(photo credit: Levi Shapiro)
The economy expanded at a faster pace in the second quarter, driven by private consumption, exports of goods and services and investments in residential housing, the Central Bureau of Statistics reported Monday.
Gross domestic product grew by a preliminary 4.7 percent in seasonally
adjusted terms after expanding 3.6% in the first quarter and 4.3% in the
fourth quarter of 2009. In the first half of the year, the economy grew
an annualized 4.1% after growing 3.3% in the second half of 2009 and
contracting by 1.5% in the first half.
In light of the debt crisis in Europe and the weakness of the euro,
which threatened to damage growth and hurt demand for goods and
services, the economy was expected to grow about 3% in the second
“The figures are very encouraging, especially in view of the concern
raised over a slowdown in the Israeli economy impacted by the debt
crisis in Europe and slower economic indicators in the US in recent
months,” said Ron Eichel, chief economist and strategist at Meitav
Investment House, which raised its 2010 growth forecast for the economy
to 3.8% from 3.6%.
“This is really an economy running on all pistons,” said Jonathan Katz, a
Jerusalem-based economist for HSBC Holdings Plc, who forecast 3.7%
growth. “Down the road, the Bank of Israel will have to increase
interest rates. This is clear to them, clear to everyone, and the pace
may surprise many.”
Growth in the business sector expanded 6%, compared with 4.6% in the
first quarter and 4.3% in the last quarter of 2009, the statistics
Exports of goods and services rose 15.8%, up from 5.5% in the first
quarter. Export growth was boosted by industrials, diamonds and
agriculture, while exports of services declined.
Imports rose 8.3%, down from 21.8% in the first quarter.
Private consumption rose an annualized 8.7%, up from 2.8% in the first quarter.
Investment in fixed assets, such as residential housing, construction
and transportation, increased an annualized 10.9%. Investment in
residential construction rose an annualized 17.1%, the fastest pace
since the last quarter of 2008.
“The figures show that the economic plan implemented by the Finance
Ministry as part of the state budget 2009-10 has contributed to a change
in the economy and the emergence of the Israeli economy out of the
global crisis,” Finance Minister Yuval Steinitz said Monday.
“I am convinced that the new economic plan for the biannual budget
2011-12, which focuses on job creation and development of competitive
advantages of the Israeli economy, will put us on a fast economic path.”
Barclays Capital analyst Daniel Hewitt expressed some caution over the upbeat preliminary figures.
“This was much higher than our forecast of 3.1% and the consensus
forecast of 2.9%,” he said. “The higher growth reading is a surprise
given the plethora of negative data from [other] indicators. At this
time there is some uncertainty as to where the economy is headed. The
more-forward-looking data suggest a deceleration, and preliminary GDP
data in Israel is subject to revision.”
Hewitt cited the July Purchasing Manager’s Index, which was below 50 for
the third consecutive month on weak new orders, both domestic and for
“Exports declined in recent months, notwithstanding relatively strong
exports in June and July,” he said. “Industrial production is still
rising, but the forward-looking Israel State of the Economy indicator
has decelerated in recent months.”Bloomberg contributed to this report.