Israel: Economy wraps up 2017 with unexpectedly strong growth
The economy finished last year on unexpectedly strong footing, buoyed by resilient consumer spending and robust growth in services exports. Despite slowing in seasonally-adjusted annualized (SAAR) terms from the third quarter, a first estimate released by the Central Bureau of Statistics (CBS) showed that economic growth in the fourth quarter came in at a robust 3.6% (Q3: +3.9% SAAR; previously reported, Q3: +3.5% SAAR), above market analysts’ expectations of more modest 3.4% growth. Along with data releases for the second half of last year, full-year economic growth was also revised upwards to 3.3% (previously reported: +3.0%).
Household spending, which accounts more than half of total output, slowed considerably from a quarter earlier, easing to 1.3% (Q3: +6.9% SAAR) on weaker purchases of durable goods and a slump in automobile sales. Public spending, which had contracted in the previous quarter (Q3: -3.2% SAAR), contributed to growth in the fourth quarter, climbing a sharp 9.7% as full-year budgetary outlays were pushed through before year-end. On the other hand, fixed investment declined in the quarter (Q4: -5.5% SAAR; Q3: +2.3% SAAR) on weaker residential investment—which fell for a third straight quarter in part due to longer construction times and a lack of skilled labor—and a steep dip in industrial investment. That said, investment in machinery and equipment rose as the Leviathan natural gas reservoir ramped up development.
In the external sector, the continued strength of exports and a sharp deceleration of imports propelled a contribution to overall economic growth in the quarter (Q4: plus 2.2 percentage points; Q3: minus 2.9 percentage points). Exports rose 7.7% in the fourth quarter (Q3: +10.2% SAAR) on the strength of services exports—especially in the high-tech sectors—and the ongoing revival of the tourism sector. Goods exports, however, moderated significantly in the quarter. Imports, which jumped a quarter earlier (Q3: +20.5% SAAR) slowed significantly in the fourth quarter, growing a marginal 0.5%.
On an annual basis, GDP growth rose from a substantial base effect in the third quarter, to 2.9% in the October–December period from 2.2%.