Companies Survey, 4th quarter, 2006

25/01/2007
All Press Releases In Subject:
The Economy and Economic Activity

Companies Survey, 4th quarter, 2006

Overview:

Reports from companies for the fourth quarter of 2006 indicate an acceleration in economic activity after a more modest rise in the previous quarter due to the hostilities in the north at the time, and expectations in most industries pointing to further expansion in the next quarter. The rise in economic activity in the quarter encompassed the manufacturing, construction, trade and service, transport and communications industries. The hotel industry showed a slight decline in activity compared to the parallel period last year, and most indicators of activity in the quarter reviewed as well as expectations of the coming quarter point to continued slowdown in the industry, which began as a result of the hostilities in the north in the preceding quarter. The leading index of the business sector and expectations in most industries point to a continued rise in activity in the next quarter. In hotels, however, the leading index and expectations are for a slowdown and a fall in activity. In manufacturing rises in output were recorded, reflecting increased export and domestic sales. Increases in domestic orders and particularly for exports for the next quarter continued. Responses from trading companies showed that the upward sales trend was continuing, and that a rise in the pace of sales in the next quarter was expected. Business services companies reported a rise in revenue, reflected both in sales abroad and in Israel, and expectations of increased orders, chiefly domestic, in the next quarter. In the hotels industry there was a slight drop in activity compared to the parallel period of the previous year, and the severity of restraints on the demand side contracted on the previous quarter, though the industry's activities still appear to be in a slowdown, reflected principally in the relatively low number of foreign tourists’ bed nights as well as Israelis’ bed nights. The decline in activity was expected to continue in the next quarter too. Activity in transport and communications increased: activity in air and sea transport fell, while in overland transport and in the communications industry it rose. Orders for the following quarter indicate a rise in activity. In construction the level of activity continued its upward trend which began at the beginning of 2006, and this is expected to continue in the next quarter. Reports on the severity of constraints on activity show that in most industries demand constraints were less severe than in the previous quarter. Most industries also reported a slight rise in supply constraints. In the hotels and trade and services industries the demand constraints became markedly less severe. Average inflation expectations to
twelve months ahead dipped to 2.0 percent during the quarter, with a significant fall in the share of companies that expect inflation to exceed the target range, from 15 percent in the third quarter to 8 percent in the fourth. Companies expect, on average, an exchange rate of NIS 4.43 to the dollar twelve months ahead after having expected NIS 4.56 in the previous quarterly survey.

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