Report · 04 Jun 2018

Unemployment increased in April, but the labor market remains tight. * Unemployment reached 3.9% in April, up from 3.6% in March. * Unemployment for the 25-64 age group is up to 3.4% from 3.2%. * Job creation has slowed to 1.0% saar in Feb-April from 2.1% in 2017. * Slowing job cr...

A stronger shekel supports lower inflation and will postpone tightening
ISRAEL · Report · 28 May 2018

The shekel has appreciated by 2.7% so far this month, which is supportive of lower inflation and rate hike postponement. The labor market remains tight with job vacancies up and job seekers down. Consumption of services remains robust while consumption of goods (domestically) has softened. Pol...

Accelerating housing rental prices support higher inflation
ISRAEL · Report · 21 May 2018

Housing rental prices have accelerated and pose a threat to higher inflation. We expect inflation to reach 1.0% NTM assuming a further housing rental price increase, a slightly weaker shekel and stable energy prices. Despite the expectation that year-over-year inflation will reach 1.3% in July of...

Trade deficit widens, CA surplus expected to contract this year
ISRAEL · Report · 14 May 2018

Macro fundamentals are less shekel supportive due to a shrinking CA surplus (growing trade deficit). In March, Israeli institutions increased their demand for FX by 1.3bn USD. We expect inflation to reach 0.4% m/m in April and 0.5% m/m in May (mostly seasonal as well as some shekel weakness and h...

Weaker shekel and wage pressure support higher inflation
ISRAEL · Report · 07 May 2018

Shekel weakness is expected to push inflation higher this year, to the low end of target. Wage growth is also accelerating, because of a tight labor market and minimum wage hike. The fiscal deficit is likely to reach the target this year (despite positive numbers through April), and a tax cut app...

The CA surplus is slowly declining on the larger trade deficit
ISRAEL · Report · 30 Apr 2018

Recent indicators point to deceleration of domestic demand, although imports are expanding rapidly (most likely e-commerce as well). Despite some growth in exports, the trade deficit is widening, and the CA surplus appears less shekel supportive. Zoom in: The weakening of the shekel in Q118 w...

MPC conveys a hawkish tone with rate hike forecast in Q418
ISRAEL · Report · 23 Apr 2018

The PMI was up 1.1 points in March to 54.7 on strong export growth. The BoI rate hold decision was expected, but we note a somewhat hawkish tone in the announcement. Zoom in: If inflation expectations spike this summer on higher year-over-year inflation, the possibility of early tightening ca...

Core inflation reaches 0.8% y/y in March
ISRAEL · Report · 16 Apr 2018

Inflation in March surprises slightly on the upside, core inflation reaches 0.8% y/y. Inflation is likely to reach the lower end of target in 2018, but the BoI is expected to be patient and wait until the inflationary environment reaches 1.5%-2% (mid-2019). Fiscal numbers in Q118 suggest that th...

Modest shekel weakening will push inflation higher in April
ISRAEL · Report · 09 Apr 2018

Average wages are accelerating, which is supportive of some inflationary pressure. The shekel has weakened by 3.3% YTD (against the basket) as some Israeli institutions are increasing their FX exposure. We currently expect inflation to increase by 0.9% cumulatively in the next three months (in pa...

Despite strong consumer confidence, PC softens modestly
ISRAEL · Report · 02 Apr 2018

The labor market remains tight, with unemployment at 3.8% in February. The Poalim confidence index reached a record level in March but private consumption indicators point to some modest slowing of domestic demand. This could be due in part to increasing e-commerce and travel abroad. While this t...

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