Companies Survey, 2nd quarter, 2010

02/08/2010
All Press Releases In Subject:
The Economy and Economic Activity

Companies Survey, 2nd quarter, 2010

Overview:

Reports from companies indicate that business activity continued to expand in the second quarter of 2010 but at a more moderate rate than in the previous quarter, as reflected by the net balance of total business sector activity (Figure 1). The pace of growth of activity and domestic and export sales was not uniform among the industries reviewed. The leading index reflects expectations of an expansion in the total activity of the business sector. However, the probability increased of a slower pace of activity expansion during the third quarter of the year in the manufacturing, construction and high-tech services industries. The growth in activity was centered more in the domestic market, and less in export sales.

In manufacturing, after growing in the previous quarter output continued to expand. This expansion was notable from increased local sales, while the rise in exports was more moderate. The growth in activity encompassed large manufacturing companies in particular, while a stable level of activity was recorded among SMEs. Orders for the coming quarter are indicative of a slower pace of sales growth to the local market and stability in export sales. Sales of commerce companies increased, in a continuation of the gradual growth in their net balance during 2009. Companies in the industry expect this trend to continue in the next quarter. Business services companies reported a growth in productivity similar to the increase in the previous quarter. Companies are expecting a more substantial growth in domestic activity and a more moderate increase in activity abroad during the next quarter. Hotels recorded a year-on-year growth in activity for the second consecutive quarter, reflecting the expansion of incoming tourism. A moderate increase was recorded in internal tourism, and this trend is expected to continue on the basis of orders for the next quarter. Transport and communications recorded a rise in activity, mainly due to a growth in sales of services to the Israeli market.
Orders for the next quarter indicate that activity is expected to expand during that quarter as well. Activity in the construction industry did not increase, and most indices still attest to the weakness of the industry. A moderate expansion in the industry's activity is expected during the next quarter. Average inflation expectations rose slightly but are still within the range of price stability, and amount to 2.6 percent compared with 2.5 percent in the previous survey. Companies expect, on average, that the NIS/US$ exchange rate in 12 months time will be NIS 4 to the dollar, more than companies' expectations in the previous quarter. Fifty four percent of all the export companies in the manufacturing industries that were reviewed, reported that they use hedging instruments to protect against the risks connected with changes in the exchange rates of foreign countries against the shekel. Among transport and communications companies, 45 percent replied that they use these instruments. Among service export companies, only 26 percent replied that they use the instruments. During the past year, the volume of hedging instruments remained unchanged among manufacturing companies, while service companies reported a decrease.a

Link to File