| By Yonatan Katz and Leader Capital Markets economists
The stock markets fell this week and erased some of the gains of the previous two weeks, this against the background of positive data, which support the continuation of the monetary tightening process. An improvement was measured in the Purchasing Managers’ Index in services, an increase in consumer confidence, an increase in industrial orders, a rapid increase in consumer credit, and on Friday: an increase in PPI output prices beyond expectations, in particular in food prices. A relatively positive economic environment also supported an increase in yields.
| Israel: Decrease in tax revenues in November
The budget deficit in November amounted to 1.2 billion shekels compared to 0.5 billion in November last year. In the last 12 months, the budget surplus reached 0.4% GDP and NIS 28.9 billion since the beginning of the year. The revenues in the budget increased by 14.5% since the beginning of the year compared to a moderate increase of 5.6% in current expenses (a few expenses due to the corona virus), this compared to a budgeting rate of 6.0%.
regarding, In November there was a real decrease of 10% compared to November 21but the Treasury emphasizes that this is a problematic comparison due to the sharp increase in revenues on Nov. 21. Compared to Nov. 19 (the eve of the Corona), there is an increase at an annual rate of 9%.
The Treasury notes that in the months of April-November Godsleep, There is a trend of decreasing income forandDead a record month in collection in March. According to the Treasury announcement, the rate of growth in collection in recent months is on the pre-corona trend line of about 5% per year. Despite the soothing words of the Treasury, the strength of the decrease in revenues in November is worrying. Local VAT collection decreased by 17% on November 22 compared to November 21 due to moderation in activity in real estate and trade.
AWell Cand Pem GiBadandA budget of 2.7% in 2023 Against the backdrop of an expectation of continued weakness in tax revenues and an increase in expenses. Finance officials are slightly more optimistic and point to the fact that an approved budget is probably not expected until the middle of the year and until then a continuation budget is expected in the first half of the year, which is expected to curb government spending. Probably the expected wage increases will be received in the second half of the year.
The more significant concern is a further increase inFireAnswer in 2024.
| The business sector continues to be optimistic
A survey of trends in the business sector (November) indicates thatYves is growing at a relatively high level. The current situation component decreased slightly, but remained at the level of the 2019 average. On the other hand, the expectations component regarding the activity three months ahead improved and rose to 8.6 points from 4.1 in October (net balance of the answers).
The employment component weakened but remained net positive (3.88). The industrial sector expects an improvement in orders for both the domestic market and exports. The service industries also expect an improvement in sales and the communication and information industry (high tech) even expects an improvement in exports in the coming month despite
Continued weakness in the employment component. An expansion in sales is also expected in the trade sector. Inflation expectations a year ahead rose slightly to 2.94% from 2.9% (down from 3.14% in August).
All in all, this is a positive survey that indicates continued stable growth and optimism regarding expansion in the coming months, despite the moderation in demand for workers.
Continued expansion bActivity is expected to allow continuation, probably B-0.5% B-January 2 and-0.25% B-February 20.
| the aboveThe inThe business nameThatsect
In the third quarter, the average salary increased by 4.1% on an annual basis (trend data), a certain moderation from 6% in the second quarter. At the same time, considering the fact that wages in the public sector are frozen, this is a relatively fast rate of wage increase of almost 6% in the business sector.
In recent months there has been a rapid increase in wages in the trade, construction and transportation sectors. There is a moderation in the increase in wages in the high-tech industry. In industry, the average salary increases at an annual rate of 5%.
Tight job market Tomc under pressureJ salaryand next year wage pressures are also expected from the public sector, which will also contribute to the pressures.
| ARThe second: Improvement in the service industries
The Purchasing Managers’ Index in the service industries indicates an expansion with an increase of 2.1 points to 56.5 points in November (the expectation was for a decrease to 53.4). The new orders component fell slightly to 56.0 (from 56.6, but still points to expansion) and the business activity component rose to 64.7 from 55.7.
The employment component increased by 2.4 points to 51.5. The supply time component decreased to 53.8 from 56.5 and moderates the ISM index, although this is a positive development in connection with the exit from the corona.
The price component continues to be very problematic and stands at 70.0 points, a slight decrease from 70.7. The pressure for price increases TheFireand Tim expected to continue,
This is compared to the weakness in the price component of the industrial index (43 points).
An increase in the Purchasing Managers’ Index in services was supposed to lead to an increase in returns on Monday due to the importance of the index (the various service industries make up about 80% of GDP). It is possible that the weakness in the purchasing managers’ index PMI (a rival index to the ISM index) in the service industries (which stands at 46.2 points) raises doubts about the reliability of the ISM index.
Despite all this, the ISM index is considered more significant and reliable in the US (the survey was created in 1915 and includes about 15 sub-sectors). In the world in general and in Europe and the US in particular, the PMI indices indicate a growing weakness in both industry and sectors, although The employment component remains positive (over 50 points):
will be mineYen Lvisibility How the Fed sneezessandni mDead MancardamomThe procurement. according to the index ISM In the service industries the recession is still mildKwhich allows Fed continue ToGodIncrease the interest rate towards 5% and maybe 5.25%. The Fed on Wednesday and theECB On Thursday expected raise the interest rate at the level of 0.5% in both banks the central ones.
| GandM AJN: A message is expected hawks MThe Fed respondedP
- A 0.5% Fed hike on Wednesday seems certain. Powell is already more than hinting that the rate of interest rate increases is expected to moderate. On November 30, Powell said:
- In other words: for Powell (and the markets), the terminal rate and the length of time it will take to maintain a restraining interest rate are more important.
- On Wednesday, the markets will react to the Fed members’ forecast (Dots) and Powell’s speech. In the September forecast, Fed members expected an interest rate increase to 4.4% at the end of 2022, 4.6% at the end of 2023 (Terminal rate, final interest rate) with a decrease to 3.9% at the end of 2024 and 2.9% at the end of 2025.
- expected revision in this forecast To-5.1%-5.2% at the end of 2023 and-4.5% at the end of 2024 and-3.2% B-2025. The long-term equilibrium interest rate is expected to remain at 2.5%.
- Regarding 2023, a downward revision is expected in the growth forecast (from 1.2% to 0.9%), and an upward revision in PCE inflation (from 2.8% to 3.0%, and core inflation from 3.1% to 3.3%). The unemployment forecast is expected to increase from 4.4% to 4.6%.
- A speech is expected “hawks“ relatively of Powell With a focus on “High interest for an extended period“. Powell will emphasize the acceleration in wages per working hour in November (an increase of 0.6% and 5.1% a year ago, an acceleration from 4.9%), the high inflation expectations among households, and the continued expansion of activity and, this despite the weakness in the real estate industry. As you remember, In his speech a week ago, Powell noted the inflationary pressures in the prices of services (excluding housing) which make up about half of core inflation and are mainly affected by wage pressures. There is a close relationship between the cost of labor per unit of output and the rate of inflation:
- Private consumption is supported by surplus savings from the Corona period of about 1.3 trillion dollars (down from 2.1 trillion at the peak), despite a decrease in savings every month:
- MaG The “June” speech is relativeA of PAwl B-30 BNovember (although the market chose to ignore taxRhyme quite “hawks”), slicerMo A set of positive data, including a manager indexThe procurement in my branches The services, strong employment data (relative toJFairies) andAcceleration per hour PBuddha Powell’s speech after a decision The interest rate may disappoint the markets when PAvel will emphasize the continuation Godpolicy Godrestraint (Although Godmoderation in rate) fthe need toMaintain a high interest rate for an extended period.
PDF Document: Weekly Macro Review by Leader Capital Markets Economists
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