Israel: Revised Q2 data shows economy expanded at a slower pace than previously estimated
September 17, 2017
A second release confirmed that the Israeli economy shifted into a higher gear in the second quarter, albeit at a more moderate pace that initially estimated. The economy expanded 2.4% in the second quarter over the prior quarter at a seasonally-adjusted annualized rate (SAAR) (previously reported: +2.7% quarter-on-quarter SAAR), which is still up significantly from the 0.6% SAAR quarter-on-quarter increase in the first quarter.
The revised data shows that private consumption was unchanged at the previously reported 6.5% SAAR increase over the first quarter (Q1: -1.1% qoq SAAR). Private consumption has benefitted from an upswing in the purchases of durable goods and a favorable base effect; in the previous quarter, purchases of durable goods fell significantly following the enactment of an environmental tax on cars. Government consumption, however, was revised down from a preliminary 3.5% SAAR increase to a slightly lower 3.1% SAAR expansion over the first quarter (Q1: +2.3% qoq SAAR). Fixed investment, on the other hand, was revised upwards significantly, from a 5.2% SAAR expansion to a 10.7% SAAR increase (Q1: -4.6% qoq SAAR).
The external sector was subject to a major upward revision. The second estimate showed that imports grew at a SAAR of 3.4% over the first quarter (previously reported: -1.1% qoq SAAR; Q1: -9.8% qoq SAAR), more in line with the solid private consumption data. Exports, however, contracted at a qoq SAAR of 7.0% in Q2 (previously reported: -8.8% qoq SAAR; Q1: +4.1% qoq SAAR).
In annual terms, GDP expanded a revised 3.9% in Q2, which was down slightly from the preliminary 4.0% expansion reported in the first reading, but slightly above the figure reported in the first quarter (Q1: +3.7% year-on-year).
Despite the revisions, the economy is still expected to perform robustly and expand at a moderate pace going forward, supported by domestic demand that is benefitting from a tight labor market. Though consumer confidence remains pessimistic, business confidence remains high, which bodes well for fixed investment growth. A finalized reading will be published on 16 October.
Author: Jan Lammersen, Economist