Israel: Activity bounces back in the second quarter
August 16, 2022
Economic activity bounced back in Q2, expanding 6.8% in seasonally-adjusted annualized rate terms (SAAR) and contrasting the 2.7% contraction logged in the first quarter. Q2’s growth rate was the strongest in the OECD.
The upturn reflected improvements in private consumption, public spending, fixed investment and exports. Household spending rose 10.4% SAAR in Q2 compared to a 1.1% contraction in Q1. Q2’s reading was buoyed by a tightening labor market and the fading impact of the pandemic. Public consumption expanded 5.0% in Q2 (Q1: -10.5% SAAR). In addition, fixed investment growth picked up to 7.7% in Q2, above the 0.4% increase logged in the prior quarter.
Exports of goods and services grew 10.3% in Q2 (Q1: -4.3% SAAR), boosted by a recovery in tourist arrivals. Conversely, imports of goods and services growth moderated to 3.5% in Q2 (Q1: +14.3% SAAR), marking the worst reading since Q3 2020.
On an annual basis, economic growth slowed to 4.8% in Q2, compared to the previous quarter's 10.8% expansion.
Growth is seen moderating in the coming quarters due to tighter monetary policy, a less favorable external environment and as the impact of the post-pandemic normalization of services activity fades.
As analysts at the EIU commented:
“With consumer demand, investment and export growth likely to slow, only partially offset by stronger government consumption and reduced imports, real GDP growth is likely to trend downwards later in 2022 and into 2023, although given the performance in the first half of 2022, it is only in 2023 that annual growth will be markedly lower.”
Author: Oliver Reynolds, Economist