With housing costs and inflation on the rise, and yet another national election set for November 1, Israelis are increasingly less confident about economic growth, according to data released Tuesday.
A consumer survey by the Central Bureau of Statistics (CBS) for June showed that overall consumer confidence fell by seven points in June, compared to May.
The survey provides monthly information for a series of indicators and is conducted with a representative sample of participants over 21 years of age. Some 8,800 participants were asked for their general assessments of the economic situation, their expectations for a change in the situation, and plans for large purchases and savings in the near future. These assessments are made for three time periods: the past year, the present, and the coming year.
The index is graded on a scale of plus 100 to minus 100, with zero marking the mid-point where people would define themselves as being neither optimistic nor pessimistic. The closer a figure is to 100, the more they feel an increase in confidence; the closer a figure is to minus 100, the less they feel confidence.
The recent survey showed that consumer confidence fell from -14 points in May to -21 points in June.
Asked about their confidence in the overall economic situation and outlook for Israel over the coming year, the index dropped to -34 points, having risen in May to -24, potentially a reaction to the political turmoil combined with rising prices.
Asked about expected changes to the economic situation in their own household over the coming year, respondents in June replied with -1 points, down from 5 a month earlier.
Asked about changes that had already taken place in their household’s economic situation over the past year, the index reversed a steady upward trend since the start of the year and fell to minus -21 — an indication that people perceive themselves to be significantly worse off now than they were a year ago.
Perhaps unsurprisingly, when asked about their intention to make large purchases (houses, cars, etc.) over the next year, compared to their plans for last year, confidence was down to -26 points (from -21 in May). There are some signs of a slowing housing market, which may be related.
Overall, the relative consumer confidence index dropped to -31 points. A high negative figure suggests that people will rein in their spending because they do not feel sufficiently optimistic about the future.
The index uses standard OECD guidelines, and despite the falls outlined, overall confidence in Israel remained ahead of Spain, Portugal, Italy, the United Kingdom, and the most pessimistic country, Japan.
The consumer confidence index showed volatility throughout the COVID-19 pandemic, falling as restrictions were applied and rising as vaccination campaigns took effect.
During the first general lockdown, the index fell to -31, and reached -28 during the second closure.
But from November 2020 to July 2021, consumer confidence rose steadily. The index hit -1 in August 2021, and rose as the country remained free from restrictions during the Jewish holidays and no further lockdowns were introduced.
Generally, the decrease in confidence and the intention to defer large purchases reflects overall concerns about household spending, and particularly the cost of housing which is continuing to rise much faster than inflation. Most recent figures put inflation at 4.1%, with a prediction it will rise further this calendar year. This in turn has led to higher interest rates – up to 1.25% — which have an almost immediate impact on disposable income for households on a variable mortgage rate.
The Bank of Israel has said that the Israeli economy is in relatively good shape. But a global slowdown has spooked investors and affected fundraising and growth for tech firms worldwide.
At home, an Israeli housing protest movement is gaining steam to demand government action over rental and purchase prices for housing, as well as the overall cost of living.