Israel: Third release revises down Q3 GDP growth on weaker spending, investment and trade
January 16, 2018
A third release by the Central Bureau of Statistics (CBS) on 16 January showed that the third quarter’s acceleration was not as impressive as initially reported. Economic growth in the third quarter was downwardly revised to a seasonally-adjusted annualized rate (SAAR) of 3.5% (previously reported: +4.1% SAAR), although it still came in ahead of the second quarter’s 2.7% expansion, once again confirming the country’s ongoing economic upturn. Explaining the change from the first estimate released on 16 November were downward revisions to household spending, fixed investment and exports, along with a significant upward revision to imports. Despite the revision, the reading still handily beat market analysts’ initial expectations of a more modest 2.5% expansion.
Household spending was revised downwards but remained upbeat, growing 7.4% (previously reported: +7.8% SAAR; Q2: +6.1% SAAR) and benefitting from the tight labor market and low inflation. Fixed investment came up even shorter from the first estimate, however, increasing 5.2% (previously reported: +8.1% SAAR; Q2: +10.5% SAAR), but still in line with strong business confidence last year. Government spending, on the other hand, was broadly unchanged; it fell 1.5% (previously reported: -1.6% SAAR; Q2: +1.9% SAAR).
In the external sector, the first estimate’s stunning rebound in exports was notably revised down. Exports of goods and services—which account for nearly a third of economic activity—grew at a significantly slower 2.4% (previously reported: +18.5% SAAR; Q2: -6.1% SAAR). Moreover, imports of goods and services were revised upwards, increasing 21.4% (previously reported: +16.6% SAAR; Q2: +6.5% SAAR). Taken together, the external sector’s contribution to overall economic growth in the third estimate was minus 5.5 percentage points (Q2: minus 3.8 percentage points), a four-year low.
On an annual basis, economic growth was revised downwards to 2.0% in the third quarter (previously reported: +2.1% year-on-year; Q2: +4.2% year-on-year). It more than halved from the second quarter on a substantial base effect.
Although a preliminary estimate for full-year economic growth was released on 31 December (2017: +3.0% year-on-year), the first estimate for growth in the fourth quarter will be released on 16 February.
Author: Christopher Thomas, Economist