Economic growth accelerated sharply in the second quarter as Israelis went on a buying binge and the widely feared export slump evaporated, revised figures released by the Central Bureau of Statistics on Thursday showed.
Gross Domestic Product expanded at a 4.3% annualized rate, of six percentage point jump from the CBS’s original estimate just two months ago. That made it the fastest pace of growth since the end of 2014 and lifted the pace of expansion for the first half of the year to 3.2%, up eight points from the CBS’ original estimate.
Growth was led by unusually high rates of consumer spending and exports of goods and services. Consumer spending jumped at a revised 9.9% annual rate in the second quarter, marking the fourth straight quarter of big increases. Spending on durables, like cars and home appliances, soared at a 35.5% rate.
Exports, which slumped most of last year, came roaring back in the first half – climbing at a revised 10.4% rate in the second quarter and an 8.8% rate in the first. Excluding the impact of startup companies and exports of polished diamonds, exports were up 13.7% in the second quarter, the CBS said.
Ofer Klein, chief economist at Harel Insurance & Finance, said that despite the sharp increase in exports, they were still weak by recent standards. Moreover, he said, economic data for the third quarter, which ended September 30, points to a slowdown in growth to a rate of about 2.5%.
“The upward revision even surprised us and we are raising our growth forecast for all of 2016 to 2.9%, compared with 2.7% previous,” said Klein, who has been more bullish on the economy than many other economists, although he added that his forecast for 2017 remains unchanged at 3.1%.
“The upward revision could explain the strength of the shekel and the positive situation in the labor market,” he added. Unemployment fell to 4.6% in August, its lowest in decades while the shekel strengthened as much as 4% since the start of the year, although it has a lost a lot of that value in the past five weeks. The dollar gained 0.6% to a Bank of Israel rate of 3.81 shekels onThursday.
The CBS said government spending also rose sharply in the second quarter to a revised 7.6% after contracting 2% in the first quarter. Imports of goods and services climbed 24.2% in the second quarter, thanks in part to the consumer spending spree.
One area, however, where the economy showed signs of slackening was in investment, which slowed to a 5,4% annual rate in the second quarter from 17.6% in the first. Investment in residential construction was a slow 3% in the second quarter, down from 3.1% in the first and well below the pace in 2015.
Investment in machinery and equipment dropped to a 6.2% annual rate in the second quarter, from 26.3% in the first, the CBS said.
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