Israeli economy shrank 0.5% in fourth quarter

Consumers put the brakes on spending, while investment also fell, putting the economy on a path of recession.

Israel's gross domestic product (GDP) shrank by 0.5% in annual terms in the fourth quarter of 2008, according to figures released by the Central Bureau of Statistics today. This follows rises of 0.9% in the third quarter and 3.2% in the second quarter.

Since macro-economic indicators have only worsened since the end of 2008, and therefore GDP will show a fall in the first quarter of 2009 as well, it can be concluded that the economy is in recession. Recession is usually defined as two successive quarters of negative growth.

The figures also show that, at fixed prices and seasonally adjusted, GDP rose an annualized 1.1% in the second half of 2008, following a growth rate of 4.8% in the first half of the year and 6% in the second half of 2007.

In the second half of 2008, private consumption fell at an annualized rate of 1.1%, after rising at a rate of 4.8% in the first half. Private consumption per capita (standard of living) fell at an annualized rate of 2.9%, after rising at a rate of 3.0% in the first half. Per capita spending on consumer durables fell 28.0%, after rising 24.7% in the first half and by 15.1% in the corresponding period in 2007.

The fall in consumption was particularly marked in per capita purchases of motor vehicles, which fell by an annualized 56.6% in the second half of 2008 after rising at a rate of 70.5% in the first half. Per capita spending on furniture fell 15.2% in the second half of 2008, after rising at an annual rate of 7.1% in the first half, while purchases of domestic equipment (refrigerators, washing machines, air conditioners, and so on) fell by an annual 4.4% per capita in the second half of 2008, after rising at a rate of 5.4% in the first half.

Exports of goods and services, excluding diamonds and sales of start-up companies, fell 6.6% in annual terms in the second half of 2008.

Investment also fell. Investment in property and fixed assets fell by an annual 5.6% in the second half of 2008, after rising by an annual1.6% in the first half, and by an impressive 24.4% in the corresponding period in 2007.

Published by Globes [online], Israel business news - www.globes.co.il - on February 23, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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