Israeli economy rebounds in Q3, grows 4.1 percent

Israel's economy grew at an annualised 4.1 percent in the third quarter of 2017, bouncing back after a surprisingly sluggish first half on big gains in exports, consumer spending and industrial investment. After a 4 percent spurt last year, Israel was forecast to grow close to that again, but growth in the first six months was just an annualised 2.2 percent.
The central bank had been optimistic about a rebound in the second half, however, and has rejected the notion of another slowdown. Growth in the July-September period was broad-based and led by an 18.5 percent surge in exports - which account for more than 30 percent of economic activity - after a decline in the prior three months. Exports excluding diamonds and start-up companies rose just 0.4 percent, though.
Similarly, private spending - another key economic driver - jumped 7.8 percent for its strongest quarter since the second quarter of 2016. Led by industries, investment rose 8.1 percent. Imports rose 16.6 percent, while government spending slipped 1.6 percent. Growth in the third quarter was faster than the average forecast of 2.5 percent in a Reuters poll of economists. The bureau revised up its second-quarter gross domestic product growth estimate to an annualised 2.5 percent from 2.4 percent.
The slower-than-expected growth in the first half of the year led the Bank of Israel a month ago to trim its 2017 economic growth estimate to 3.1 percent from 3.4 percent, although it maintained a 3.3 percent growth projection for 2018. The GDP data came a day after the bureau said Israel's annual inflation rate edged up 0.2 percent in October to keep inflation well below the government's annual target range of 1 to 3 percent.
The central bank does not expect inflation, the very low level of which stems from an appreciation of the shekel and measures to reduce the cost of living, rather than a lack of demand, to reach its target until mid-2018. Its own economists foresee the benchmark interest rate remaining at 0.1 percent until a 15 basis point rate increase in the fourth quarter of 2018, while Governor Karnit Flug has said rates will not rise until inflation hits its target.