Israelis save on expenses considered a necessity but spend on experiential and fun

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by Ifi Reporter Category:Financial Sep 11, 2022

Israelis try to save on expenses that are considered a necessity - such as buying food products at the supermarket and paying electricity and water bills - and on the other hand, continue to spend on things they see as experiential and fun, for example going to restaurants and cultural and entertainment shows.
The result is a clear slowdown in the increase in spending from June to August (compared to the corresponding period in 2021), compared to the rate of growth from January to May, alongside a significant increase in the portion of spending on entertainment and pleasure in the total spending of Israelis - according to an analysis based on data from the Automated Bank Services Company, Manages the national credit card payment system.
However, the comparison of the total expenditure this year with that of last year should be taken with a limited guarantee, and due to the effects of the corona virus and its limitations. For example, in March 2021 the skies opened but only partially, and on June 1 the restrictions on the economy were lifted (among other things, the cancellation of the green and purple notes).
In total, Israelis spent about NIS 39 billion on credit cards in August - a 5.6% increase compared to the corresponding month. This is the third consecutive month of single-digit growth in total expenses - 6.5% in July and 5.8% in June - after five consecutive months of double-digit growth (with the exception of single-digit growth in March, due to the timing of Passover, which fell this year in April, compared to March last year ).
But if you take into account the inflation since the beginning of the year, the natural increase in the population of about 2% on average per year and the increasing trend in the use of credit cards at the expense of other means of payment - this is stagnation and even a decrease in spending. On average, in January-August there was an increase of about 10% in expenses.
However, one should not rush to the conclusion that inflation and the fear of recession are causing Israelis to reduce their spending. Almost all of the increase in total spending in August - 77% of the increase which amounted to approximately NIS 2.1 billion - was on "pleasure industries": flights, vacations in Israel and abroad, restaurants and fast food, and leisure and entertainment.
Most of the increase in August (54% in the amount of NIS 1.1 billion) came specifically from an increase in spending on vacations and flights abroad. However, it should be noted that about 921 thousand Israelis went abroad in the past month, according to the Central Bureau of Statistics, compared to about 273 thousand August 2021 - then Israel was in the midst of the "fourth wave" of the corona virus. In addition, the Sheba data do not include the expenses of Israelis abroad (orders made from international websites are included in the data).
Another branch that clearly enjoys a significant increase of 31.5% in spending from January to August, compared to the corresponding period, is the restaurants, including cafes and fast food businesses (including deliveries).
On the other hand, two industries that Israelis spent less on in August are the food chains - with a decrease of 0.6%, which continues the trend of slowing growth of the last few months - and the fashion and footwear industry, which recorded stagnation. Now the question is what will happen to expenses later this year and when, if at all, will inflation lead to a decrease in consumption.
"The current data relating to private consumption reflect at best stagnation, and at worst - a decrease in consumption," says Alex Zbzinski, the chief economist of Meitav Investment House. "The value of sales in the marketing chains, expressed in real prices, has remained fairly stable over the past year. Credit card purchases have hardly grown in the past six months. Here we are talking about nominal data - so in real terms, credit card purchases have decreased."

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