Bank of Israel: Growth rate to slow in Q4

Growth expected to slow for the first time since the second quarter of 2009, due to economic uncertainty.

October 30, 2011 23:26
1 minute read.
Traders look at screens at a bank in Lisbon, Weds.

traders watching stocks. (photo credit: Rafael Marchante/Reuters)

Israel’s growth rate will slow in the fourth quarter of 2011, for the first time since the second quarter of 2009, the Bank of Israel reported Sunday in its Survey of Companies for the Third Quarter.

The slowdown in growth will follow the slower growth in May-August 2011 as economic uncertainty increased.

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The slower growth in the fourth quarter will be due to domestic consumption, manufacturing exports and sales of services abroad, the same factors that affected Israel’s growth in the third quarter.

The Survey of Companies found that industrial output rose slightly in the third quarter, compared with the preceding quarter, due to a standstill in export sales, especially by hi-tech companies. The slowing in the net balance of output compared with the second quarter was most pronounced among smaller firms, though expectations for the following quarter are for a slowdown in output for both large and small companies.

The growth in commercial activity slowed in the third quarter, and the number of employees in the sector was unchanged. Companies expect a further increase in sales in the fourth quarter.

Business services companies also reported slower growth in the third quarter than in the preceding quarter, due to lower domestic and foreign sales, and they expect the decline to continue in the fourth quarter.

Israel’s slowing growth is taking place against the background of debt crises in Europe and volatility in the financial markets, the fear of a major slowdown in global growth and continuing geopolitical instability in the Middle East.

The Bank of Israel notes that, for the first time since the second quarter of 2009, the The Israel Purchasing Managers Index fell below the 50 percent dividing line between economic expansion and contraction, reflecting the strong probability of another slowdown in activity.

The Bank of Israel notes that 12-month inflation expectations fell to 2.6% in the third quarter from 3.1% in the second quarter. Companies expect that the shekel-dollar exchange rate twelve months from now will be NIS 3.80/$, compared with NIS 3.60/$ forecast in the previous survey, and NIS 3.70/$ during the period that the survey was conducted.

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