Signs of growth deceleration

ISRAEL - In Brief 27 Sep 2023 by Jonathan Katz

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High-tech service export growth appears to have stalled. In July, high tech service exports (Israel’s main economic driver making up 8% of GDP including all computer services) declined by 0.9% m/m following growth of 1.8% in June. Annual growth in May-July was only 0.5% saar following growth of 21% in the previous three months. This is most likely due to a slowing global trend in this sector, and capital raised abroad by start-ups has also decelerated. Weak service exports and FDI have moderated Israel’s strong external fundamentals, making the shekel more vulnerable to financial outflows so far this year Manufacturing activity remains weak with the PMI declining by 0.2 points in August to 48.1, as domestic orders declined to 53.0 (still net positive in the past 17 months) as did export orders to 45.1 (reflecting contraction in the past 7 month). Strong defense exports (concentrated in a few companies) are not reflected in the PMI. Economic growth appears to be decelerating towards the end of the second quarter and through August. The Composite State of the Economy Index increased by a rate of 0.07% in August following 0.04% in July and 0.01% in June. The index was revised downwards in June and July from 0.07% and 0.15% respectively. The Index was positively influenced this month by increases in the industrial production index (July), the retail trade revenue index (July), building starts (June), and electricity production (August). In contrast, the services revenue index (July), imports of consumer goods (August), imports of production inputs (August), goods exports (August), services exports (June), and credit card purchases (August) declined and had a negative impac...