BoI forecasts slower industrial growth

Construction industry bucks trend, set for an upturn in activity.

October 7, 2010 06:44
2 minute read.
Sales of brand new homes dropped 5% in the first q

construction tel aviv 311. (photo credit: Ariel Jerozolimski)


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Growth across almost all industries is expected to slow down in 2011, except for the construction industry, which is set for a rebound next year, the Bank of Israel reported Wednesday.

“With the exception of the construction industry, a somewhat slower pace of growth is likely in all industries in 2011 relative to the growth estimate for 2010,” the central bank said in a report on the annual forecast of growth in principal industries. “Manufacturing product will expand by 7.5 percent and 4% in 2010 and 2011 respectively.”

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Business-sector product across almost all industries is expected to grow 5.7% in 2010, before slowing down to 4.4% in 2011, the report said.

Against this, the central bank forecasts a recovery in the construction industry.

“A rebound in the construction industry is apparent,” the report said. “Construction product is expected to grow by 4.8% in 2010 and by 7% in 2011.”

Growth in the trade and services industry is expected to expand 5.7% in 2010 and 3.6% next year, the report said. The transportation and communications industry is is expected to grow 5.3% this year and 5% in 2011.

Last week, the Bank of Israel lowered its growth forecast for the economy in 2011 to 3.8% from 4%, on expectations of a slowdown in exports and private consumption.

Exports, excluding diamonds, are expected to grow 11.3% this year and slow to 5.8% in 2011, following a contraction of 10.2% in 2009, the report said.

“The reason for the downward adjustment of the 2011 growth forecast is the expected slowing of export growth to 5.8%, slightly under the projected growth rate of global trade of 7%,” the Bank of Israel reported last week in an update on the macroeconomic forecasts for 2010 and 2011.

“The downward adjustment of the growth outlook in the United States, to which Israeli exports are particularly exposed, will contribute to this. The rate of increase in private consumption is also expected to decelerate, as the level of private consumption is very high today relative to GDP, also due to the adjustment of the inventory of durable goods.”

The central bank said its research department had begun compiling a forecast of developments in principal industries, which is intended to assess industry-specific developments to compare them with business-sector production.

As with macroeconomic forecasts, industry forecasts are dependent on the realization of assumptions regarding exogenous variables that are difficult to predict, such as the growth in world trade, which it is assumed will develop in accordance with the International Monetary Fund forecast, the report said.

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