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Trade Review

The available data Indicates of economic growth is slightly slow in Israel and activities show that this accelerated in 2000. In present year, the state of the economy and manufacturing even declined, but their level remained higher than in the first half of the year, reinforcing the view that since 1999 an economic recovery has been under way. National Accounts figures show that the level of all uses rose during 1999 more than did that of GDP. Thus, the rapid expansion of imports of goods and services, whose response to changes in aggregate demand should be faster than that of GDP, is apparently another indication of economic revival. Exports of goods and services accelerated between every quarter, so that by 1999 they were 10 percent higher than in 1998, the continuous expansion of investment since 1998 also persisted, mainly in equipment (ships, planes, and Intel) and inventories. Private consumption also increased relatively rapidly, especially in 1999, so that per capita consumption rose; public consumption grew slowly, except in 1999 (when the general elections were held). On the sources side, by contrast, GDP and business-sector product, which had fallen in 1999, expanded once again, although their level in 1999 was only 2 percent above that of 1998 (thus, per capita product shrank, and the gap between actual and potential GDP appears to have widened, the annual growth rate of the latter being estimated at 4 percent). Imports of goods and services, which declined in 1998, rose rapidly throughout 1999, the steep increase in capital goods being particularly prominent. The results of the Bank of Israel's quarterly Survey of Companies show that the resurgence of all the principal industries continued, even strengthening in 1999. Thus, starting in 1999 the activity of firms involved in manufacturing, commerce, transport and communications, and hotels expanded, and for the first time the decline in construction activity was checked. In the first three quarters of 1999 the output of manufacturing firms grew, after six successive quarters in which it had declined, and their exports increased, too. All the principal industries indicated that they expected the high level of activity to continue. Nonetheless, slack domestic demand remained the main constraint preventing the more rapid expansion of output. All the indicators in Table 1, except construction, show that activity accelerated in 1999, and for the first time they all rose by more than 20 percent. Manufacturing output data indicate a steady rise since 1999, alongside a relatively rapid increase in the export industries (electronic equipment, machinery and electrical equipment, and transport vehicles), while the output of the other industries, which produce mainly for the domestic market, fell or rose slightly.

 In construction, beginning in 1999 and for the first time in years, there are some indications that demand is expanding, although other indicators, including construction investment, show that the decline is continuing. An analysis of the trend of the principal indicators of construction show that in 1999 and 1999, for the first time, there was a slight rise in the rate of growth of residential starts (2 percent in each quarter), all of it in government-initiated construction. Data on residential completions also point to a recovery: in 1999 and 1999 the number of units whose construction was completed rose (by 16 and 9 percent respectively), the main contributor to this trend being the business sector. Other indicators of increased construction activity are the greater number of persons taking mortgages and the sharp rise in apartment sales by the ten largest construction companies in 1999. On the other hand, total investment in construction fell in each quarter of 1999 (seasonally-adjusted figures), especially in 1999, most of it in non-residential construction, and construction time grew longer. There were signs of recovery in the other industries, too. The index of the revenue of all the commerce and services industries (based on VAT data, seasonally adjusted) was 5 percent higher on average in the period reviewed than in the equivalent period in 1998. The number of tourist entries, which had fallen steadily in the previous two years, reaching a record low in 1999 (seasonally-adjusted figures), began to rise subsequently, and by the end of the period reviewed it was 35 percent higher than in the equivalent period in 1998. An analysis of the trend of tourists entering the country by air indicates that this has been rising for about a year, as the average monthly growth rate was 3.3 percent in July-September, and 2.5 percent in October and November.


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