Half of commerce, services expect more sales in first quarter

One in four of the businesses surveyed expected lower sales in the first quarter and 24% expected no change.

March 29, 2006 10:13
2 minute read.

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Some 51 percent of commerce and services businesses are expecting higher first quarter sales, the Federation of Israeli Chambers of Commerce said this week, citing a survey of 130 companies. "Since 2005's growth reflected correction following the recession of previous years, the continued growth and stability currently expected by the companies is an expression of the growth potential within the commerce and services sector of the economy," said Israela Mani, the federation's deputy general-director on economics and taxation. One in four of the businesses surveyed expected lower sales in the first quarter and 24% expected no change. Additionally, 26% of the businesses anticipated higher profits, 30% lower profits and 44% no change. According to the survey, 63% of the businesses had not expected to change the size of their work force while 27% expected to have added employees and 10% thought they would have had to cut jobs. Comparing 2005 with 2004, 68% of businesses reported a rise in sales, 45% earned greater profits and 31% added employees. Service exports rose 12% to $16.9 billion in 2005, the federation said. "Economic policy makers must stop thinking about exports only in terms of goods exports. Services exports account for fully 30% of Israel's total exports, and are continuing to develop at a fast rate," said federation president Uriel Lynn, calling service exports "one of the leading engines of the Israeli economy." Tourism services exports grew 19% to $2.8b.; transportation services exports grew 15% to $3.7b.; and exports of all other services grew 9% to $10.3b. Diamond exports, as well, are almost entirely service exports, Lynn noted. Separately, the Bank of Israel reported that commerce and services activity "grew significantly" in 2005, continuing the trend of the preceding 18 months. "Since activity in these sectors, constituting half of the economy's business product, is primarily nontradable, it is tightly bound to developments in local demand," the central bank said. The bank attributed the fast growth in activity within commercial sectors and some service sectors - such as hospitality and food services and health, personal and other services - to the continuing rise in income and private consumption. Growth in activity of business services, including computer, legal and accounting services, as well as growth in the activity of financial institutions, resulted from the recovery in business sector activity and surges in the capital market, the BOI said. The food and hospitality service sector's product grew 11%, followed by 9.4% growth in business services. Growth in tourism service exports and start-up activity also contributed significantly in 2005, the central bank added. While the recovery led to increased employment in most commercial and service sectors, development of wages varied by sector. Wages rose in sectors requiring high levels of human capital, such as business services, computer services, research and development, but not in sectors employing less educated workers, such as hospitality and food services, security, cleaning and manpower services. Services accounted for 76% of the overall sector's product in 2005 with commerce accounting for the remaining 24%.

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