• Sani Ziv

Weekly update 24.02

עודכן ב: אפר 13

A lot of economic data released in the last 10 days, starting with negative CPI reading on Friday February 16 and ended up with interest rate hold decision. In between, the CBS released robust GDP estimates for the fourth quarter, the shekel gained power against the Euro and the TA25 tumbled on fears of the coronavirus pandemic.

We were accurate on the CPI reading, expecting a negative 0.4% CPI reading. Prices fell in eight out of ten categories and continued to advance only for fresh fruits and vegetables and health services. Headline y/y inflation dropped to 0.3% with core inflation at 0.5%. Prices were pushed down by the shekel appreciation (appreciated by 8.7% during 2019) but likewise reflect very low inflation environment.

Our models show 0.9% increase in the next 12 months with February inflation rate at -0.1% and March at 0.3%.

On Monday, the BoI left the interest rate unchanged, but the interest-rate announcement leaves room for a rate cut later on. The BoI warns of the coronavirus's impact on the economy and on inflation, but assumes in its baseline scenario that the spread of the virus will be halted in the coming months and the overall impact on the global economy will be limited. On the other hand, the Central Bank also added that if strict preventative measures are required to curb the spread of the virus, this is expected to have a more significant impact on the economy. We are not ruling out a rate cut even before the next announcement if the virus's disruptive effect on the economy widen.

Data released last week

Friday, February 16: The Consumer Price Index decreased by 0.4% in January, close to market expectations of a 0.3%-0.4% decline

Monday, February 17: initial estimate for the fourth quarter of 2019 reveals an annualized growth rate of 4.8%. Excluding volatile vehicle import gdp advanced 3.3% following 3% in the third quarter. The growth estimate for 2019 was revised up, to 3.5%, compared to 3.3% under the initial estimate in December.

We predict 2.7% gdp growth in 2019 (2.9% natural gas production from Leviathan estimated at 0.3% of GDP.

Wednesday, February 19: Job openings decreased 1.7% m/m in January 2020 after a rebound of 3% in December (seasonally-adjusted data). Job openings growth is stabilizing according to trend data after a decline in first half of 2019 and a slight increase in the second half of 2019.

Wednesday, February 19: The one-year rate of inflation expectation slightly declined in January 2020 to 0.8%-1.0%.

Thursday, February 20: The Manufacturing PMI of Bank Hapoalim was down 1.7 points in January 2020, indicating slower performance by the manufacturing sector despite a rise in local orders.

Thursday, February 20: Weak industrial production in the fourth quarter of 2019. Trend data for industrial production fell in December by an annual 2.9% and by 1.6% within the quarter.

Thursday, February 20: January revenue indices (trend data) increased 2.6% in Q4 2019, down from a 4% increase in Q3.

Monday, February 20: The labor markets stayed firm in January 2020, with seasonally-adjusted unemployment at 3.6% as in the previous month.

Monday, February 20: The BoI left the interest rate unchanged, but the interest-rate announcement leaves room for a rate cut later on.


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