ECONOMIC SURVEY - 18-Jul-95

(COMMUNICATED BY GPO ECONOMICS DESK)

18 July 1995

MACRO-ECONOMIC SECTOR:

* INFLATION UP BY 0.3% IN JUNE.
The Consumer Price Index rose by 0.3% in May, the Central Bureau of Statistics reported. This was slightly less than had been expected by some observers. During the month, the price of vegetables and fruits decreased by 7.5%, while an increase of 0.6% was seen in the price of food, a 0.4% rise in the price of housing, and 1.8% rise in the price of clothing and shoes. For the first half of 1995, inflation has risen by 2.5%; 4.4% when excluding fruits and vegetables.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* ECONOMIC EXPANSION DURING SECOND QUARTER OF 1995 - BANK OF ISRAEL.
The economy expanded faster during the second quarter of 1995, compared to the year's first quarter, a Bank of Israel survey of 660 industrial, trade, construction, transportation, communications, and hotel concerns revealed. According to the quarterly survey conducted by the Bank's Research Department, industrial firms discounting seasonal factors reported both an increase in local and export sales, though export orders stabilized. Large and medium sized industrial firms showed greater growth, while small industrial firms reported a sizable reduction in their activities. This phenomenon was also reported by large and small firms in the construction sector. Trade, hotel, transportation, and communications firms all reported a growth in their activities, even after discounting seasonal factors.
Bank of Israel - Ohad Bar-Efrat, 972-2-6552712

* SLOWDOWN OF 3% IN ECONOMIC ACTIVITY IN SECOND QUARTER - FEDERATION OF ISRAELI CHAMBERS OF COMMERCE.
A 3% decrease in economic activity during the second quarter of 1995 was reported by economists at the Federation of Israeli Chambers of Commerce

(FICC). The FICC reported that companies providing products for the industrial sector, and firms selling durable goods, reported large decreases in their activities during the second quarter. Companies selling consumer goods such as clothes, food, and toys, however, reported a growth in their sales during the second quarter. Firms providing industrial inputs reported the decrease due to a slowing of their customer's industrial activities. According to the FICC, during the quarter, terms of payment in most sectors were lengthened, reflecting increased competition and limiting profitability.
Federation of Israeli Chambers of Commerce - Sara Lipkin, 972-3-5631010

FOREIGN TRADE:

* ISRAEL AND EUROPEAN UNION AGREE TO SIGN FREE TRADE AREA TREATY.
On 17.7.95, Israel and the European Union agreed on a new Free Trade Area Treaty which will continue Israel's special trade status with the group. The treaty, which has been under negotiation for more than two years, to replace its 1975 predecessor, ensures Israeli goods greater access to the European markets, allows Israel to more fully participate in the EU's industrial research and development funds and facilities, provides improved access for agricultural goods to the EU - though not as much as Israel had hoped - and will help give Israeli firms greater access to EU members government procurement contracts. Israel is hoping the treaty will help it to reduce its trade gap with the EU, which was approximately $7.5 billion in 1994.
Foreign Ministry - Oded Eran, 972-2-303343

* SEWAGE TREATMENT FACILITIES IN SOREQ RIVER VALLEY TO BE FINANCED BY EUROPEAN UNION.
The European Investment Bank, the European Union's financial institution, reported that it was lending ECU 35 million to Israel for use in sewage treatment infrastructure in the Soreq River Valley, west of Jerusalem. The new infrastructure facilities are intended to stop sewage discharges into the Soreq River, thereby preventing pollution from reaching the Mediterranean Sea, and preventing polluting seepage into the Jerusalem and West Bank regional underground aquifers.
EU in Israel - Gino Nale, 972-3-6964166

* ISRAEL'S BALANCE OF TRADE SURPLUS WITH JAPAN - $127 MILLION FOR FIRST HALF OF 1995.
Israeli exports to Japan rose by 35.7% while Japanese imports fell by 6% during the first half of 1995, the Israeli Japan Friendship Society and Chamber of Commerce reported. Total exports to Japan were $590.4 million while imports were $463.7 million, during the period. Industrial exports rose by 33.4% to approximately $200 million, with high-tech exports increasing 20% to $69.5 million, while chemical exports rose by more than 70% to $64.6 million. Diamond exports rose by 36%, to approximately $400 million, the group reported.
Israeli Japan Friendship Society and Chamber of Commerce - Elhanan Harel, 972-3-6957122

GOVERNMENT SECTOR: