Companies Survey, 2nd quarter, 2009

25/08/2009
All Press Releases In Subject:
The Economy and Economic Activity

Companies Survey, 2nd quarter, 2009

Overview:

Reports from companies and businesses indicate that the rate of contraction of business activity in the second quarter of 2009 has moderated relative to the two previous quarters. In the review quarter the net balance of overall activity in the business sector continued to be negative, but at a more moderate value than that recorded in previous quarters (Figure 1). In all industries, except for construction and communications, the net balance was negative, but at a more moderate value than in the previous quarter. Commerce and construction recorded stability in activity, and communications even recorded an increase in activity. As reported by the companies in the survey,most industries experienced an easing in the severity of demand-side constraints, which still, however, constitute the major constraint for increasing their activity. A slight easing in financing was also recorded in most industries. The leading index of activity reflects expectations of a further decline in activity of the overall business sector, but in some of the industries the expectation is that of an increase. The companies report a substantial increase in the expected level of inflation for the next 12 months, which is already close to the upper limit of the inflation target.
 
Manufacturing output continued to contract in the second quarter, but at a relatively more moderate rate than in the previous quarter. The continuing contraction at a more moderate rate, is reflected in both domestic sales and in exports. Export orders and those for the domestic market point to a continuing decline in activity in the next quarter as well. In commerce, stability in sales was recorded, following declines in the two previous quarters. Expectations are for a significant increase in sales in the next quarter. In business services, companies reported a further fall in revenue in the wake of the decrease in activity in Israel, but at a more moderate rate. The companies expect an increase of activity in the industry in the next quarter. In hotels the significant downturn in activity has continued, and reflects the sharp decrease in inbound tourism and the more moderate decrease in internal tourism. Expectations are for a continuing decline in activity. Transport and communications companies recorded a decrease in activity, particularly in transportation, in which a decrease was recorded in marine and aerial transportation, as opposed to stability in overland transportation. In communications an increase in activity was recorded. Even though the expectation is of an increase in activity in the industry in the next quarter, no easing was recorded in the severity of demand constraints. Construction recorded stability following decreases in the previous quarters, as well as an easing in the severity of demand constraints and financing constraints in the industry.
Expectations for the next quarter are of increases in activity, but at a moderate rate. Companies' reports on employment indicated a continuing decrease in the number of employees in all industries. Average expectations of inflation for the next twelve months have increased substantially, and are approaching the upper limit of the price-stability target— 2.8 percent as opposed to 1.5 percent in the previous survey. The companies expect, on average that the NIS/$ exchange rate will be NIS 4.20 twelve months hence, as against NIS 4.36 in the previous survey. On the other hand, there has been an increase in the percentage of companies that expect inflation in the next twelve months to overshoot the upper limit of the price-stability target (3 percent), from one percent in the previous survey, to 30 percent in the review quarter.
Link to File