GDP jumps 5.1% in 2Q

Israel’s economic output jumped an unexpected annualized 5.1 percent in the second quarter of 2013, pulling the annualized growth for the first half of the year up to 3.4%, the Central Bureau of Statistics reported Sunday.

By NIV ELIS
New shekel notes 370 (photo credit: Courtesy Bank of Israel)
New shekel notes 370
(photo credit: Courtesy Bank of Israel)
Israel’s economic output jumped an unexpected annualized 5.1 percent in the second quarter of 2013, pulling the annualized growth for the first half of the year up to 3.4%, the Central Bureau of Statistics reported Sunday.
The major contributors to growth were a healthy level of private consumption, which rose 6.7% in the second quarter, and government spending, which increased 8.3%. Gross fixed capital formation, a measure of investment, dropped 6.3%.
Some economists have attributed the sudden spurt in growth and consumer spending to the value-added tax.
Aware that the tax was set to rise by one percentage point in June, consumers ran out to buy products before the tax hit.
Indeed, in the first half of 2013, spending on durable goods such as furniture, home appliances and cars soared 10.2%, whereas in the previous six months it had dropped 6.6%.
Higher growth will help Finance Minister Yair Lapid hit the deficit target for the year of 4.65% of GDP and give him more wiggle room to make adjustments. For example, over the weekend he announced extended tax benefits for employees working second and third shifts, the kind of adjustments that require extra budgetary flexibility.