02.Feb .2021 23:30

Business Sector of Israel on a Recovery Path

Business Sector of Israel on a Recovery Path
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The net balance in the overall business sector of Israel improved considerably in the final quarter of 2020, but remains at a negative level, thus indicating that the state of the economy is still weak relative to the pre-crisis period. 
 
The latest Companies Survey, published by the Bank of Israel, was conducted from the middle of December 2020 through the middle of January 2021, indicates the continued recovery of business sector activity in the final quarter of 2020. 
 
Pursuant to the report, the net balance of manufacturing industry output continued to recover in the final quarter, and remained negative and not statistically significant. The negative balance reflects an assessment of weakness mainly in exports and in the number of employees. Based on orders for the coming quarter, the companies in the industry expect that sales to the domestic market will continue to be weak in the first quarter of 2021, while sales for export will increase. The distribution of manufacturing companies by company size shows that the net balance of large companies remained positive, while that of small companies was greatly negatively impacted.
 
The net balance of services industry revenue improved in the final quarter and became positive, though not statistically significant. It reflects an improvement in the sales of services and in the number of employees. Expectations in the industry for the coming quarter are that activity will grow, and the companies report that orders from abroad decreased.
 
The net balance of trade industry sales remained positive in the Q4, but not statistically significant. Expectations in the industry are for an increase in sales in the next quarter.
 
In the other industries, the number of responses was too small for the findings to be statistically valid at the industry level. 
 
An examination of supply and demand constraints finds an additional easing in the final quarter in demand constraints in the services and manufacturing industries, and increased severity of the constraints of a shortage of professional workers in all industries. When examining the financing constraint, a deterioration can be seen in the final quarter, mainly among medium-sized companies.
 
In the Q4 2020, the average of companies’ expectations of the inflation rate over the coming 12 months increased, to 1.3 percent. The share of companies that expect inflation over the coming 12 months to be within the target range indicating price stability (1–3 percent) also increased, to 55 percent, while the share of companies expecting that inflation will be below the target range declined, to 39 percent. Expectations regarding the exchange rate of the US dollar in the coming quarter and in the coming 12 months declined, to NIS 3.35/$ and NIS 3.44/$ respectively. During the period of the survey the average exchange rate was NIS 3.22/$.
 
The findings of the Companies Survey for the Q4 2020 are based on the responses of 231 companies and businesses in various industries.