Companies Survey, 3nd quarter, 2004


Reports from companies for the third quarter of 2004 indicate that total economic activity continued to expand, for the fifth quarter in succession. The growth in activity encompassed all the principal industries with the exception of the construction industry, but expectations in the majority of industries were of a moderate increase in activity in the domestic market and in exports during the next quarter. Manufacturing output rose, reflecting an increase in export sales as well as in sales to the domestic market. On the other hand, there was a significant slowdown in the rate of increase of both export and domestic orders. Trading companies’ sales rose more rapidly than in the previous quarter, with a slower growth in sales expected during the next quarter. Business services companies reported a continued rise in revenue compared with the previous quarter deriving mainly from an increase in sales of services 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 a moderate increases sea transport, reductions in overland transport and a standstill in communications. In construction, buildings and infrastructure activity declined again, and building companies expected activity to decline further during the next quarter. In reports on the severity of constraints on the implementation of activity, the downward trend in demand-side constraints continued in most industries. Average inflation expectations for the next twelve months went down to 2.5 percent in the second quarter, with the share of companies expecting inflation to exceed the targeted range declining slightly to 20 percent from 22 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 4.72 to the dollar.

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