The new government is expected to be fiscally responsible

ISRAEL - In Brief 06 Jun 2021 by Jonathan Katz

---

Highlights:Politics: The new “change” government will be sworn in by next week, barring any unforeseen developments. We think this government is a positive development for fiscal policy and stimulating growth.Economic indicators continue to point to a strong recovery Broad unemployment declined to 9.6% in the 1st half of May from 10.6% in the 2nd half of April. This is made up of a 5% official unemployment rate + 1.7% of Covid furloughs + 2.9% who lost their jobs but were not active job seekers. Further decline is expected next month when those under 28 will cease to receive government Covid support. Disposable income increased by 2.3% m/m in March as many new jobs were created. This has fueled private consumption growth. Chain store sales increased by 1.8% in April and by 13% since Feb. Credit card purchases increased sharply in the last week of May, in part due to the end of hostilities. The Poalim consumer confidence index declined modestly in May (most likely due to the hostilities) but remained elevated. The CBS business tendency survey in May points to expectations for further expansion. Inflation expectations stand at 1%-1.3% for the NTM. FX: The shekel appreciated by 0.3% last week against the basket of currencies and has weakened by 0.7% YTD.· In Q121, the BoI purchased 13.5bn USD, while Israeli institutions sold 6.5bn, non-residents sold 3.1bn and the business sector sold 4.1bn.The bond market: Fiscal numbers for May will be published sometime this week. Tax revenues have surprised on the upside so far this year.Few restrictions remain: Israel is basically Covid-free and has opened up totally. All restrictions have been removed except wearing masks indoors. M...