Companies Survey, 4th quarter, 2004


Reports from companies for the fourth quarter of 2004 indicate that total economic activity continued to expand, for the sixth quarter in succession. The growth in activity encompassed all the principal industries with the exception of the construction and transport industries, but expectations in the majority of industries were of a continued increase in activity for the domestic market and especially for exports. Manufacturing output rose, reflecting an increase in export sales and a more moderate increase in sales to the domestic market. Export orders continued to rise, and orders for the domestic market edged up. Trading companies’ sales exceeded those in the previous quarter, and a further growth in sales was expected for the next quarter. Business services companies reported a continued rise in revenue deriving mainly from an increase in sales of services abroad. The number of hotel bed nights 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 modest increase in air and sea transport was recorded concurrent with a marked decline in overland transport and a small rise in communications. In the construction industry the decline persisted and even worsened, mainly in buildings and infrastructure activity, and building companies expected activity to decline further during the next quarter. Reports on the severity of demand-side constraints on the implementation of activity were mixed: they increased in the transport and communications and business services industries, and a reduction in trading companies. The demand constraint remained the most effective constraint on activity in the quarter. Average inflation expectations for the next twelve months went down again, to 2.1 percent, with the share of companies expecting inflation to exceed the targeted range dropping steeply to 9 percent from 20 percent in the previous quarter. Companies expected, on average, that the exchange rate in twelve months would be NIS 4.59 to the dollar, compared with NIS 4.72 in the previous quarter’s survey.

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