Companies Survey, 2nd quarter, 2003


Reports from companies for the second quarter of 2003 indicate that economic activity stabilized, with different trends evident in different principal industries: the decline in both manufacturing output and sales to the domestic market flattened out, while the standstill in exports continued; in business services, the decline in revenue moderated somewhat, particularly in domestic sales; sales of trading companies rose, and were expected to continue rising in the next quarter; in the hotel industry, bed-nights of foreign tourists were steady after declining for several quarters, and those of Israelis increased, so that the total number of bed-nights rose; Among the two digit industries, the rise in air transport contrasted with the continued standstill in overland and sea transport and in communications. On the other hand, in construction, the downward trends in the construction of buildings and in infrastructure construction accelerated. The demand side featured prominently in reports on the severity of constraints on implementing activity, but in most industries the constraint eased slightly. The main supply-side constraint was financing difficulties in all industries except for construction, in which the shortage of skilled labor headed the list. Average inflation expectations for the next twelve months dropped steeply in the quarter to 2.6 percent, with a significant rise—from 27 percent in the previous quarter to 74 percent—in the share of
companies expecting inflation to be within the target inflation range. Companies expected the exchange rate twelve months hence to be about NIS 4.7 to the dollar, on average.

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