Clutch of New Data Mostly Points to Accelerating Growth for Israel's Economy

Figures show export recovery, but consumer spending turns tepid and the jobless rate edges higher.

Illustrative: A man sorting through several 200-shekel bills.
Emil Salman

A clutch of economic indicators released by the government on Monday pointed to accelerating economic growth in the third quarter, as export growth picked up pace and tourism showed a long-awaited revival.

Exports of goods and services – traditionally Israel’s economic growth engine – climbed at a rate of 7.1% in July-September, accelerating sharply from growth of just 0.4% in the second quarter, the Central Bureau of Statistics reported. Industrial production, another growth engine, showed a 5.5% annualized rise in the two months, extending a 7.2% gain from the previous two months.

But the picture was clouded by signs that the consumer spending boom that has led economic growth in recent quarters may be coming to a close. Most significantly, the CBS reported that the unemployment rate jumped to 4.9% in September, up from 4.6% in August when it had reached its lowest in decades.

Meanwhile, the CBS’ index of retail sales – a barometer of domestic consumer spending – fell at a 4.3% annualized rate in July-August, turning around from a 6.4% increase in the previous two months.

The index on consumer confidence was unchanged at minus 15%.

Merchandise imports – not counting rough diamonds, ships and aircraft, and energy – continued to rise strongly, climbing an annualized 8.1% in the third quarter. But the increase was paced by a 36% jump in imports of capital goods used by factories and other businesses, while imports of consumer goods fell at a 2.6% rate.

The surfeit of economic data came as the CBS dumped figures that would normally have been reported over October, but was delayed until the end of the High Holy Days.

The new data suggest that the economic growth that accelerated sharply in the second quarter isn’t about to slow soon, as some economists had feared. Gross domestic product expanded at a 4.3% annualized rate – a 0.6 percentage point jump from the CBS’s original estimate just two months ago – to make it the fastest rate of growth since the end of 2014.

The CBS also said industrial exports rose at a 6.1% annualized rate in the third quarter, versus a 0.8% decline in the previous three months. Exports of high-tech, which had been in a prolonged slump, were up 9.7% in the quarter, while medium-tech exports, like chemicals and machinery, rose at a 12.5% rate, the CBS said.

Although Israel’s jobless rate rose in August, it fell to 4.7% for all of the third quarter – from 4.8% in the second quarter – and remains at historic lows. Moreover, the percentage of working-age Israelis either holding a job or actively seeking one continued to rise, reaching 64.3% in September, up from 64.1% in August.

The tourism sector, still reeling from the huge setback it received following the Gaza war in the summer of 2014, got some rare good news from September hotel stays: these showed a 5% increase from the same period in 2015. Israeli overnight stays were down 3% to 1.2 million, maybe reflecting tepid spending, but stays by foreign tourists were up by a third to 681,000, the CBS said.

“After quite a long time, finally we have some positive figures,” said Noaz Bar-Nir, director of the Israel Hotels Association.

But he said the industry will have a better idea where it stands after figures for October come in. This year, he noted, the peak High Holy Days travel season occurred in that month, rather than over September and October.