On the eve of the Knesset elections on January 22, the public remains despondent about the economy, as it has been for the past year, according to the Consumer Confidence Index, compiled by Globes Research and pwc Israel, for December 2012. The public's assessment of the current economic situation, its expectations about the economy and their personal economic situation in six month, are lower than they were at the end of 2011.
The Consumer Confidence fell by 5.3 points in December to 74.4 points (baseline 100 = 1996), after rising 2.3 points in November and 13.9 points in October. At the end of 2012, three weeks before elections, the index was 2.7 points lower than at the end of 2011, the year of the social protest.
After the upward correction in the index in October and November from sharp drop earlier in 2012, the public's pessimism returned in December. A possible explanation is Governor of the Bank of Israel Prof. Stanley Fischer's forecast of just 2.8% GDP growth in 2013, excluding the natural gas sector, below the previous forecast of 3% growth. Another factor is the uncertainty about economic policy after the elections.
The Consumer Confidence Index is based on monthly surveys by the Smith Institute of 500 respondents who make up a representative sample of the Israeli public. For each of the index's components, "Globes" calculates the net balance of optimism: the percentage of optimistic respondents less the percentage of pessimists.
The net balance of optimism for the question, "What in your opinion is the current state of the economy?" fell by 2.5 points in December to minus 29.9 points, after falling by 2.1 points in November and rising 16.3 in October.
The net balance of optimism for the question, "What will be the state of the economy in six months' time?" fell by 10.1 points in December to minus 31.1 points, after rising by 10.6 points in November and 13.7 in October. The decline reflects the public's response to macroeconomic developments and the expected post-election policy measures.
Nevertheless, the three month moving average for net balance of optimism (the average for October, November, and December) rose by 4.7 points in December, after rising by 7.5 points in November and 1.9 points in October. The trend figure is, however, still seven points lower than at the end of 2011, and the public sees a bleaker economic future than it did after the social protest.
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2013
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