I guess when you bang people over and over on the head, you shouldn’t expect them to be optimistic, and the latest figures show that is exactly what has happened in Israel. Israeli consumer confidence dropped to its lowest level since 2004, and chances are good that the trend will continue.
According to the Jpost.com: “The monthly
Consumer Confidence Index compiled by Bank Hapoalim and TNS, the global marketing information group, dropped in February by 10 points to a level of 111.3 after rising by 7.9 points in January. “Following a surprising increase in January, the index, impacted by the worsening economic climate, last month fell back down below the December level,” Bank Hapoalim economists said in a report Monday. “The decline in the index is consistent with recent data showing that the economy is falling into a recession. “The index showed that the greatest fear of consumers is the situation of the job market; the rate of surveyed who think that there are few available positions reached a high.”
With more and more companies announcing layoffs, and no political leadership, look for consumer confidence to continue to crumble.
With US retail sales continuing to sag, large retailers apparanetly are looking abroad to try and find some growth. Globes is reporting that trendy US retailers GAP and Banana republic plan to start opening stores in Israel. According to the report: “Elbit Retail CEO Arik Ben-Zino said, “The first Gap store will open in Israel in the second half of 2009. The store will carry a wide range of infant, children, men, and women’s lines. We also plan to market addition Gap brands. We’ll open the first Banana Republic men and women’s stores in 2010.”
It will be very interesting to see how clothing will be priced. Like many foreign brands that open up in the holyland, prices are very high, and many consumers are priced out of the stores. If prices are reasonable, these stores will be successful, as Israeli’s will flock to them en masse. No need to go to Herald Square on their next trip to New York, they can buy the same thing locally.
As we have mentioned here more than once, the Israeli economy may not be in as great shape as our leaders have let on. Tonight’s surprise 50 basis point cut, bringing rates down to just 3%, indicates that even the Bank of Israel is worried about a potential economic slowdown or even a recession.
With analysts lowering their ‘09 growth forecasts, Fischer who has until last week remained unrealistically optimistic, appears to have thrown in the towel an admitted that things aren’t all that rosy, and is trying to add liquidity to the Israeli banking system to try and prevent the same type of credit crisis gripping the global banking system.
While I think the local economic slowdown will continue, this aggressive move by the Bank of Israel will help stem the damage to the economy that a prolonged recession could cause.
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.
