Companies Survey,1st quarter, 2007

31/05/2007
All Press Releases In Subject:
The Economy and Economic Activity

Companies Survey,1st quarter, 2007

Overview:

Reports from companies for the first quarter of 2007 indicate that the rise in economic activity persisted, andexpectations in almost all industries point to further expansion in the next quarter. The rise in economic activity in the quarter encompassed the manufacturing, construction, trade, transport, communications and service industries. The hotel industry showed a sharp decline in activity compared with the first quarter of 2006, and most indicators of activity in the quarter reviewed point to continued recession in the industry, which began as a result of the Second Lebanon War in the summer of 2006. The leading index of the business sector and expectations in all industries apart from the hotel industry point to a continued rise in activity in the next quarter. In manufacturing, rises in output were recorded, reflecting increased export and domestic sales. Increases in domestic and in particular export orders for the next quarter continued. It should be noted that the rise in activity and in exports in this quarter mainly reflects the responses of low-tech and medium-tech companies, and to a lesser degree high-tech firms. Responses from trading companies showed that the upward sales trend was continuing, and that a further rise in sales was expected for the next quarter. Business services companies reported a moderate 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 steep drop in activity compared to the first quarter of 2006; the industry's activities still appear to be in slowing down, reflected principally in the relatively low number of foreign tourists’ and Israelis’ bed nights. Nonetheless, activity is expected to rise in the next quarter, and the severity of the demand constraint in the industry continued to ease. Activity in
transport and communications increased: activity in sea transport and in communications rose, while air and overland transport remained steady. Orders for the following quarter indicate a modest rise in activity. In construction the level of activity continued its gradual rise, after more moderate increases since the beginning of 2006, and this is expected to continue in the next quarter. Reports on the severity of constraints on activity show that compared with the previous quarter, it was mainly demand constraints that changed. In transport and communications the demand constraint became more severe, while in hotels it eased. Average inflation
expectations to twelve months ahead dipped to 1.8 percent, with a decline in the share of companies that expect inflation to exceed the target range, from 7 percent in the previous quarter to 5 percent in 2007:Q1. Companies expect, on average, an exchange rate of NIS 4.36 to the dollar twelve months hence compared with expectations of NIS 4.42 in the previous quarterly survey.

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