Companies Survey, 3rd quarter, 2010

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The Economy and Economic Activity

Companies Survey, 3rd quarter, 2010


Reports from companies show that economic activity continued to expand in the third quarter of 2010 at a similar pace to that since the beginning of the year. This expansion in activity, which was reflected in a rise in the net weighted balance of the business sector, encompassed most industries, but not the construction industry. A positive trend in industrial activity was recorded in both domestic sales and exports; against this, however, the responses of service companies in the review quarter and in previous quarters indicate that the recent growth is based on expanded domestic market activity. The leading index expects overall expansion of activity in the next quarter.

The net balance in manufacturing has increased, thanks to a rise in domestic sales and exports. The rate of utilization of machinery and equipment grew rapidly, and the net balance of the change in the number of employees was also positive. Companies reported a moderation in orders for the next quarter. The volume of activity in trading companies grew at a high rate derived from the size of the net balance. Companies' expectation are for a steady increase in sales in the fourth quarter. Business services companies reported an increase in activity, a continuation of the trend from the beginning of the year, but sales of services abroad continued to mark time in the review quarter as well. The next quarter is expected to show recovery and an increase in activity in light of companies' reports in recent quarters of an increase in orders from abroad. Hotels reported a sharp rise in activity relative to the same quarter last year (which was characterized by a low in the industry in the wake of the global crisis), thanks mainly to an increase in foreign tourists' bed nights, but also thanks to an increase in those of Israelis. The expansion of activity in transport and communications continued, and the net balance of total activity in the industry was very high. The positive picture in this industry was reflected in activity growth both in Israel and abroad, as well as in an increase in the number of employees, and optimistic expectations for the next quarter. The activity in construction continues to be moderated. At the same time, the net balance of the construction of buildings has been positive in recent quarters, although not significantly so, and this is also true of expectations for the next quarter. Companies report a decrease in the number of employees and a constraint in this area. Average inflation expectations for the next 12 months are within the price stability target, and stand at 2.6 percent. Companies expect that the exchange rate in twelve months time will be NIS 3.9 to the dollar, similar to the expectations in the previous survey. The average exchange rate on the day of reporting was NIS 3.70 to the dollar.

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