Recent Economic Developments, 114

09/08/2006
All Press Releases In Subject:
The Economy and Economic Activity

Recent Economic Developments, 114

Overview:

In the first half of 2006 (the period reviewed), prior to the deterioration in the security situation, Israel’s economy showed continued expansion of real activity, with an even faster rate of growth than the rate of the last three years. The forces that had caused the positive turnaround in the economy in the second half of 2003 and that affected the economy in 2005 continued to operate in the first half of 2006. National Accounts data for the first quarter of 2006 exceeded expectations and indicate sustained growth, with GDP rising at an annual rate of 6 percent. The business sector maintained its position at the forefront of growth, with its product growing at an annual 7.7 percent in the first quarter. Among the principal industries, the services and manufacturing industries grew fastest, and the recovery in the construction industry was sustained, particularly in the private sector. Fixed investment increased, with a steep rise in investment in imported machinery, a sign of a process of sustainable growth. Private consumption rose considerably after exhibiting a certain steadiness in the second half of 2005. The positive trend in Israel’s foreign trade persisted: exports of all export industries rose, leading to an increase in the current-account surplus to 3 percent of GDP. Tax revenues continued to rise in the period reviewed, as did labor input in the business sector. The Bank of Israel Companies Survey for the second quarter of 2006 also presents a positive picture of economic activity: a rise in activity that encompassed all industries, including a modest increase in the construction industry and in transport and communications; and the leading index in the survey indicates a further increase in business-sector activity in the next (i.e., third) quarter. Output rose in manufacturing industries with all levels of technological intensity, and reflected increases in both exports and the domestic market. Trading companies reported a rise in sales.

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