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The fourth quarter of 2009 saw a substantial increase in economic activity, following rather slighter improvement in the third quarter, according to the Bank of Israel's periodic survey of 585 companies and businesses.

Two striking elements that differentiated the last quarter of the year from the previous one, were rising sales and a dramatic decline in forecasts of a further business slowdown.

But there was one major exception to the general sense that both domestic and overseas sales are increasing: the hotel industry, where companies could not claim to feel their business has re-energized.

The increased of activity exceeded the previous forecasts of most businesses. Most industries cited restricted demand as the primary factor limiting expansion of their business activity. Nevertheless, responses pertaining to their business activity over the coming quarter indicate that they expect sales to increase further.

The re-expansion of economic activity follows a decline that began in the fourth quarter of 2008, that ended in the second quarter of 2009.

The labor market has been improving as well, the study found. Although there was no increase in the number of jobs, the decline in the number of workers was slowed.

Companies that participated in the survey expect inflation in 2010 to reach 2.8%, which is slightly below the maximal range defined as price stability. They predict that the dollar exchange rate will reach NIS 4 by December of this year.

In the hotel industry, business waned slightly in the last quarter of 2009 compared to the same period in 2008. The fourth-quarter decrease followed steep declines throughout the first three quarters of 2009.