According to analysts, Israel’s third-quarter growth will likely lead to a drop in interest rates. The growth has analysts puzzled since the consequent 4.1% annual growth projection is much higher than predictions.
“The higher-than-forecast rate of growth apparently stemmed from the component known as inventory, which reflects the gross inventory accumulated in various sectors of the economy. This figure expanded by 2.8 billion shekels in the third quarter, without accounting for seasonal changes, versus a 1.4 billion shekel decrease in previous quarters,” according to a recent Haaretz article.
What events are causing these mystery growth figures? Is the country’s situation as good as the Central Bureau of Statistics’ reports?
Central Bureau’s Facts and Figures
The Central Bureau of Statistics put third-quarter growth between 2.6% and 2.8%. This was based on partial data rather than a close read of the sources. Despite this estimate, economic growth feels like it’s still sliding downward. The Central Bureau stats starkly contrast with the general consensus.
Here are a few highlights:
- The unexpected growth provides an upward revision of 3.1% to 3.2% of 2019’s projected growth rate.
- The sharp spike in business inventory totals a NIS 2.7 billion increase.
- This reverses the trend of the second quarter.
Understanding the Economics
For help understanding the complexities of Israeli market drivers, many students turn to a comprehensive and insightful economics tuition. Understanding economics helps when it comes to delving into the charts and tables supporting quarterly growth — and for poking holes in overly optimistic assumptions.
For example, what’s can be learned from Israel’s current economic state?
An increase in business inventory could represent a slowdown, with merchants stuck with unsalable merchandise. However, Israel folds in intangibles such as intellectual property assets, a positive growth indicator.
“In the preceding quarter, this happened in the opposite direction. Because car imports were brought forward to the first quarter, growth in the second quarter was at a minuscule 0.7%. Without the statistical noise created by vehicle imports, the annualized growth rate in the second quarter would have been 2.7%. This is not substantial growth, but it is nevertheless growth that is close to the potential,” according to a recent Globes article.
It’s true that per capita spending rose by 0.8%. Taking away vehicle imports, this increase is negative.
The question remains, is the growth real or what’s inflating the figures? Harel Insurance and Finance researchers chalk it up to private sector growth of 5%. There are strong growth projections accompanied by a weak composition. This means that contradictory data could be the culprit in the mysteriously rosy growth estimates.
Time will tell whether the fourth-quarter performance corroborates a northern growth trend or adjusts to reflect a more somber economic outlook to close out the year. Investors and economists hope for the former but realistic suspect the latter is true.