Weekly Israel Macro Wrap Up

ISRAEL - In Brief 12 Sep 2021 by Jonathan Katz

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Weekly Macro Review 13.9.21 Recent economic indicators have been generally positive: Credit card purchases in August expanded by 4%-5% (according to our seasonal adjusted estimate from weekly BoI data). Sectors which witnessed a sharp increase in demand include hospitality and leisure, as well as consumption of durables. The fact that Israelis are not flocking abroad and remain in Israel this summer is supportive of domestic private consumption, as well as some inflationary pressure in certain sectors (mentioned above), as we assume in our inflation forecast. The Business Tendency Survey in August pointed to strong growth, albeit slightly lower than in July. The components reflecting future growth (orders) suggest steady expansion ahead, both in industry, retail and services. Inflation expectations NTM in industry increased slightly to 1.54% (from 1.4% two months ago), while expectations in retail declined slightly to 1.23% from 1.33%. Wage growth has remained moderate so far. Trend data for average wages point to an annual nominal wage growth of 4% (looking at data through June 21 compared to pre-Covid). Certain sectors, such as information and communications (with a 7.6% wage growth), reflect the strong demand for hi-tech workers. So far, we do not view wage pressure (so far) as very inflationary, as labor productivity in the past two years has surpassed wage growth. Monetary policy: It is worth noting that although the last rate decision was unanimous in favor of no change, one member was in favor of some tightening but changed his mind due to the spike in infections: “One member was of the opinion that the strong National Accounts data and the increase in the infla...