Companies Survey, 2nd quarter, 2004


Reports from companies for the second quarter of 2004 indicate that total economic activity continued to expand, albeit at a more moderate pace than in the previous quarter. The growth in activity encompassed all the principal industries with the exception of the construction industry, and expectations in the majority of industries were of an increase in activity in the domestic market and in exports during the next quarter. Manufacturing output rose, reflecting an increase mainly in export sales, as well as sales in the domestic market. Orders increased in both the export market and the domestic market. Trading companies’ sales rose more moderately than in the previous quarter, with a further growth in sales expected during the next quarter. In a new development, business services companies reported an upsurge in revenue compared with the previous quarter concurrent with an increase in sales of services in Israel and abroad. The number of hotel bed nights recorded in respect of foreign tourists and Israelis continued to rise, and activity was expected to continue growing in the next quarter. In the transport and communications secondary industries, a
notable increase in air transport was recorded concurrent with moderate increases in overland and sea transport and a standstill in communications. In construction, buildings and infrastructure activity declined to a greater extent, and building companies again expected activity to decline during the next quarter. In reports on the severity of constraints on the implementation of activity, a decrease in supply side constraints was apparent in most industries, especially financing restraints. Average inflation expectations for the next twelve months rose to 2.7 percent in the second quarter, with the share of companies expecting inflation to exceed the targeted range increasing to 24 percent compared with 12 percent in the previous quarter. But in a pattern similar to that in the previous survey, companies expected, on average, that the exchange rate in twelve months would be NIS 4.75 to the dollar.

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