Companies Survey, 4th quarter, 2008

17/02/2009
All Press Releases In Subject:
The Economy and Economic Activity

Companies Survey, 4th quarter, 2008

Overview:

Reports from companies and businesses indicate that the slowdown in business-activity growth became more serious, and activity actually decreased during the fourth quarter of 2008. This marked the continuation of a trend apparent since the beginning of the year and which became significant in the third quarter of 2008. Activity slowed in that quarter in all industries reviewed, and the net balance of business-sector activity became negative for the first time since the second quarter of 2003. Moreover, the leading index for the quarter quite clearly reflects expectations of a more serious activity slowdown compared with the previous quarter. Although the decline in activity reported in most industries in the fourth quarter of 2008 matches the expectations of the previous Companies Survey, the extent of the decline was greater than expected. An analysis of the constraints in manufacturing and trade shows that as in the previous quarter, demand-side constraints became more serious as a result of the slowdown. On the supply side, the quarter was notable for companies’ increasing financing difficulties (principally in the case of large and medium-size enterprises) in all industries and especially in trade, construction and transport and communications industries. The slump in demand and business activity are also reflected by a large drop in inflation expectations for the coming twelve months, which after some considerable time are now within the targeted range of price stability. The downturn in demand and activity during the quarter encompassed all industries except for transport and communications. A standstill in activity was recorded at hotels. In all the industries reviewed, activity is expected to remain at a reduced level. In the construction, services and hotel industries, a more serious activity slowdown is expected.
In manufacturing most companies reported an initial decline in output after several years of growth in activity. The decline in activity in manufacturing during the quarter reflects a fall in domestic sales and a considerable decrease in exports, as well as a drop in the number of workers.
Orders for the next quarter, especially domestic orders, reveal a continued downturn in activity. In trade a large drop in sales was recorded following a slowdown in the previous quarter and a further decline in sales is expected for the next quarter. Business services companies reported a decrease in turnover following a continual rise in turnover. Companies expect a more considerable decline in activity in the next quarter. In an initial development, hotels reported a standstill in activity compared with 2007:Q4, due to a decrease in the number of bed-nights by Israelis, this despite an increase in tourists’ bed-nights. The hotels industry expects activity to fall appreciably due to the deteriorating economic situation in Israel and worldwide, and to the turn for the worse in the security situation in Israel. In transport and communications the decline in activity and orders in the quarter is indicative of a continued downtrend in activity. Construction remains slack and expectations for the next quarter point to a more severe downturn in activity in the industry. After some considerable time, average inflation expectations for the coming twelve months are now close to the middle of the targeted range of price stability, and fell to 1.7 percent compared with 3.5 percent in the previous survey, concurrent with a large rise in the ratio of companies expecting inflation be within the targeted range–from 41 percent in the previous quarter to 70 percent in the quarter reviewed. Companies expect the average exchange rate twelve months ahead to be NIS 4.14 to the dollar as against NIS 3.9 in the previous survey. The average exchange rate as of the date when the companies participating in the survey reported amounted to NIS 3.806 to the dollar.

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