Key economic indicator hints at better times

State-of-the-economy index rises for the first time in a year.

hi tech 248.88 (photo credit: Ariel Jerozolimski)
hi tech 248.88
(photo credit: Ariel Jerozolimski)
The leading index of economic indicators rose 0.2 percent in June, its first gain since last July, as exports and imports increased, the Bank of Israel reported Sunday. "It's still too early to say whether there's a turnaround in the business cycle," the central bank said in its report. "The rise in the index in June was led by an increase in exports and imports of goods, while other components of the index dropped." The rise in the June state-of-the-economy index compares with revised drops of 0.3% in May and 0.7% in April. The June imports-of-goods index was up 3.7%, following a drop of 3.6% in May; the exports-of-goods index was up 1.5%, after rising 7.8% in May. Data published by the Central Bureau of Statistics on Sunday showed that exports of goods, not including diamonds, rose by an annualized 1.2% from April through June, after declining at an annualized rate of 23.9% from January-March. Exports of goods, excluding diamonds, to the United States rose by an annualized 15.8% in the second quarter, after falling by an annualized 4.7% in the first quarter. Exports to Asian countries rose by annualized 0.3% in the second quarter, after dropping by an annualized 36.7% in the first quarter. Exports to the European Union fell by an annualized 10.6% in the second quarter, after plunging by an annualized 47.9% in the first quarter. Exports to the rest of the world rose by 33.4% in the second quarter, after falling by an annualized 12.2% in the first quarter. A survey of industry expectations published by the Israel Manufacturers Association on Sunday indicated a slowdown in the dramatic fall in output and in the wave of layoffs over the past six quarters. "There are signs of a slowdown in the pace of the output falls in the industry, which means that we could be getting closer to the bottom of the crisis," said Ruby Ginel, deputy director of the association's economics and regulation division. The survey was carried out among 158 industrial companies during the second half of June. It indicated that after six consecutive months of sharp output falls, industrialists were expecting a significant moderation in the downturn until stabilization in the third quarter of this year, Ginel said. In the third quarter, sales to the domestic market and exports should drop at a more moderate pace, he said. "However, industrialists are still not reporting signs of a recovery or growth, as they are still struggling to keep within current credit frameworks," Ginel said. Forty-eight percent of the surveyed industrialists said their production had dropped in the second quarter of this year, while 26% registered a modest increase; 35% reported job cuts, while 10% said they had been hiring. Ginel said layoffs continued in the second quarter across most sectors of the economy, except for the rubber and plastics sector. The chemicals and electronics sector continued to lay off workers at the same pace as in the beginning of the year, while layoffs in other sectors in the economy slowed down, he said. The statistics bureau reported Sunday that manufacturing production had declined in the March-May period, albeit at a slower pace than in the first two months of the year. The growth rate in manufacturing production dropped 9.9% in annual terms in March-May, compared with a 16.6% contraction in the December-February period. The slowdown in the fall of industrial production was led by more moderate declines in the hi-tech sector, which fell 5.1% in March-May, after falling 6.6% in December-February. Not including the hi-tech sector, the growth rate in manufacturing production fell 13.1% during the same period. Industrial production in the mixed-traditional technology sectors - rubber, plastics, metal goods, jewelry - dropped 16.5% in March-May, compared with a 38.4% plunge in December-February. In the mixed hi-tech sector - chemicals and electronic equipment - the rate fell 15.4%, compared with a decline of 24.2% in the previous period. In the traditional industry sector - food, textiles, clothing, wood - it fell 7.1%, compared with 12.6% in the previous period.