Israel: GDP records first contraction since Q4 2023 in the second quarter
GDP reading: GDP declined 3.5% in seasonally adjusted annualized rate terms (SAAR) in the second quarter, contrasting the 3.1% expansion seen in the first quarter and marking the worst result since Q4 2023. The contraction was caused by the two-week economic shutdown during conflict with Iran in June.
Broad-based decline: Household spending declined at a milder pace of 4.1% SAAR in Q2, following a 6.0% contraction in Q1. Government spending deteriorated 1.0% in Q2 (Q1: +1.9% SAAR), while fixed investment contracted 12.3% (Q1: +6.4% SAAR). Exports of goods and services slid at a quicker rate of 6.9% in Q2 (Q1: -2.2% SAAR). In addition, imports of goods and services growth waned to 0.6% in Q2 (Q1: +5.3% SAAR).
GDP outlook: The economy should return to growth in Q3 now that Iran and Israel have reached a ceasefire.