Israel’s merchandise trade deficit widened more than 60% in July from its average in the first seven months of the year as the fighting in Gaza disrupted operations at the country’s airports and seaports and the shekel gained in value.
- The Gaza effect: In shaky economy, Arab businesses hit hardest
- In surprise move, Bank of Israel cuts base rate to five-year low
- Israel’s finance chief seeks to raise 2015 budget deficit to 2.9%
Israel ran up a 6.6 billion-shekel ($1.9 billion) deficit in the month, compared with an average gap so far this year of 4.1 billion shekels, the Central Bureau of Statistics said on Tuesday. Merchandise exports exceeded 16 billion shekels, 6% less than the seven-month average, while imports were 7% higher at 22.6 billion shekels.
Operations at Ashdod Port, one of Israel’s two big seaports, was disrupted much of July by Hamas missiles while many foreign airlines suspended service to Israel, hurting tourism and air freight. In addition, many factories in the south of the country were working on partial shifts or were shuttered altogether, slowing production and delaying deliveries.
The trade figures are the latest in an accumulating stream of economic data showing how the damage from the five weeks of fighting affected the economy. On Monday, the CBS reported that tourist arrivals dropped 26% in July from a year earlier while the Finance Ministry reported lower tax revenue and higher government spending for the month.
Besides the fighting, Israel’s trade is being affected by the shekel's against the dollar and other major currencies. Even as the fighting raged, the shekel appreciated 0.9% against the U.S. currency and 1.3% against the euro, making Israeli exports more expensive and imports cheaper.
The CBS noted that it was the fifth month in a row that the Israeli currency strengthened against the dollar.
On the other hand, Israel’s merchandise trade deficit — which doesn’t include the increasingly important component of service exports — was on track to narrow for all of 2014. The CBS said that on an annualized basis, the deficit was 48.7 billion shekels in the first seven months, down from 51.3 billion shekels in 2013 and 70.4 billion shekels in 2012.
Nevertheless, the trade situation for Israel looks poor. For the May-July period, trend data showed that merchandise exports, excluding ships, aircraft and diamonds, were down at a 12% annualized rate, steeper than the 10.6% drop in February through April, the CBS said.
Exports of high-technology goods, a key component of the economy, were down at an 8.2% annual rate in the three months, extending an 11.2% drop in February through April.
Imports were down as well, but not by nearly as much. Trend data showed a 2.6% annualized decline in May through July, more than the 1.4% drop in February-April. Imports of capital goods were down a sharp 9.9% in May-July, the CBS said. The capital-goods number includes things like machinery and equipment used in factories, making it a barometer for future economic activity.
Imports of consumer goods dropped at a 1.7% annual rate in May-July, turning around from a 2.4% annualized increase in the three previous months, it added.