The economy grew at a 4.1% annual clip in the third quarter, far in excess of the market's 2.6-2.8% expectations, according to an initial estimate published today by the Central Bureau of Statistics. The unexpected result, which indicates that economic growth is stronger than most analysts believed, makes a decision by the Bank of Israel Monetary Committee to cut the interest rate at the end of the month less likely.
The Central Bureau of Statistics' 4.1% estimate for third-quarter growth follows a growth rate of only 0.6% in the preceding quarter (a figure later revised to 0.7%). The increase in GDP is attributable mostly to private spending for the Jewish holidays and larger gross investment in inventory. Growth would have been even higher had it not been for the US-China trade war, which caused an estimated 3.6% drop in exports of goods and services.
Private sector product was up 5% in the third quarter, public consumption (by the government and the local authorities) 4.2%, and private consumption 2.8%. Investment in fixed assets, on the other hand, plunged 6.1%, while exports of goods and services fell 3.6%. Imports of goods and services grew 1.9% in the third quarter.
Vehicle imports, which declined steeply in the second quarter, depressing the growth rate by almost 2%, contributed 0.4% to the rate of growth in the third quarter. Excluding import duties, most of which are attributable to vehicles, the growth rate was 2.7% in the second quarter and 3.7% in the third quarter.
The Bank of Israel is now unlikely to cut the interest rate to 0.1%. In its last interest rate announcement, the Bank of Israel said it would consider lowering the interest rate in its next decision, while two of the five Monetary Committee members even favored cutting the rate before the decision in early October. The committee eventually left the rate unchanged by a vote of three to two.
Published by Globes, Israel business news - en.globes.co.il - on November 17, 2019
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