The slowdown in the US economy is starting to take its toll on the local economy as industrial productivity retreated in April after 29 months of expansion, business research company Dun & Bradstreet Israel said on Sunday.
"The local economy is experiencing a slowdown in exports as a result of the slowdown in the US economy over the past three months, which in turn has reduced the demand for Israeli products abroad. At the same time, domestic demand of products has also contracted. In addition, the Pessah holiday fell in April, leading to a reduction in activity and demand. As a result of these forces, there is a slowdown in the production lines of factories in Israel," said economists at D&B Israel.
The Israel Purchases Manager's Index (PMI), an indicator of industrial output, which is carried out by D&B fell 7.9 percentage points in April below the 50 percent mark for the first time in 29 months to 42.6%. PMI values above 50% reflect growth, and D&B economists said that although they expected productivity to pick up slightly over the next month, it was not at all clear whether the index would grow back above 50% - the threshold between economic expansion and contraction.
The index's export demand component fell by 8.1 percentage points to 48.9% in April from the previous month after 37 months of expansion. During the same period, the domestic demand component dropped by 9 percentage points to 41% compared down from the previous month.
The production output component which last month contracted after 28 months of expansion saw the sharpest drop of 10 percentage points, to 37.4%, in April. However, D&B economists added that the main reason for the contraction in productivity was Pessah.
The employment component remained above the expansion mark in April, experiencing a moderate drop of 1.1 percentage points, leaving the index's component at 51.6%, down from 52.7% in March. D&B economists cautioned though that in the case the slowdown in demand continued, employment in the production will also retreat.
The index's price component fell by a moderate 2.3 percentage points to 71.3% in April, driven by continued price increases in raw materials for 35 consecutive months.