Policy tightening unlikely without a significantly weaker shekel
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 creation will dampen disposable income and is supportive of slowing PC demand.
* On the other hand, a tight labor market is still supportive of wage pressure.
More PC indicators are pointing to deceleration.
* Debit card purchases are up 1.7% saar in Feb-April, down from 6.4% in the previous three months.
* A similar trend is apparent in chain store sales.
* This does not include e-commerce from abroad.
The rate hold decision came as no surprise.
* The MPC noted that inflation and inflation expectations (one-year) have moved higher but are still below target.
* Growth is strong and balanced, with the labor market tight and wages up.
* We think that the nearly 3% shekel appreciation in May will postpone tightening
* We think that tightening is unlikely before the shekel reaches 3.7/USD.
Politics: Violent demonstrations in Gaza continue with attempts to breach the fence. The Israeli public views favorably the way Netanyahu handled the escalation of violence last week, which included a massive bombardment of targets in Gaza following a barrage of missiles into Israel.
Important data this week: On Wednesday the Business Tendency Survey for April will be released, and on Thursday average wages for March. It will be important to see if the 6% minimum wage hike in December 17 is still having an impact.
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