Israel’s economy slows in second quarter after early year spike

Israel’s economy grew an annualized 1.8% in the second quarter of 2018, slower than previously thought, weighed down by a steeper drop in exports and a decline in consumer spending, the Central Bureau of Statistics said in a second estimate.

In a preliminary estimate last month, the bureau said gross domestic product (GDP) grew an annualized 2.0% in the April-June period, less than the average forecast of 2.4% in a Reuters poll.

The bureau on Sunday also raised its first-quarter GDP estimate to 5.1% from 4.8%.

Over the first half of 2018, the economy grew an annualized 4.1%.

The Bank of Israel, which forecasts 3.7% growth in 2018, has played down the second-quarter data, saying it does not indicate a change in trend, with most of the decline in growth deriving from fluctuations in vehicle imports.

It also has noted that more recent indicators show the economy “continuing to grow at a solid pace” led by strong consumer spending.

Excluding net taxes on auto imports, GDP rose 2.8% in the second quarter compared with 3.9% in the first quarter.

The central bank last month again held its benchmark interest rate at 0.1%, where it has remained for 3-1/2 years. A rate increase is expected as early as the fourth quarter of this year now that inflation has moved back to within its 1-3% target range.

Israel’s annual inflation rate dipped to 1.2% in August from 1.4% in July.

In the second quarter, exports – which comprise over 30% of economic activity – fell 2%, more than a preliminary estimate of a 0.1% decline. Private consumption fell 1.7% versus an initial 0.5% rise.

Investment in fixed assets fell 3.7%, government spending decreased by 3.9% and imports rose 1.3%. (Reuters)