For those who think that the local Israeli economy is immune to a global economic slowdown, today’s economic numbers on consumer confidence, may want you to think again. Globes reports that the index dropped to its lowest leevl in 4 years.

The article says: “The Consumer Confidence Index has been falling since the third quarter of 2007, even before there were signs that the economy was entering a slowdown. The index indicates that the public has sensed the economic trends for a long time, even as official macroeconomic data only now shows declines in private consumption and slower growth.”

With so much of the recent local economic success due to strong consumer spending and optimism, this continued deline in confidence, could spell the end of the current economic cycle. Growth estimates have been sliced, and while official estimates are still over 3% GDP growth for the year, with a slowing consumer and export companies reeling from Shekel strength I think we may be hard pressed to achieve those numbers. Keep in mind that israel has been late to the game concerning an economic downturn. That doesn’t bode well for ‘09 growth, which may continue to sag.

So where is there room to be optimistic? With the USD staging a recent comeback and pushing through the 3.6 barrier, the investment opportunities ahead may lie with export driven industries, especially the much sought after Israeli hi-tech industry. With this industry under performing over the last year or two, it may be time for Israeli hi-tech to make a comeback.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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