Israel’s economic growth slowed to a 2.1% annual rate in the first quarter as consumer spending and investment both declined, the Central Bureau of Statistics reported on Sunday, citing preliminary figures.
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But economists said the figures did not necessarily point to a long-term slowdown and that they stood a good chance of being revised as more data come in.
“At this point we don’t believe there has been a change in direction,” said Ofer Klein, head of economics and research at Harel Insurance & Finances. “There are a lot of positive indicators that have been released recently that support continued growth both in Israel and abroad, among them figures on the labor market business and consumer confidence, and revenues from taxes.”
Growth in the first quarter was down from a revised 2.9% rate in the final quarter of 2013, but up from 1.9% in the third quarter of last year. The Bank of Israel in its latest forecast from March said GDP would grow 3.1% this year, down from 3.3% in 2013.
The CBS said consumer spending dropped at a 2% annual rate in the first three months of the year, reflecting a per capita decline of 4%. It was also the second straight quarterly decline. Investment in machinery and equipment declined at a 14.4% pace, turning around from a 4.1% annualized rise the previous quarter. Public sector spending was unchanged.
Business sector GDP edged up just 0.4%, its lowest in many quarters.
The disappointing GDP data come two days after the CBS reported that inflation for April was just 0.1%, the lowest for the month since 2003. It was well under the 0.6% that economists had been forecasting, suggesting a slowdown in consumer spending.
The CBS confirmed that, reporting on Sunday that purchases of consumer durables like household appliances fell at a 6% annual rate in the first quarter, extending a 7.6% drop in the last quarter of 2013.
In foreign trade, exports of goods and services climbed at a 6.3% annual pace in the first quarter, marking a sharp slowdown from a 21.9% rise in the previous quarter. Polished diamonds were biggest contributors to the rise, jumping at a 134% annual rate. Non-diamond industrial exports rose at a 2.8% rate. Service exports increased 4.8% on an annual basi Ofer Klein, head of economics and research at Harel Insurance & Finances s, the CBS said.
Imports of goods and services rose an annualized 5.4%, slowing slightly from a 5.6% in the previous quarter.
Klein said the weak data confirmed his view that the Bank of Israel would not be raising its base lending rate anytime soon. He said the rate would probably remain at 0.75% until the end of the year, but added that the odds of a rate cut had grown “significantly” with the release of the first-quarter GDP data.