Companies Survey, 3nd quarter, 2006

29/10/2006
All Press Releases In Subject:
The Economy and Economic Activity

Companies Survey, 3nd quarter, 2006

Overview:

Reports from companies for the third quarter of 2006 indicate that in the wake of the war in the north, there was a small increase in economic activity, following larger increases since the beginning of 2004. The rise in the third quarter occurred in manufacturing, transport and communications, trading, and to a modest extent also the service industries. Activity in the construction industry remained steady. In contrast, activity in the hotel industry showed a sharp decline, a direct result of the hostilities in the north. The leading index of the business sector and expectations in most industries point to a continued rise in activity in the fourth quarter. In hotels and trading, however, the indication is of a slowdown and possibly even a fall in activity. The fighting in the north, which took place in July and August 2006, affected activity in all parts of the country and all industries, but particularly in Haifa and northern Israel, with the service industries and tourism suffering most. In manufacturing rises in output were recorded, reflecting increased export and domestic sales. Increases in both export and domestic orders for the fourth quarter continued. Responses from trading companies showed that the upward sales trend was continuing, but that a slight drop in sales was expected in the fourth quarter. Business services companies reported a moderate rise in revenue, reflected mainly in increased sales abroad, and expectations of increased orders, chiefly domestic, in the fourth quarter. In the hotels industry here was a very steep drop in total activity, following the hostilities in the north, and this reflected a sharp fall in the number of foreign tourists’ bed nights together with a more modest drop in Israelis’ bed nights. The decline in activity was expected to continue in the fourth quarter too. Activity in transport and communications increased: activity in air and land transport remained steady, and in the communications industry it rose. Orders for the fourth quarter indicate a rise in activity. In construction the level of activity held steady, after rising in the previous two quarters, and is expected to increase moderately in the fourth quarter. Reports on the severity of constraints on activity show that in most industries demand constraints were more severe than in the previous quarter. Most of the supply constraints also became somewhat more severe. In the hotels and transport industries the demands constraints became markedly more severe due to the deterioration in the security situation. Average inflation expectations to twelve months ahead dipped to about 2.5 percent during the quarter, with a significant fall in the share of companies that expect inflation to exceed the target range, from 24 percent in the second quarter to 15 percent in the third. Companies expect, on average, an exchange rate of NIS 4.56 to the dollar twelve months ahead after having expected NIS 4.69 in the previous quarterly survey.

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