| Victor Behar, director of the economic department at Bank Hapoalim, and Hapoalim economists
| Israel
The Prime Minister decided to suspend the legislative procedures for changes in the judicial system, and negotiations were opened between the representatives of the coalition and the opposition. Meanwhile, the protest against the changes continues, and a protest supporting the changes has also been added to it.
The reaction of the markets was not uniform: the reaction was close to the statement followed by an increase against the dollar, which was later replaced by a depreciation; The yield gap in government bonds (against the US) for a period of 25 years has narrowed to about 25 basis points, the stock indices rose this week, but these were apparently affected by the trend overseas.
The political uncertainty will probably continue to be a significant factor in the coming months, it affects the mindset of investors from abroad and consumers in Israel. The credit risk of the State of Israel is not the factor to which the uncertainty drains – investors in the world, including the rating companies, estimate that this risk is low is very.
God- CDS of Israel for a five-year term fell back this week to a level of about 58 basis points, although it is not a product with high marketability, but it is still an indication of the low country risk. The volatility of the exchange rate was affected by the political uncertainty, but other factors are also at work in the background, such as a sharp decrease in and a decrease in the export of services.
Credit card purchases began to grow in the months of January-February, after a certain slowdown in the second half of 2022. The figures are somewhat surprising, given the erosion of purchasing power and increases.
The increase (in real terms) in purchases is noticeable in the food sector, and in contrast, a downward trend in purchases of services is evident. The Bank of Israel’s 2022 report published this week analyzes the consumption and savings trends of households from 2020. The analysis shows that the Corona event resulted in a cumulative savings surplus (beyond the savings trend that existed before the Corona) in the amount of approximately NIS 200 billion, or 12.6% of the GDP.
This analysis supports continued growth in private consumption even if there is damage to the purchasing power of households in the short term. At the same time, we estimate that the distribution of savings was very unequal, and the population groups that accumulated savings during this period are not characterized by a high marginal tendency to consume.
A strong labor market supports high interest rates over time. fell in February to a level of 3.9%, compared to 4.3% the previous month. The employment rate in the prime working ages (25-64) also rose to 79%.
It rose at the beginning of April to NIS 5,572 per month, a 5.1% increase compared to the previous salary. The wage increase is significantly lower than inflation in the last two years. Demand for workers at the lower wage levels is high, so competition will likely result in higher wage increases.
The forecast was updated downwards to 3.0% in the last 12 months. We are reducing the forecast for the coming year in light of a slight strengthening of the shekel exchange rate, and possibly also a postponement of food price increases.
We estimate that the increase in rent prices will moderate greatly in the second half of the year.
It is still expected to rise by 25 basis points tomorrow. Inflation expectations have fallen recently, and most of the inflation curve is now within the target range. Inflation expectations are expected to continue to decrease after the release of the upcoming indices which are high.
Given the decrease in inflation expectations that we estimate, the short-term real interest rate will rise to a level of about 2%, which is very restrained compared to the past. The interest rate increase process is close to its end in our estimation, but the interest rate is expected to remain at its high level at least until the end of the year.
| global
A calm surrounding fears of a crisis in the banking system, and the market estimates that in the US Autoto is starting to decline, led to increases in stock markets around the world last week.
The H, H and H indices recorded increases of slightly over 3% this week. In the summary of the first quarter of the year, a high variation was recorded between the indices and they rose at rates of 0.4%, 7% and 17% respectively.
The index rose by 4.5% last week and added 14% to its value since the beginning of the year. The stock markets in Asia were also in positive territory last week. Since the beginning of the year, the 12% increases in the stock index in Taiwan and 11% in South Korea stand out.
In the commodity market, the price of a barrel of oil rose last week by 6.6% to the level of 80 dollars.
| US banks
The Biden administration has proposed rules to tighten regulation on small and medium-sized banks. Against the background of the upheaval in some banks, led by Silicon Valley Bank and Signature Bank, the administration submitted a proposal to tighten the rules applicable to banks with assets worth between 100 and 250 billion dollars.
The intention is to increase the capital and liquidity requirements applicable to these banks, and to conduct stress tests more often than in the past. These steps will bring the regulatory environment of the aforementioned banks closer to that valid for the large banks.
In the past week, a relative calm was evident, with significant increases, in trading in the shares of small and medium-sized banks.
