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COUNTRY INSIGHTS

Strong defense exports and weak imports reduce the trade deficit
ISRAEL · In Brief · 13 Sep 2023

Industrial exports continue to expand parallel to weak import growth. In June-August, industrial exports expanded by 8.2% saar (trend) following growth of 7.5% in the previous three months. Most of this expansion is centered around defense exports (transportation equipment, electronic products) a...

A weakening shekel increases the likelihood of another rate hike
ISRAEL · Report · 11 Sep 2023

1. The fiscal deficit continues to drift higher on rapid expenditure growth and weak revenues. 2. Business sector sentiment reflects steady growth, with some improvement in the high-tech sector. 3. Recent shekel depreciation will contribute to inflation, increasing the likelihood of another...

A weakening shekel increases the likelihood of another rate hike
ISRAEL · In Brief · 10 Sep 2023

Business sector optimism remains steady The August Business Tendency Survey points to steady growth (actually accelerating in August) and steady expectations for further growth. The high-tech sector is also reporting expected expansion in exports and employment next month, apparently on the back ...

Rates remain on hold, but MPC concerned about further shekel depreciation
ISRAEL · In Brief · 04 Sep 2023

Rates remained steady at the September 4 meeting, with the BoI announcement noting that "Inflation is moderating, but is still above the target range, economic activity in Israel remains at a high level but a number of indicators point to some moderation in growth, the labor market remains tight ...

Wage pressure remains acute
ISRAEL · In Brief · 04 Sep 2023

Wage pressure remains acute The average nominal wage increased by 6.0% y/y in June and by 6.2% in July (initial estimate). Trend data point to wage acceleration in the Q2 to an annual pace of 7.7%, especially in food and accommodation and manufacturing. The labor market remains tight (3% unemploy...

Rate-hold decision expected, at least for now
ISRAEL · Report · 01 Sep 2023

1. We expect a rate-hold decision on Monday, with inflation moderation the overwhelming consideration. 2. Much uncertainty remains regarding who the next Governor will be, and we could see Deputy Governor Abir fill the position for quite some time. 3. Private consumption indicators point ...

Rate-hold decision expected, at least for now
ISRAEL · In Brief · 01 Sep 2023

Rate-hold decision expected next week The main factor for the MPC will be recent inflation moderation. Both headline and core have moderated, including goods and services. Growth indicators point to steady but soft growth, relative to 2022. Private consumption growth remains weak and actually neg...

Who will be the next Governor?
ISRAEL · In Brief · 29 Aug 2023

High-tech exports expand modestly High-tech service exports (a major economic driver) increased by 1.6% m/m in June and by 9.8% y/y (sa). The second quarter witnessed growth of 4% saar. June’s strong print will most likely support an upward revision in the second estimate for Q2 GDP. Although inv...

Low inflation will allow the BoI to tolerate some shekel weakness
ISRAEL · Report · 28 Aug 2023

1. Recent economic indicators point to some deceleration, although the labor market remains tight. 2. We see upside risks to our inflation forecast, especially if the shekel continues to weaken. 3. Inflation moderation will support a rate-hold decision next week, but an October rate hike ca...

Low inflation will allow the BoI to tolerate some shekel weakness
ISRAEL · In Brief · 27 Aug 2023

Economic indicators have been mixed The BoI Composite Index increased modestly by 0.17%, slower than the pace in 2022, but somewhat faster than the pace earlier this year. Total revenues from the various branches contracted by0.7 % saar in Q2. Manufacturing declined by 1.8% saar with a 3.2% decli...

Slowing inflation could delay further tightening
ISRAEL · Report · 21 Aug 2023

1. Underlying inflation has moderated in recent months, pushing up the shekel depreciation threshold triggering a monetary response. 2. Second quarter GDP numbers point to deceleration. 3. There are growing signs of labor market slackness.

Headline growth steady, but the devil was in the details
ISRAEL · In Brief · 16 Aug 2023

GDP growth surprised on the upside, reaching 3% saar in Q223 (our forecast was 2.8%, Bloomberg survey: 2.3%). The devil was in the details. A closer look point to a decelerating economy. Industrial exports actually declined by 8.5% saar and high-tech service exports by 1.8%. Total exports decline...

Inflation surprises again on the downside, supporting rate stability in September
ISRAEL · In Brief · 15 Aug 2023

Inflation surprises again on the downside Inflation in July increased by 0.3% m/m (expectations were for 0.3% to 0.5%, we were at the high end), and moderated to 3.3% y/y from 4.2% (due to strong base effect). Core inflation moderated as well to 3.6% y/y from 4.5%. All major categories reflect mo...

Shekel depreciation increases the likelihood of further tightening
ISRAEL · Report · 14 Aug 2023

1. Pressure for shekel depreciation continues, increasing the likelihood of further monetary tightening. 2. We expect July’s CPI to reach 0.5% m/m on seasonal factors; Q223 GDP is expected to reflect growth of 2.8% saar. 3. The elevated risk premium for Israel has been translated into a we...

Shekel depreciation increases the likelihood of further tightening
ISRAEL · In Brief · 13 Aug 2023

Shekel weakening continues Last week, the shekel declined by 0.9% against the basket and 4% YTD. The BoI views the shekel as critical for inflation, and sees the FX passthrough at 10%-20% having increased in recent months. In June, Israeli institutions were net purchasers of 0.8bn USD and 5.2bn i...

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