Israel: Economic growth accelerates in the third quarter
A third reading of national accounts data, released on 16 January by the Central Bureau of Statistics (CBS), confirmed the preliminary reading of a 2.3% quarter-on-quarter expansion at a seasonally-adjusted annualized rate (SAAR) in the third quarter. This was a marked acceleration from the second quarter’s underwhelming 0.6% expansion and followed a downward revision released on 30 December, which saw the economy growing 2.1% in the third quarter over the prior period. The improvement came mainly on the back of a stronger external sector, as domestic demand was largely unchanged. Meanwhile, year-on-year growth in the third quarter was unchanged at 2.9%.
On the domestic front, government consumption growth was stable at 10.0% in the third quarter over the second quarter, during which public expenditure contracted 4.4%. The contraction in fixed investment was slightly less severe in the third reading of national accounts data (-10.4% quarter-on-quarter; previously estimated: -10.5% qoq; Q2: -5.7% qoq) as the drop in residential building investment was less steep than previously estimated; this offset a more severe drop in industrial investment expenditure. Private consumption growth was downwardly revised from 2.7% to 2.3% (Q2: -2.5% qoq).
The external sector’s performance improved in the third reading from the second one, with exports estimated to have increased 11.7% over the previous period in SAAR terms (Q2: -1.7% qoq). Exports were previously estimated to have grown 8.5%. Simultaneously, the decrease in imports turned out to be larger than estimated in the second release of GDP data (-5.3% qoq; previously estimated: -5.0% qoq; Q2: +0.1% qoq). Consequently, the external sector mainly drove the improvement in the headline reading.
Looking ahead, the economy should maintain a robust pace of growth on the back of resilient domestic demand, benefiting from an uptick in fixed investment growth. Although export growth is also expected to accelerate, lingering global trade tensions remain a downside risk to the external sector. Regional instability further clouds the outlook.