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Business growth accelerated in all sectors of the economy, except the hotel industry, in the fourth quarter of 2009, spurred by increases in both foreign and domestic sales, according to the Bank of Israel's quarterly companies survey published on Tuesday.
"Reports from companies indicate that in the fourth quarter of last year, business activity grew significantly after activity started to recover faster than expected in the previous quarter and a contraction since the fourth quarter of 2008," stated the report. "The positive trend reflects the rapid transition from fears of a deep crisis to expectations of growth in activity based mainly on both stronger growth in domestic activity as in the previous quarter and sales abroad."
The economy expanded at a 3 percent annual rate in the third quarter of 2009 and is projected to have grown at a 4% clip in the fourth quarter.
The survey, which is based on a representative sample of 585 companies across all sectors of the economy, found that the sharp decline in demand that hampered expansion of business activity in previous quarters was easing.
Researchers at the Bank of Israel emphasized that although the labor market experienced a positive turnaround of activity in the fourth quarter, there is as yet no perceptible increase in the number of employees.
"There is a moderation in the decline of employees that characterized the previous quarters," the central bank said. "In the survey, 44% of the companies reported that as a result of the economic crisis, employees were willing to compromise on salaries and 36% said that workers showed flexibility on the terms of their employment."
Activity in the industrial sector grew at a faster pace than had been expected in previous surveys, as sale orders from abroad and the domestic market are picking up.
Within the trade and commerce sector, companies increased numbers of workers moderately on the back of heightened business activity in the fourth quarter and expectations of stronger sales in the first quarter of 2010.
Following two quarters of stable activity, the companies in the construction sector reported a moderate rise in the volume of work on buildings and a decline in the construction of infrastructure in the fourth quarter.
Businesses active in the hotel and tourism sector are not yet seeing signs of a recovery. Hotel companies reported a moderate fall in activity in the fourth quarter compared with the same quarter last year, following steep declines since the beginning of 2009. The contraction in activity was led by a downturn in hotel stays by foreign tourists, while hotel stays by Israelis rose slightly. Based on reservations received for the first quarter, companies in the sector don't expect a significant recovery in activity.
The average inflation rate projected by survey respondents for the 12 months through December 2010 dropped to 2.8%, from the 3% predicted in the previous survey.
The percentage of companies expecting inflation over the next 12 months to be above the government's price stability target range of 1%-to-3% fell to 38%, from 46% in the previous quarter.
The companies surveyed expect that the dollar will cost NIS 4 on average at the end of December 2010, similar to the projections in the previous quarter. They forecast an average dollar level of NIS 3.86 by the end of the first quarter of this year. The dollar stood at NIS 3.78 on the day the survey was conducted.