War holds back July growth

The central bank updated its June combined index to show a 0.4% rise in economic activity in June, replacing the preliminary 0.7% growth figure.

growth biz 88 (photo credit: )
growth biz 88
(photo credit: )
Economic data released Monday provided the first official sign of the economic impact of the war in the North. The combined index of the state of the economy rose 0.2 percent in July, reflecting a slower pace of expansion of economic activity in the country, the Bank of Israel said Monday. Rises in industrial production and imports of goods were "significantly offset" by a "sharp drop" in exports "due to the fighting in the North," as well as a drop in commerce and services revenues, the central bank said. While exports of goods dropped fully 11.9% in July, services exports rose 1.4% and the imports component of the index rose 1.9%, following a 0.4% rise and a 2.6% drop, respectively. Indices of both industrial production and commerce and services revenues incorporated into the overall index related to June activity, which occurred before the outbreak of fighting on the northern border. Industrial production rose 2% in that period, but commerce and services revenues fell by the same amount. The central bank also updated its June combined index, also known as the "s"-index, to show a 0.4% rise in economic activity in June, replacing the preliminary 0.7% growth figure. Prof. Rafi Melnick of the Interdisciplinary Center Herzliya also calculated a 0.2% rise in economic activity in July, but estimated that "the bulk of the war's influence on the economy" will be visible in the August index since the war began in the second half of the July and continued into August. Industrial production continued its "quick expansion" into June, he added. Separately, the Central Bureau of Statistics said industrial production grew a full 6.9% in the first half of the year in comparison with the same period last year. The number of wage-earners employed in manufacturing grew 2.9%, boosting the number of hours actually worked by 3.3%. Trend data indicated a 11.7% annualized rise in industrial production during the second quarter, following a 10.4% annual rise in the first quarter, both are significantly greater than the 3.7% growth rate industrial production saw in the whole of 2005. The bureau also released data showing that commerce and services revenues rose 9.9% in the first half of the year, in comparison with the first half of 2005, with trend data indicating a 5.9% annualized rate in the second quarter and 9.7% annualized growth in the first quarter. Wholesale revenues grew an annualized 6.6% in the second quarter, following an 8.3% rise in the first, while retail revenues grew 3.3% in the second quarter and 7.2% in the first, according to annualized trend data. Chain stores, however, saw a seasonally-adjusted 3.7% drop in total sales in July following a 1.5% drop in June. Food sales in chain stores, on the other hand, rose 1.3% in July after dropping 1.4% in June.