Israel: Economic growth accelerates in the third quarter
A first estimate of national accounts data for the third quarter, released by the Central Bureau of Statistics (CBS) on 18 November, showed that the economy accelerated from Q2’s revised 1.2% quarter-on-quarter expansion at a seasonally-adjusted annualized rate (SAAR) to 2.3% in Q3. The result was driven by both the domestic and external economy but came in below market expectations of a stronger 2.8% expansion. Moreover, compared to the same period a year ago, economic growth eased from a revised 3.7% in the second quarter to 3.1% in the third quarter.
In quarter-on-quarter terms, domestic demand benefited from swings in private and public consumption. Private consumption expanded 2.1%, contrasting the 2.6% contraction in the second quarter. This reflected a markedly weaker contraction in the consumption of durable goods, likely still suffering from the surge in automobile sales in the first quarter. Meanwhile, public consumption increased 9.5%, swinging from a 3.3% drop in the previous quarter. Fixed investment, however, contracted at an even sharper rate (Q3: -6.3% qoq; Q2: -4.6% qoq), reflecting a contraction in both residential building and industrial investment.
Turning to the external sector, exports expanded 7.2% in the third quarter following Q2’s 0.8% contraction, while imports dropped 5.0% in Q3 (Q2: -1.9%) over the previous period despite firmer domestic demand.
Going forward, economic growth is expected to remain firm next year and the year after. The economy is expected to be aided by resilient domestic demand and robust foreign demand. However, rising inflationary pressure will likely put a lid on private consumption growth by denting purchasing power. Lingering global trade tensions remain a downside risk to Israel’s economy, while regional instability clouds the outlook.