Now it's official: the slowdown is here. In the second half of 2011, Israel's GDP grew at an annual rate of just 3.6%, compared with 5.3% in the first half, and 5.8% in the second half of 2010, the Central Bureau of Statistics reported today. The calculation is on an annual basis, at fixed prices, and seasonally adjusted. The growth rate in the final quarter of 2011 was 3.2%, after rates of 3.8% in the third quarter and 3.9% in the second.
Even more than the total growth figures, the figures showing the make-up of growth are cause for concern. Private consumption fell 1.1% and exports of goods and services fell 7.3%, while public consumption rose 5.1% and investment in fixed assets, including residential construction, rose 9.0%.
Per capita private consumption, the "standard of living", fell 3% in the second half of 2011, after a fall of 4% in the first half. Spending on consumer durables fell 17%, after a 17.5% rise in the first half of the year. The fall in vehicle purchases is especially sharp: 24.3% per capita in the second half, after a rise of 11.7% in the first half. Purchases of domestic appliances such as refrigerators, washing machines, air conditioners, and so on, fell by 16.6% per capita, after rising 42% in the first half.
Investment in fixed assets (residential and industrial construction, plant and equipment, and commercial vehicles) continues to rise, but at a slow rate: 9% in the second half of 2011, compared with 20% in the first half. Investment in residential construction rose 10.7%, compared with 14% in eth first half year.
"This is a very negative growth mix. The important components of growth are shrinking. We will see how this affects monetary policy, because the severity of the figures is clear and should influence the decision makers," Bank Leumi chief economist Dr. Gil Bufman said today.
Somewhat more optimistic is Harel group chief economist Dr. Michael Sarel. "The business sector looks good and grew fairly well in the fourth quarter and in the year as a whole," he says, but adds, "The mix is worrying because we are seeing a decline in private consumption and in exports, and in investment too the rise is pretty small, and relates mainly to old real estate projects.
"Monetary policy looks reasonable, and as far as fiscal policy is concerned, it is too late to make big changes this year, and the deficit, which is already at a worrying level, should not be deliberately expanded. If there are shocks, it could reach unhealthy levels. At present, it is hard to see the government or the Knesset deciding on further cuts, and it makes no sense to carry out such cuts. However, public spending must not increase. It's already at a dangerously high level should a crisis occur."
Published by Globes [online], Israel business news - www.globes-online.com - on February 16, 2012
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