The Central Bureau of Statistics (CBS) reported that the country's gross domestic product shrank by 0.4% in the third quarter of 2014, the first time the economy has contracted in almost five years.
Sunday's announcement from the Central Bureau of Statistics covers the period when the country fought a 50-day war - Operation Protective Edge, with Islamic militants in the Gaza Strip. The war ended Aug. 26. Israel estimated its cost at US$2.5 billion, slightly less than 1% of GDP. The Finance Ministry said despite the weak third quarter it maintains a 2014 economic growth estimate of 2.4 percent and a forecast of 2.8 percent for 2015.
Israel's last economic contraction came during the global financial crisis-impacted first quarter of 2009
The decline in GDP in the third quarter reflects a decrease in investments in fixed assets and exports of goods and services, excluding diamonds and startups. Spending on private consumption and public consumption rose.
Exports, which account for some 40% of economic activity, rose 2.8% in the third quarter. Private spending, another key driver, grew 3.9% while investment in fixed assets slipped 3.6%.
Exports of goods and services, excluding diamonds and startups, were down 4.4% in the third quarter, with exports of tourism falling by an annualized 77.5% (31.1% in quarterly terms) and industrial exports, excluding diamonds, falling 1.7%. On the other hand, exports of miscellaneous services, excluding startups, were up by an annualized 10%.
Total exports of goods and services rose by an annualized 2.8% in the third quarter, following a 13.6% drop in the preceding quarter. Exports of diamonds rose by an annualized 53.3% (11.3% in quarterly terms), while startup exports fells.
Imports of goods and services were up by an annualized 16.2% in the third quarter, following a 4.5% decline in the preceding quarter.
Imports of goods and services excluding defense imports, ships, airplanes, and diamonds rose 9.8% in the third quarter, following an annualized 2.4% increase in the preceding quarter.
Spending on private consumption rose by an annualized 3.9% in the third quarter, representing a 1.8% per capita increase. The rise in spending on private consumption follows a 3.3% rise in the preceding quarter and an annualized 0.7% rise in the first quarter of 2014.
Government spending increased 3.1% and imports surged 16.2%. Excluding public sector spending, the economy contracted 1.4% in the third quarter. The bureau also revised its estimate for second-quarter GDP to 2.2% from a prior 1.9%.
