Economic activity manages moderate 3Q growth despite war

Sector by sector analysis of the central bank's report showed a rise in economic activity in the manufacturing, communications and trade industries, and in the services industry to some extent.

By SHARON WROBEL
October 30, 2006 08:08
2 minute read.

 
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Despite the negative impact of the war in the North, overall economic activity in the third quarter of this year grew moderately, the Bank of Israel said Sunday. Using qualitative measures of about 460 companies and businesses participating in the quarterly report, the central bank said the moderate rise came as a result of war's influence in July and August, which strongly affected economic activity in Haifa and northern Israel impairing activity of the services industries and tourism sector. But the hostilities in the North, the Bank of Israel said, had a non-uniform effect on economic activities in the major industries and geographical regions, where economic activity expanded moderately. For the fourth quarter, the bank expects a continued rise in economic activity in the business sector and most industries except the hotel and trading sectors. "In the hotel and trade industries, the leading index and expectations are for a slowdown and possibly even a fall in activity," said the bank's report. Sector by sector analysis of the central bank's report showed a rise in economic activity in the manufacturing, communications and trade industries, and in the services industry to some extent. The hotel industry suffered sharp falls in its activity, while the transport and construction industries remained stable. The bank further reported that expectations among companies were that the shekel would depreciate over the next 12 months to NIS 4.56/$1, compared with the outlook of NIS 4.69 three months ago. The participating companies forecast a level of NIS 4.43 to the dollar by the end of the last quarter of 2006. The companies' average provision for inflation for the quarter fell to 2.5% from 2.6% in the previous quarter. The proportion of companies expecting that inflation in the next 12 months would exceed the government's upper limit of 3% was down to 15% from the 24% who expected this in the previous quarter. Meanwhile, the Israel Manufacturers' Association said in a report Sunday that economic activity in the manufacturing industry was expected to recover slowly in the fourth quarter after economic growth was curtailed in the third quarter as many factories were forced to stop all or part of their activity during the hostilities in the North. Looking ahead, a survey of 165 companies carried out by the Association found that about 55 percent of respondents expected a rise in economic growth in the fourth quarter as a result of an increase in both exports and activity in the local market.

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