Companies Survey,1st quarter, 2008

11/05/2008
All Press Releases In Subject:
The Economy and Economic Activity

Companies Survey,1st quarter, 2008

Overview:

Reports from companies participating in the survey indicate that the rate of expansion slowed down in the first quarter of 2008. The slowdown in growth in this quarter encompassed most of the industries, except for the hotel trade that expanded rapidly, and commerce in which sales grew. The leading index of activity in the business sector does not forecast further slowdown, and reflects a certain improvement in the next quarter. From the survey it also emerges that contrary to the process that characterized activity in past quarters, in this quarter demand constraints became more severe while supply constraints eased in most industries. Despite the easing in supply constraints, the survey indicates that similar to previous quarters, expectations of inflation persist. Manufacturing output slowed considerably relative to the previous quarter. The slowdown in manufacturing activity reflects the lack of growth in sales to the domestic market and a significant slowdown in exports. Orders to both the domestic and the export markets for the next quarter have also only grown at a moderate rate. In commerce, sales continued their upward trend and companies expect the trend to continue. Business services companies reported moderate revenue increases, which reflect a growth in sales of services abroad on the one hand, and a significant slowdown in domestic sales, on the other. Hotels reported an upturn in activity relative to the same quarter last year, thanks to an increase in the volume of inbound tourism. The low level of constraints on inbound tourism and the continuing growth in reservations for the next quarter support expectations of continued strong activity. Transport and communications companies reported a growth in activity. Orders for the next quarter suggest that activity will continue to move ahead. Construction activity continues to be characterized by fluctuations and uncertainty, which also emerges from the expectations for the next quarter. As in the past, reportage about the severity of constraints on construction activity indicates that supply constraints, particularly shortages of skilled workers, are dominant. Average inflation expectations for the next twelve months fell slightly in this quarter to 2.69 percent as against 2.77 percent in the previous survey, but with an increase in the proportion of companies that expect inflation to overshoot the target range—30 percent in the review quarter as against 25 percent in the previous quarter. The companies expect, on average, that the NIS/$ exchange rate will stand at NIS 3.93 twelve months hence as against NIS 4.18 in the previous survey. Companies, on average, expect the NIS to depreciate against the dollar in the coming quarter by 5.7%, and to stand at 3.66. The average exchange rate on the date of reportage in the survey was NIS 3.46.

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