Recent findings from Bank Hapoalim and KANTAR’s Consumer Confidence Index have revealed noteworthy shifts which cast a favorable light on Israel’s economic landscape, despite its ongoing political concerns. The index, which measures consumer sentiment, saw a rise of 1.2 points in July 2023, reaching a level of 126.3 points.
This upswing in consumer confidence reflects a positive undercurrent that has captured the attention of market observers. A parallel trend has been observed in the United States, further affirming the notion that economic sentiment is on the upswing.
This cautious uptick in consumer confidence comes amidst a backdrop of ongoing political uncertainty, which has recently cast a shadow over the nation’s financial landscape.
Indeed, this year has seen Israel’s sovereign credit score decline and warnings from leading global rating agencies. While these challenges persist, the emerging resilience of consumer sentiment hints at a potential silver lining.
Digging deeper into the data, Bank Hapoalim’s insights highlight a constructive trajectory in average wages across various sectors. Notably, certain industries have managed to outpace the inflation rate over the past year, signaling a positive turn of events.
Israel’s high-tech sector
Over a span of 12 months, the average wage has risen by a notable 5.6%, surpassing the inflation rate of 4.2%. Yet, the relationship between this income increase and its impact on consumer purchasing power remains intricately tied to the evolving landscape of interest rates, which have implications for credit returns and mortgage rates.
Beyond the numerical indices, the report subtly underscores a moderation in private consumption, evidenced by metrics such as credit card transactions.
Against this backdrop, an interesting trend emerges within the travel sector: the desire to explore beyond borders has led to a remarkable 20% increase in the number of Israelis embarking on international journeys in July, compared to the previous year.
Despite the measured optimism of consumer sentiment, it is important to focus on Israel’s high-tech sector. As a key driver of economic stability, the sector’s difficulties, as highlighted in a recent report by Start-Up Nation Central, have far-reaching implications.
The first half of 2023 saw a significant 29% decrease in private funding, a level not seen since 2018, accompanied by a significant 53% drop in investor participation in investment rounds in H1 2023 compared to the previous year.
As the nation navigates these intricate economic waters, close attention should be paid to the dual narratives of consumer confidence and hi-tech funding challenges. As global dynamics continue to fluctuate, the interplay between Israel’s local challenges will play a critical role in its economy’s future health — or lack thereof.