Israeli Consumption Patterns Shift Amidst "Iron Swords" War: 28% decline in check-based transactions

In light of the ongoing "Iron Swords" war in Israel, a sense of economic uncertainty looms as the public grapples with the evolving financial landscape. The research department of ERN, a prominent payment clearing company from Menorah Mitvatim, has delved into the emerging effects on Israeli consumption behavior since the outbreak of the conflict.

After just over a week of fighting, signs of transformation in consumer transactions have already surfaced. During the initial week of the campaign, there was a notable 28% decline in check-based transactions, compared to the same week in September 2023 (9-14.8). A closer regional breakdown reveals that, as expected, the southern region saw a substantial 46% decrease in transaction volume, whereas the northern region bucked the trend with a 13% increase. The central region, meanwhile, also witnessed a 40% drop in transaction volume.

ERN's research department additionally explored consumption patterns in two distinct sectors: the ultra-orthodox and the Arab communities. It became evident that checks remain the preferred mode of payment in both sectors, although their usage is trending in opposite directions. The Arab sector reported a remarkable 38% increase in check-based transactions, while the religious sector recorded a significant 37% decrease in transaction volume.

Further analysis shows a 44% surge in transaction volume in the wholesale and food industry, largely driven by donations and support for the residents of the south and IDF soldiers. Conversely, the clothing industry experienced a substantial 90% decline, likely attributed to store closures and the prevailing subdued mood. The tourism sector also endured an 88% reduction in transaction volume.

Shai Preminger, CEO of ERN, commented on these shifts, stating, "We recognize dramatic changes in the consumption pattern of the public in Israel, which already indicate at this stage the seriousness of the economic damage caused by the war in the south, which may spread to other sectors and exacerbate the situation. However, to the extent that we see a gradual return to normality, this may translate into an improvement in economic activity and consumer spending, and of course in the demand for credit beyond the framework that consumers have in banks and credit card companies, which the company provides in a variety of services."

As the "Iron Swords" war unfolds, these shifts in consumption behavior raise concerns about the broader economic impact and the potential consequences for various sectors in Israel. The situation remains fluid, with hopes for a return to normality on the horizon.