Managers Grow More Bullish on Economy

Survey finds that a growing number of executives expect real estate prices to remain unchanged.

Business people are more optimistic about the economy than they have been in the past half-year, a survey published on Wednesday by the Ziegelman Institute business consultancy found.

The poll of 200 senior corporate executives found that 16% expect gross domestic product to increase in the next half-year while 25% expect it to decline. This compares with 13% and 28%, respectively, in Ziegelman's previous poll three months ago. The remaining 59% expected no change.

"The beginning of the fiscal year, when new work plans are being put into effect, is traditionally accompanied by greater optimism among managers," said CEO Ehud Ziegelman. "Even so, more managers still expect a decline in the economy in the second half of the year than those who are expecting growth."

The survey found that a growing number of executives expect residential real estate prices to hold steady, marking a change in outlook after a long period of forecasted increases. Some 56.8% see prices for homes stabilizing in the next half-year, up from 43.8% in the previous surveys. The proportion expecting prices to continue rising dropped to 25.8% from 37.2%.

"We could be seeing the end of rising property prices, but still no drop," explained Ziegelman. " A change such as raising interest rates, whose drop until now has only helped to boost prices, won't in our opinion substantially change the price level that's become psychologically entrenched in the market."

Executives' somewhat rosier outlook on the economy was reflected in their hiring plans. While 68% of the survey respondents didn't foresee any change to the size of their company's payroll, 16% anticipated an increase while 16% anticipated a reduction. It was the first time in three quarters that the number saying they planned to hire wasn't exceeded by the number planning to trim their payroll.

"The Israeli labor market is exhibiting relative resilience, with employers in no hurry to lay off workers," said Ziegelman.

On how the government should balance its budget, the three measures most frequently recommended by executives out of nine that were offered in the survey were: deep cuts to the defense budget (56.5% ), across-the-board reductions in spending by government ministries (48.4% ), and raising the tax rates on corporate profits and capital gains (also 48.4% ).

Raising taxes for employees has the least support (2.2% ).

Reuters