BOI: Construction, commerce and industry could bounce back

The construction sector could even benefit from repairs and reconstruction projects in the North, the researcher added.

construction 88 (photo credit: )
construction 88
(photo credit: )
By the end of the third quarter, commerce and industry could make up for July losses related to the military confrontation with Hizbullah, while the tourism sector is likely to suffer more long-term damage, assuming normalcy is regained within the week, a researcher at the Bank of Israel said Sunday. "It is clear that [the economy as a whole] will suffer damages, but this is hard to quantify," he said. The construction sector could even benefit from repairs and reconstruction projects in the North, the researcher added. While commerce and industry likely would be able to find a way to transfer lost business to August, hoteliers and transportation companies dependent on tourism would suffer from both the hit to tourist entries during the fighting itself, as well as more long-term wariness and avoidance by many potential visitors to the country. "In those sectors, what is lost is lost," though the full extent of damages also would depend on the compensation ultimately received by the government, he said. The Bank of Israel research division on Sunday released a survey of some 600 companies and businesses indicating various sectors' performance during the year's second quarter, based on questions asked before the initial Hizbullah attacks. Industrial enterprises of all technological levels indicated that rises in output continued, reflecting growth in both exports and domestic sales. Inventories of finished goods expanded, as the use of equipment an machinery increased. At the time, industrialists expected that growth in orders placed from abroad and the domestic market would continue into the third quarter. While commercial businesses also saw an increase in sales and anticipated that this would continue into the third quarter, as well, construction companies only felt a moderate rise in operations. Rises in construction of infrastructures and buildings were offset by drops in building starts and finishes. Increased activity among big and medium-sized builders contrasted with stability among small companies. Big and medium-sized companies said they expected increased activity in the third quarter, while small companies anticipated drops. Transportation and telecommunications companies experienced somewhat slower growth in the second quarter, buoyed by increased sales to both Israelis and tourists. While sales by land and air carriers grew, sales of marine transporters and telecommunications providers dropped. The hotel sector continued to grow in the second quarter - maintaining two straight years of increased revenue per room - as increased stays by tourists from overseas more than made up for lower sales to Israelis. Prior to the confrontation with Hizbullah, hoteliers were looking forward to increased sales in the third quarter, as well. Now, all those projections are in doubt. The extent of damage would depend on just how long the conflict lasts, he said. Separately, the Ministry of Industry, Trade and Labor said last week that demand for workers in the business sector rose 12.3 percent in the second quarter to 44,300 available positions, which was fully 55.2% above the number of positions available in the second quarter of 2005. The number of positions filled rose by 9.5%, while the number of employees losing or leaving jobs grew by only 2.6%, bringing net job creation to 17,300 posts, up from 7,900 in the first quarter. Due to drastic drops in demand for workers in the North - which accounts for about one-quarter of the job market - growth indicators were expected to be "much lower" in the third quarter, however, ministry labor market analyst Benny Fefferman said Sunday. Fefferman also agreed that the construction sector likely would see increased activity from structural repairs and government-driven infrastructure development. "There will be a lot of work [for construction businesses]," Fefferman said, but suggested that new residential construction - driven by private household demand - could suffer along with the rest of the economy.