Companies Survey, 4th quarter, 2010

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The Economy and Economic Activity

Companies Survey, 4th quarter, 2010


Reports from companies show that economic activity in the fourth quarter of 2010 continued to expand at a similar pace to that throughout the year. This expansion in activity, reflected in a rise in the net weighted balance of the business sector, encompassed most industries. The leading index expects across-the-board expansion of activity in the next quarter.

The net balance in manufacturing has increased, thanks to a rise in domestic sales and exports and despite expectations in the previous quarter of a slowdown, 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 continuing growth in orders for the next quarter. The volume of activity in trading companies grew at a lower rate than in the last quarter, based on the size of the net balance. Companies' expectations, however, are that in the first quarter of 2011 the net balance will return to its size in the previous quarters. Business services companies reported an increase in activity, a continuation of the trend from the beginning of the year, but as against the development from the beginning of the year, sales of services abroad also rose in the review quarter for the first time since the start of the recovery in the industry. The recovery is expected to continue at an even greater rate in the next quarter in light of companies' optimistic reports of orders from abroad. In the review quarter, hotels also reported a sharp rise in activity relative to the same quarter last year (which was still characterized by a low in the industry in the wake of the global crisis), thanks mainly to an increase in foreign tourists' bed nights that was reflected in companies' reports of a substantial and sustained easing of demand constraints from abroad. The expansion of activity in transport and communications appears to have continued, even though the net balance of activity has moderated since the last quarter. The source of this moderation is a decrease in the net balance of sales to Israelis, particularly in communications. Construction activity grew slightly in the review quarter, as reflected mainly in the reports of the large construction companies. Expectations for the next quarter are optimistic. Companies report supply constraints and a substantial increase in output prices. Average inflation expectations for the next 12 months are within the price-stability target, and stand at 2.65 percent. Companies expect that the exchange rate in twelve months time will be NIS 3.78 to the dollar, similar to the expectations in the previous survey. The average exchange rate on the day of reporting was NIS 3.57 to the dollar.

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