The second closure interrupted the recovery process of the Israeli economy in Q3

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by Ifi Reporter Category:Capital Market Oct 27, 2020

The second closure interrupted the recovery process of the Israeli economy in the third quarter of the year. This emerges from the Bank of Israel's membership survey published on Monday. Although activity in the economy continued to shrink from July to September, the recovery from the peak of the corona crisis was felt in the economy. The survey shows that the balance sheet of the business sector improved in the third quarter but remained at a very negative level.
Although the balance of output in manufacturing recovered in the third quarter, it remained negative. The negative balance sheet reflects an estimate of a decline mainly in exports and the number of employees. The companies estimate, based on orders for the next quarter, that sales will continue to decline in the fourth quarter, both for the domestic market and for exports. The division of the companies in the industry according to the size of the company shows that the net balance of the large companies remains positive while the small companies are severely affected.
The balance of revenue in the services industry recovered in the third quarter but continued to be negative and significant, reflecting a decrease in the sale of services in Israel and abroad and a decrease in the number of employees, due to the corona crisis and the expulsion of employees. The industry expects that in the next quarter activity will continue to shrink, and companies report that orders from abroad have fallen.
The sales balance in the trading industry rose to a positive level in the third quarter, due to the continued expansion of the easing of operations and the opening of businesses. The industry expects a decline in sales in the next quarter.
The Bank of Israel economists note that when examining the supply and demand constraints, they find relief in the third quarter from the demand constraints in the services, manufacturing and trade industries, and the tightening of supply constraints in the manufacturing industry. When examining the limitation posed by financing difficulties, further relief can be seen in the third quarter as a result of relief among medium-sized companies, following the activation of the dedicated government lending fund to assist small and medium-sized businesses due to the corona crisis.
The survey also shows that in the third quarter of 2020, companies' average inflation expectations rose to 1.2% in the next 12 months; The rate of companies expecting inflation to be in the target range (54% to 3% per year) also rose to 54%, and dropped to 40% of the rate of companies expecting inflation to be below the target range in the next 12 months.
The forecast for the dollar exchange rate in the next quarter and in the next 12 months is at the level of NIS 3.49 and NIS 3.55 per dollar, respectively. During the survey period, the average exchange rate was NIS 3.42 to the dollar.
The findings from the Companies Survey for the third quarter of 2020 are based on the responses of 262 businesses and companies from various industries. It is generally found that the data from the Companies Survey are aligned with the macroeconomic data trends of the economy, and their advantage lies in the fact that they are available and provide information relatively quickly relative to the other data sources.

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