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The composite state-of-the-economy index rose 1.2% in July, extending the recent upturn that had stemmed nearly a year of declines, according to figures released by the Bank of Israel yesterday. The figures confirm recent numbers that point to an improvement in the Israeli economy.

The composite index represents various aspects of economic activity including manufacturing, imports of non-investment assets, revenues from trade services and exports of goods and services, which includes tourism, software, research and development and real estate brokerage.

The Bank of Israel notes that in July there was an across-the board increase in economic activity, with particularly sharp increases in both production and revenues by manufacturers.

Service exports climbed 3.2% in July after dropping 3.1% in June. Goods exports rose 0.4% in July after falling 1.1% in June, and imports increased for the second consecutive month by 4.3%.

Along with the composite index for July, the Bank of Israel revised composite index figures for April, May and June this year based on new data from the Central Bureau of Statistics. These numbers painted a slightly rosier picture than had been thought. The change in the index for April was revised from -0.8% to -0.5%, the change for May was revised from -0.3% to +0.1% and the change for June was readjusted from +0.2% to +0.6%.

The index peaked in May 2008, when it reached 131.1 points. But until April 2009, 11 consecutive months, the index had been in decline. It reached 120.4 points in July 2009, down 8.2% from its peak level.

The Melnick index on the state of the economy also rose in July - by 0.6%. According to Prof. Rafi Melnick of the Interdisciplinary Center in Herzliya, who prepared the index, the economic freefall has slowed down and we may now be starting an upturn.

Melnick said the manufacturing production index, mainly a reflection of the supply side and revenues in trade and services, rose sharply in June (the last month for which data is available). The imports index, which measures imports of raw materials for local production, continued to rise in July. The number of jobs in the business sector continued to decline, indicating that the job market continues to be weak.

Another upbeat indicator released yesterday is that Israel's industrial exports increased by 0.4% in July to compared with the month before to $2.75 billion, the Manufacturers Association said.

However, to keep things in proportion, compared with July 2008, Israel's industrial exports were down 23%, Economics Division director Ruby Ginel said.

Exports began to decline in the third quarter of 2008. But by June and July of this year, most industrial sectors were reporting an upswing, the association said.

The biggest increases by sector were reported in metals, mining and minerals, pharmaceuticals, telecom equipment and medical equipment.

The change for the better could prove fragile, the association warned. Exporters are still highly vulnerable to the weakness of the U.S. dollar against the shekel. Any appreciation by the shekel could hit industry hard, including those sectors ostensibly showing signs of recovery, Ginel said.