The Bank of Israel State of the Economy Index rose 0.3% in January. The increase in proceeds in the retail and services sectors, the increase in exports of goods, and the continued growth in the proportion of available jobs had a positive effect on this index. The drop in imports of consumer goods and industrial inputs and the fall in exports of services detracted from the increase in the January index. Imports of consumer goods plummeted 19.7%, which completely wiped out the 18.9% rise in this item in December 2014.
The Bank of Israel stated that growth in this index began to pick up speed in August 2014. Faster growth in business product in the fourth quarter of 2014 caused an upward revision in the rise in the index in previous months, with the higher growth rate having a positive effect on the trend component of the index.
At the same time, the Bank of Israel believes that the higher growth rate and the positive effect on the trend component will not persist, because the growth rate in the fourth quarter was exceptional, reflecting to a large extent the economic recovery following Operation Protective Edge and the steep increase in purchases of vehicles caused by changes in taxation.
Ministry of Finance chief economist Yoel Naveh also commented today on the high economy growth in the fourth quarter: 7.2% in GDP and 8.8% in business product. He attributed the figures to three factors: recovery from Operation Protective Edge, the US economic recovery, and massive purchases of private vehicles in advance of the change in environmental taxation in January. Naveh predicted that the economy would revert to its 3% growth pattern in the coming months, in line with growth in recent years.
The Bank of Israel is expected to announce the interest rate for March tomorrow. Most economists believe that the Bank's monetary committee will leave the rate unchanged at its historic low of 0.25%. The Central Bureau of Statistics is expected to publish its revised figures for the employment situation. The unemployment rate is also at a historic low - 5.7%.
Published by Globes [online], Israel business news - www.globes-online.com - on February 22, 2015
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