Israel GDP Q3 2019

Israel: Growth rebounds in Q3 on stronger private consumption

The economy expanded 4.1% in quarter-on-quarter, seasonally-adjusted annualized rate terms (qoq SAAR) in the third quarter, considerably exceeding Q2’s upwardly revised 0.8% expansion (previously reported: +0.6% qoq SAAR). However, excluding net taxes on imports—which have introduced heightened variation in GDP data so far this year—underlying momentum was fairly stable (Q3: +3.7% qoq SAAR; Q2: +2.9% qoq SAAR).

Private consumption increased 2.8% SAAR (Q2: -0.8%) on higher consumption of durable goods, likely linked to a renewed spate of vehicle purchases. Fixed investment continued to fall (Q3: -6.1%; Q2: -4.7%), again likely due in part to volatility in vehicle imports. Investment in machinery and equipment also declined. Government spending, conversely, rose 4.2% in Q3, having surged 13.5% in the previous quarter.

On the external front, exports of goods and services plunged 8.4% in the quarter (Q2: +2.9%), while imports were up 1.9% (Q2: +2.5%). As a result, the external sector subtracted 3.1 percentage points from growth, contrasting the 0.1 percentage-point contribution in Q2.

Looking ahead, growth should be resilient, supported by a strong labor market and expansionary monetary policy. Furthermore, developments in the gas sector should boost industrial output, as operations at the Leviathan gas field come online toward the end of 2019.

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