The actual data from the labor market showed that in September and October (initial estimate) the number of Israeli employees remained almost unchanged compared to the previous months. But contrary to the headlines in the press, the number of people employed in the high-tech industry remained relatively stable (until September) compared to a (slight) decrease in the number of people employed in the other industries. The average salary of Israeli employees increased by about 4 percent in the last 12 months (slightly lower than the rate of inflation) with rapid salary growth in the business sector alongside stagnation in the public sector. We expect a reduction in the gaps next year after signing a wage agreement in the public sector. Something that will continue to support service inflation and high interest rates over time.
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The summaries of the discussions from the last interest rate decision showed that the members of the monetary committee unanimously supported an interest rate increase of half a percentage point. From the summaries it appears (as expected) that the process of interest rate increases will continue in the following decisions as well, something that in our estimation is not yet fully embodied in the bond market. In addition, it is likely that the Bank of Israel’s increased MCM issuances will contribute to the increase in yields in the short term. Israel’s exports of services rose in September to a new record (according to seasonally adjusted data) and the figures for the previous two months were updated upwards. At the same time, the export of services in the high-tech industries (about 60% of the total export of services) recorded a decrease for the second month in a row. After years of double-digit growth, we anticipate a slowdown in the export of hi-tech services against the backdrop of the expected recession in the US and Europe during the next year. However, we believe that Israeli hi-tech is relatively more resistant to a crisis such as the dot-com crisis at the end of the 1990s -2000 against a background of greater variety and wider access to funding sources.