| Yaniv Bar, economist in Leumi’s economics department
| The pace of credit card purchases has stabilized in recent months at a low level compared to the pre-corona crisis trend
The data of the Central Bureau of Statistics (CBS) show that the volume of credit card purchases by private individuals (in local businesses only) increased in the month of October by a minimal rate of about 0.1% compared to the previous month (data adjusted for seasonality, at constant prices). Compared to October 2021, this is an increase of about 1.1%.
Growth was recorded in all product groups, with the exception of other products and services (computers and software, fuel, electricity and gas, communication equipment and services, etc.). The volume of purchases in the food and beverage sector stood out positively in October, alongside moderate increases in purchases of industrial products (clothing and footwear, electricity and electronics and furniture) and services (leisure and recreation, flights and hospitality, government services and more).
In recent months, the growth of the volume of credit card purchases has continued, while slowing down the rate of real growth. The total volume of purchases, as well as the volume of purchases in most groups (except food and beverages), is low compared to the trend.
This figure was until recently in a moderating trend that slowed down a bit in recent months, after it was similar to the trend during most of 2021. The current volume of purchases is about 5% lower compared to the potential level, a gap similar to that of total private consumption (as measured in the framework of national accounting) in relation to the trend . The purchases in the services and industrial products sectors stand out as negative, and on the other hand, the total purchases of food and beverages stand out as positive, as mentioned.
In conclusion, the volume of credit card purchases continues to grow, but has stabilized in recent months (until October) at a low level compared to the trend that existed before the outbreak of the crisis. In this context, we note that the Bank of Israel’s data regarding credit card spending (seasonally adjusted, at current and unrealistic prices like the CBS data presented above) show that in November (the first three weeks) there was a moderate increase in the volume of purchases.
The current macro environment, which includes price stability above the target (1%-3%) and interest rates on a rising trend that is expected to continue, alongside relatively low level consumer confidence combined with a high level of uncertainty, support a more moderate rate of expansion of private consumption.
Looking ahead, in our estimation in a central scenario, the year 2022 is expected to result in a growth of about 7.3% in private consumption, and next year it is expected to expand by about 3.3%.
| The activity indicators of the high-tech industries in the field of services continue to indicate a relatively rapid expansion
In September, Israel’s export of services (not including start-up companies) amounted to approximately 7.1 billion dollars (seasonally adjusted data). This figure does reflect a moderate decrease of about 0.3% compared to the previous month, but in relation to September 2021 it is an increase of about 8.2% (in current dollar terms).
A similar trend was also recorded in the export of the services of the high-tech industries (which includes computing services, research and development, communication services and computer manufacturing), which stood at approximately 4.1 billion dollars in September. This figure reflects a decrease of about 0.7% compared to the previous month, and an increase of about 7.5% compared to September last year. This is an activity component that makes up about 57% of the economy’s total export of services (excluding start-up companies), and which has been a significant growth engine of the Israeli economy in recent years.
Another figure, which is an index for examining the state of activity of the high-tech industries in the service sector, is the high-tech revenue index in the service industries (seasonally adjusted data at constant prices). This figure indicates a moderate increase of about 0.6% in the month of September compared to the previous month, and an increase of about 10.2% compared to September 2021.
After the rate of expansion of these activity indices reached a peak during 2021, from the beginning of 2022 a trend of moderation in growth rates began. Although the current growth rates are lower than those in 2021, they are still relatively high (annual rate of about 13-14%), and have even increased slightly in recent months.
That is, high-tech activity in the service industries (revenue and export) continues to grow at a rapid pace, despite the challenging macro environment, which includes, among other things, a significant moderation in the global growth environment – with an emphasis on Israel’s main trade partners in this area: the Eurozone and Looking ahead, we estimate that the export of services is expected to continue to be a dominant component in the growth composition of the economy in the coming years as well.
| The growth rate of the total revenue of the economy is high relative to the trend, but is in a moderating trend
Revenue in the total economic sectors (excluding diamonds) increased in September by approximately 1.3% (data adjusted for seasonality, at constant prices) compared to August, and at a rate of approximately 2.2% compared to September 2021, according to the CBS data.
The branches of activity that stood out positively in the month of September are: electricity and water supply, entertainment and leisure, and financial and insurance services. On the other hand, the sectors stood out negatively: activities in real estate and construction and the high-tech sectors in industry. In an overall view, the expansion in economic activity continues, while somewhat slowing down the pace.
The current level of redemption in the economy as a whole is about 2.6% higher than the trend. This is a gap that is lower than what was at the end of 2021 and the beginning of 2022 (about 5.5%-6.0%), thus reflecting a trend of moderation in the pace of activity expansion.
In addition, we note that there is considerable variation in the development of the various branches of activity. The high-tech (total index, industry and services together) and trade (with an emphasis on wholesale trade) sectors stand out positively with a high growth rate relative to the trend, with industry now growing at a rate similar to that of all economic sectors.
On the other hand, the revenue level in relation to the trend is in a sharp downward trend in the real estate and construction activities sectors, this is against the background of the decrease in the volume of transactions in the housing market since the beginning of the year. Also, the hospitality and food services sector stands out negatively, with a significantly lower revenue compared to the trend.
In conclusion, the rate of expansion of revenue in all sectors of the economy remains high compared to the trend that existed before the outbreak of the Corona crisis, but it is on a moderating trend in recent months. The expected moderation of the global and local growth environment, combined with continued interest rate increases and inflation higher than the target, are factors that support the continuation of the trend.
Looking ahead, we estimate that the year 2022 is expected to result in a growth of about 6.0% (annual average), and in 2023 we expect a moderation in the growth rate to a level of about 3.4%.
PDF Document: National Economist’s Macro Review
The writer is an economist in Leumi’s economics department. The data, information, opinions and forecasts in the review are provided as a service to readers, and do not necessarily reflect the official position of the bank. They should not be considered a recommendation or a substitute for the reader’s independent judgment, or an offer or an invitation to receive offers, or advice for the purchase and/or making investments and/or any operations or transactions. The information may contain errors and changes may occur. The bank and/or subsidiaries and/or companies related to it and/or controlling owners and/or interested parties may from time to time have an interest in the information presented in the review, including financial assets presented in it.