Companies Survey, 3rd quarter, 2009

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Companies Survey, 3rd quarter, 2009


Reports from companies indicate that in the third quarter of 2009 business activity started to recover faster than companies had expected, following contraction since the fourth quarter of 2008 in the wake of the global crisis. This recovery, which was reflected in a sharp drop in the probability of a slowdown, and a small increase in the weighted net balance of the business sector, was based mainly on the moderate growth of domestic activity. Although the increase in the weighted net balance is small (see Footnote 2, Figure 1), it added to the list of encouraging indicators observed in the previous quarter, when its decline moderated. This positive trend in business-sector activity reflected in particular the increase in activity in the manufacturing sector, but signs of recovery were evident also in the trading sector and to a lesser extent in the services sector. As in the past, when the labor market reacted with a lag, there is as yet no perceptible increase in the number of employees, despite the recovery in activity.

The net balance in industry rose slightly thanks to the small rise in domestic sales. At the same time, companies' responses regarding orders for the fourth quarter show that growth will continue to be moderate. In trade, the volume of activity increased, but the increase in the net balance in this sector was not significant. Companies are more optimistic in their expectations of a rise in sales in the following quarter, and already the net balance in this sector is significant. In business services, companies reported no change in the level of activity, following significant declines since the last quarter of 2008. Whereas domestic sales remained steady, the export of services continued to fall in this quarter. The recovery in the level of activity could take place in the following quarter in view of the rise in orders. The hotel industry reported a sharp fall in activity compared with the record level a year ago, a reflection of a fall in the number of bed nights for both Israelis and foreign tourists. In transport and communications the contraction in activity continued, even though the negative net balance is approaching zero, following the stability in the last quarter which came after sharp falls in the previous quarters. A steep drop in sales of services to foreigners stood out, but sales to Israelis also declined. In the construction industry the level of activity continues to be moderate, but expectations for the next quarter are somewhat more optimistic. Inflation expectations for the next 12 months increased slightly beyond the price-stability target to 3.2 percent from 2.8 percent in the previous survey. The companies expect that the NIS/US$ exchange rate in 12 months time will be NIS 4 to the dollar, compared with an expected NIS 4.2 in the previous survey.

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