2007 ended with falling public confidence in the Israeli economy and fears for the new year, the latest figures for the "Globes" Consumer Confidence Index reveal. The index fell by 3.5 points in December after falling 2.5 points in November, making it a negative trend throughout the second half of 2007. The Consumer Confidence Index ended the year at 79.3 points, just slightly higher than the 78 points recorded in December 2006. The fall in the index in December resulted from a worsening in all its components, especially in the responses on the current state of the economy, and the outlook for six months time. Responses on the personal economic outlook for six months time were only slightly pessimistic.
The Consumer Confidence Index, compiled by Globes Research and Kesselman and Kesselman - PricewaterhouseCoopers Israel highlighted two clear contrasting trends in 2007 - marked optimism in the first half of the year, during which the index rose by 12 points, and increasing pessimism in the second half of year, during which the gains of the first half were almost wiped out. The developments during the first half of the year signaled optimism and a sense of relief that the after effects of the Second Lebanon War had run their course. The sharpest rise of all was seen in the index's current economic outlook component, which gained 20 points by July. The general and personal economic outlook components also saw significant gains, albeit more moderate.
The index changed direction from the middle of 2007, with sharp falls, principally in economic outlook components. The fall in the current component was more moderate, with optimism at the end of the year still higher than it was last January.
The index at the end of 2007 therefore expresses a pessimism that could have a negative impact on trends in private consumption in the first half of 2008. This will have important macroeconomic repercussions on economic growth; if there is a slowdown in economic activity worldwide, especially in the US, in the first half of the year, it will have a significant impact on Israeli exports. A slowdown in private consumption growth in this period, as a result of consumer pessimism, could also translate into lower economic growth. It would appear, therefore, that a reduction in GDP growth to 4% in 2008 is a real possibility.
The expected slowdown in private consumption was reflected in data on the public's purchasing plans. The figures show that plans to purchase durable goods continued to fall as did plans to purchase cars. Real estate purchasing plans, on the other hand, continued to rise, a trend reflected in the latest reports of a resurgence in Israel's real estate sector.
Published by Globes [online], Israel business news - www.globes.co.il - on January 3, 2008
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