Israel's Economy Grows, But Consumer Spending Declines, Central Bank Reports

Israel's economy showed surprising growth in August, with the Bank of Israel's composite index of economic activity rising by 0.4%. This monthly growth rate, averaged from June to August, places economic activity above its long-term trend of approximately 0.3%.

The central bank attributed the August increase primarily to a rise in imports of consumer goods and production inputs, higher VAT and indirect tax revenues, and positive GDP figures from the second quarter. However, several factors tempered the overall growth.

These moderating factors included a decrease in credit card purchases, a reduction in exports of goods and industry, a decline in the retail trade index, fewer job vacancies and employees, and a drop in the NASDAQ 100 index during July.

Alongside the August data, the Bank of Israel also revised its estimates for previous months. The July index was slightly adjusted downward, while the June estimate saw a minor upward revision, reflecting more complete data.

Despite the overall economic expansion, the decline in consumer spending, indicated by lower credit card purchases and retail trade, suggests a potential disconnect between macro-economic growth and household purchasing power.