Exports rise despite dollar’s drop

But trade deficit for April widens to 16-year high on stronger shekel.

By NADAV SHEMER
May 12, 2011 22:47
3 minute read.
ship imports exports [illustrative]

illustrative-ship imports exports 311aj. (photo credit: Ariel Jerozolimski)

Exports rose an annualized 28.8 percent in the February-April period, the Central Bureau of Statistics reported Thursday. The rise came despite growing concern by manufacturers that they would be hit hard by the falling dollar, which sank to a 34-month low against the shekel at the end of the month.

However, the data showed the widest trade deficit in at least 16 years in April as a stronger shekel made exports less competitive in world markets. The gap, excluding polished diamonds, ships and aircraft, widened to a seasonally adjusted $1.6 billion from a revised $1.2b. in March, the statistics bureau said. Imports rose 6.3% to $5.5b., while exports fell 2.1% to $3.9b., the first decrease in four months.

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The trend data calculated by the bureau, seasonally adjusted and corrected for irregular elements, pointed to an annualized rise in exports (excluding diamonds) of 28.8% in the quarter beginning in February and a simultaneous rise of 25.8% in imports (excluding diamonds, ships, aircraft and fuels).

Manufacturing exports (excluding diamonds) constituted 84% of all export of goods, while diamond exports accounted for 13% and agriculture for the remaining 3%.

While these statistics would seem to contradict recent criticism from the Manufacturers Association of Israel and exporter groups that the dollar’s fall is hurting them, the association says the data does not reflect the entire picture.

“More than 70 percent of Israeli exports are fixed according to the dollar, and there are many different explanations [for the continuing rise in exports],” Ruby Ginel, the association’s vice president for the economy and regulation, told The Jerusalem Post Thursday.

Israeli manufacturers were left with large inventories after 2010 and had “no choice but to sell those stocks, even at a loss,” he said. Another reason for April’s rise in exports, he said, was that there is generally a lag between the fall of the dollar and its impact on the exchange rate.

“The damage it causes to the competitiveness [of Israeli exports] comes with a lag of around half a year,” Ginel said. “So it’s reasonable to assume that toward the end of the year, or sometime in the second half of 2011, we will see the impact of the exchange rate with a drop in exports.”

“There is still reason to worry,” he said. “Right now the dollar is hovering between NIS 3.40 and NIS 3.50. We are talking about a revaluation [of the shekel] of 26% since 2006. We are talking about a continuing drop in the profit margins of manufacturers.”

The Manufacturers Association says it has not received a government response since holding a press conference last week, at which its president, Shraga Brosh, accused Finance Minister Yuval Steinitz of not caring about the plight of exporters in light of the falling dollar.

The dollar hit its lowest point against the shekel in almost three years on May 1, when the Bank of Israel set the dollar-shekel representative exchange rate at NIS 3.395. However, it has recovered gradually since then and by early Thursday afternoon had topped NIS 3.50 for the first time in six weeks.

The dollar should continue to rise next week toward NIS 3.52 on the back of the drop in global commodity prices, USG Capital analysts Eli Ben- David and Shay Zakhaim said in a report Thursday.

However, they said the overall trend of the shekel strengthening against the dollar would not disappear. They, and most other analysts, believe Bank of Israel Governor Stanley Fischer will raise the interest rate for June by 25 basis points to 3.25%.

“Fischer will pay less attention to the dollar exchange rate as a measure for making interest-rate decisions,” the USG Capital report said. “The determining factor will be inflation, and in the event that inflation continues to rise, the interest rate will continue to rise accordingly.”

Bloomberg contributed to this report.


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