The index indicated a slow moderation in the rate of inflation. The core component of an index PCEknown as the Federal Reserve’s preferred measure of the inflation environment, rose by 0.3% in February and in the last 12 months it rose by 4.6%, down from 4.7% the previous month.
the general index of thePCE decreased by 0.3% to an annual rate of 5.0%. Although there is evidence here of another stage in the inflation moderation process, there is still a long way to go from here to convergence to the target inflation of 2% per year.
The economic indicators in the US presented a mixed trend. The Conference Board’s index rose last month, beyond expectations, with the increase this month being influenced by an increase in the expectations index and despite the decrease recorded in the index for the current situation. On the other hand, a decrease was recorded in the University’s consumer confidence index this month.
Private income in February increased by 0.3% and private expenditure increased by 0.2%. Real private spending decreased by 0.1%. The rate of private savings from disposable income rose slightly to 4.6%.
The last estimate of the rate for the last quarter of 2022 was slightly lower than the last quarter and stood for growth at an annual level of 2.6%.
| The US housing market
Recovery in purchases, but apartment prices continue to fall. The contracts for rose in February for the third month in a row by 0.8%, compared to an expected decrease of 3.0%. Despite the increase in the level of transactions in recent months, their level is still 21% lower than in February last year.
An index for house prices in the 20 largest cities in the US fell by 0.4% in January and completed a decline of about 4.7% since the peak in June 2022. The sharpest declines were recorded in San Francisco and Seattle where prices fell from the peak by 13.2% and 11.4% respectively, Whereas in the cities of Miami and New York, more moderate price decreases of 1.5% and 2.3% were recorded respectively.
Some increase in yields to maturity on US government bonds. In the past week, the yield to maturity on government bonds to increased by about 0.1%, from 3.38% to 3.47% for the year. A sharper increase was recorded in the yield to, from 3.78% to 4.03%.
As for the Fed’s policy in the coming months, the large gap continues between the signals of the members of the Federal Bank, which indicate no change in interest rates for the rest of the year, and the assessments in the capital market, which predict interest rate decreases in the second half of the year.
The capital market is now anticipating one more interest rate increase of 0.25% with only a 50% probability, and that starting in September of this year the interest rate will begin to decrease so that it will reach an interest rate of 4.5% at the end of 2023. The capital market estimates that the interest rate at the end of 2024 will be around 3.5% and at the end of 2025 at a level of around 3.0%.
| The Eurozone: a decrease in the annual inflation rate and at the same time an increase in the core component of inflation
A first estimate for March showed that its annual rate dropped from 8.5% in February to 6.9% in March, mainly due to a drop in energy prices. Excluding food and energy prices, core inflation actually rose from 5.6% to 5.7% in March.
These data support the continuation of interest rate increases by the ECB. At the same time it was announced that it remained stable in February at the level of 6.6%. In France, public protests against a proposed reform of the pension system continue. For now, several attempts to negotiate between the trade unions and the government have failed.
| China: This year’s GDP growth is expected to contribute about a third of global GDP growth
This, according to the senior director of the International Monetary Fund. According to the IMF, the rate of China’s economy is expected to increase this year and reach 5.2%, while the rate of growth in the global economy is expected to slow down to below 3%.
Last year, the Chinese economy grew at a rate of 3%, one of the lowest rates in history. The Purchasing Managers’ Index of the service industries rose to a level of 58.2 points in March, the highest level since March 2011. However, the Purchasing Managers’ Index of the industrial sectors rose to a level of 51.9 points, slightly above the forecast.
As for the business sector, the ecommerce Alibaba Group (NYSE:) has announced a plan for six separate units, each of which will be able to raise new sources and even issue itself. Many analysts estimated that this step might ease the regulatory pressures that have been applied recently towards the group.
The authors of the review are Bank Hapoalim economists. The review is based on publicly available data and information. The data and information used to prepare it were assumed to be correct, and this without Bank Hapoalim Ltd. performing independent tests in relation to the data and information. There is no verification or confirmation of their correctness in this review. The bank and its employees are not responsible for the completeness or accuracy of said data or for any other omission, error or deficiency in the document. This review is for informational purposes only, and does not claim to be a complete analysis of all the facts and all the circumstances related to what is stated therein. The information on which the review is based and the opinions therein may change from time to time, without any further notice or publication. This review is not adapted to the investment goals or to his personal and unique needs of each investor. This article should not be considered as investment advice or a substitute for investment advice that takes into account the data, needs and special investment goals of each person, and you should not act according to what has been said, except after receiving personal advice that takes into account the needs, goals and personal data of each investor, and after exercising consideration Independent opinion.