Companies Survey, 3rd quarter, 2007

28/11/2007
All Press Releases In Subject:
The Economy and Economic Activity

Companies Survey, 3rd quarter, 2007

Overview:

Reports from companies for the third quarter of 2007 indicate that the rapid rise in economic activity was maintained. Companies in all industries reported increases, and the leading index of the business sector points to further expansion in the next quarter. In most industries, companies reported that demand constraints eased, and in some industries supply constraints are more severe than demand constraints. This, together with rise in inflation expectations, suggests that the economy is a high level of activity, and that it is converging steadily to realizing its full production potential. Manufacturing output rose steeply, reflecting increases in export and domestic sales. Orders for the next quarter, for the domestic market and even more so for export, also continued rising. In commerce the upward sales trend continued and became even more pronounced, and companies expect the rapid rise to be sustained in the next quarter. Business services companies reported a rise in revenue, reflecting increased domestic and export sales, and orders for the next quarter also rose. and companies expected sales to accelerate in the next quarter. The rise in economic activity in the quarter occurred mainly in the manufacturing, commerce, transport, and service industries. There was a moderate increase in activity in the construction and the hotel industries, and various indicators show that there was no significant rise in either of them. The leading index of the business sector and expectations in industries overall point to a continued rise in activity in the next quarter. In construction, on the other hand, no clear picture emerged: expectations continue to be positive, but the probability of a slowdown in the next quarter rose. In manufacturing, rises in output were recorded, reflecting increased export and domestic sales. Increases in domestic and even more so in export orders for the next quarter continued. In the hotels industry activity was higher than in the third quarter of 2006; this came as no surprise in light of the low level of activity in that quarter due to the Second Lebanon War. Evidence of the industry’s return to buoyant activity can be seen in the easing of the constraint on activity caused by the number of tourists from abroad––that constraint declined for the first time to a level lower than that in 2006:Q2, prior to the outbreak of the war. Reservations for the next
quarter are consistent with the expectations of a continued high level of activity. Activity in transport and communications increased. All the sub-industries except for overland transport showed greater activity, and orders for the next quarter indicate continued expansion of activity. In construction the level of activity rose, mainly in infrastructure construction, but a certain slowdown is expected in the next quarter. Reports on the severity of constraints on activity related to the rise in input prices, and hence increased severity of the supply constraint compared with the previous quarter. Average inflation expectations to twelve months ahead rose to 2.66 percent, and the share of companies expecting inflation to exceed the target range increased considerably, from 8 percent in the previous survey to 22 percent in the current one. Companies expect, on average, that the exchange rate twelve months hence will be NIS 4.31 to the dollar compared with expectations of NIS 4.44 in the previous quarterly survey.

Link to File