May purchasing data could show slowdown

Growth in the manufacturing sector expanded in Q1, but a drop in exports and domestic demand in May indicates a change of direction.

shopping women 88 (photo credit:)
shopping women 88
(photo credit: )
Growth in the manufacturing sector expanded in the first quarter but a drop in exports and domestic demand in May indicates a change of direction. "From the beginning of this year, we have seen all economic indicators going up including the growth indicators provided by the Bank of Israel," Zeev Deckel, head of Dun & Bradstreet Israel's PMI Services told The Jerusalem Post. "We are the first to say that there is a downward change of direction because of a reported drop in exports and domestic demand, which are the main indicators for a slowdown." The Israel Purchasing and Logistics Managers Association's Procurement Managers Index carried out by D&B Israel fell 2.4 percentage points in May to 54.7% from 57.1% in April. The drop was carried by a slowdown in exports to 56.4% from 64.5% in April, and a drop in domestic demand to 52.2% from 54.2%. Higher prices for raw materials boosted the prices component of the index to 79.2%, its highest level since November 2004. "If in June or the following months the index dropped below the 50%, which is the threshold between expansion and slowdown, we would see a downward growth trend," said Deckel. As such, the PMI Index for May indicated that the manufacturing sector still expanded, for the seventh consecutive month, but the drop in exports and domestic demand during the same month signalled that the expansion was growing at a slower pace. According to the Manufacturers' Association's first quarter report for 2006, the sector experienced an accelerated monthly production growth rate of 2% over the same period last year compared with an increase of 1.4% in the last quarter of 2005 and 1.8% in the quarter before that. Fastest growth rate of 5.7% in the months of January to March was reported in the production rate of the hi-tech sector after a slow growth rate of 0.8% in the last quarter of 2005. In addition, the report disclosed that 4,100 new employees were hired in the first quarter representing a 1.2% increase over the last quarter. The accelerated rate of employment growth in the manufacturing sector is expected to lead to the employment of 7,500 new workers during 2006 according to estimates by Shraga Brosh, President of the Manufacturers' Association of Israel. The forecast by Brosh would mean an increase of 2.2% in the work force to a total of 345,000 employees in the sector. During the first quarter, the hi-tech sector experienced an employment growth rate of 2%, hiring 1,500 new employees, whereas the traditional technology sector only saw a level-headed employment growth rate of 0.4%, or 470 new employees - similar to the growth rate in the previous quarter.