Economy index rises by 1.2% in July

For the first time since May '08, trend figures for July showed that the number of unemployed did not rise.

jerusalem unemployment line 88 248 (photo credit: Ariel Jerozolimski [file])
jerusalem unemployment line 88 248
(photo credit: Ariel Jerozolimski [file])
The leading index of economic indicators rose a preliminary 1.2 percent in July, its third gain in a row following declines since last June, indicating that economic activity is expanding, the Bank of Israel reported Wednesday. "It seems that a turnaround is emerging which is reflected in the rise in economic activity," the central bank said in its report. "The rise in the index in July showed increases in all components of the index, particularly in the sharp rise in industrial output and turnover." In June the index rose 0.2 percent for the first time since the outbreak of the global economic crisis last year, although revised figures published Wednesday showed that the index was already up 0.1% in May instead of the 0.3% fall in the original reading. The rise in the July state-of-the-economy index compares with a revised increase of 0.6% in June and a revised fall of 0.5% in April. "We are at a turning point in the economy marking an emergence out of the recession but we can still expect some volatility ahead of us, while unemployment will continue to rise," Shlomo Maoz, chief economist at Excellence Nessuah Investments said in a telephone interview with The Jerusalem Post on Wednesday. "The index has been fueled by a rise in public expenditure and boosted by a low interest rate environment encouraging private consumption." The June industrial production index rose by 2.1% after falling 0.3% in May. "The rise in industrial production is led mainly by the start of production at the new Intel plant. Neutralizing the Intel effect industrial production figures are still low," said Maoz. The July imports-of-goods index was up 4.3%, continuing the 4.3% rise in June; the exports-of-goods index was up 0.4%, after dropping 1.1% in June; and the exports-of-services index saw a 3.2% rise after declining 3.1% a month earlier. Last week the Central Bureau of Statistics said gross domestic product had risen by 1% in annual terms in the second quarter, after contracting by 3.2% in the first quarter and 1.4% in the last quarter of 2008. In light of recent positive economic data, Bank Hapoalim on Wednesday revised its growth forecast for the economy to a contraction of 0.3% for this year from a contraction of 1.2% previously and 3% in 2010, from 1.5% previously. "The Israeli economy returned to growth in the second quarter of this year, the sharp decline in exports halted, we are seeing a recovery in private consumption and there are expectations for an increase in industrial activity," said economists at Bank Hapoalim. "However a long-term recovery of the economy will depend on a recovery in the employment market. The return to growth in the economy does not encompass all sectors and there are companies who are still facing great difficulties." The Bank of Israel forecasts a 1.5% contraction of the economy for the full-year of 2009, returning to growth of 1% next year, while the Finance Ministry predicts a 1% decline this year and a return of growth of 1.5% in 2010. Separately, the Israel National Employment Service reported that for the first time since May last year, trend figures for July showed that the number of unemployed did not rise month over month. According to the trend figures, the number of unemployed stood at 210,410 in July compared with 210,470 in June. Last month, the number of job seekers fell 2.1% in seasonally adjusted terms to 225,600, from 230,500 in the previous month. "In July the number of new job seekers fell by 1.4% to 23,000 as the number of unemployed narrowed," said Yossi Farhi, Director of the Israel National Employment Service. "However it is too early to determine whether the trend data points to a turning point." Commenting on the positive data, Industry, Trade and Labor Minister Binyamin Ben-Eliezer warned about early enthusiasm while emphasizing that the data needed to be tested over time. "We need to examine the data over time and more importantly we need to find ways for the 210,00 unemployed to get back to work," said Ben-Eliezer. "Positive data indicating an emergence out of the economic crisis in the second quarter are exaggerated and premature. Therefore we will continue to use all possible measures to encourage growth, help small and medium-sized businesses and help factories and exporters."