Bank Hapoalim Ltd said that Israel’s Purchasing Managers Index (PMI) fell to its lowest in two years in August, the third consecutive month the indicator pointed to a contraction in industrial activity.
The index fell 4.2 points to 42.6. A PMI below 50 indicates economic contraction. The global PMI, by contrast, rose in August, and has indicated expansion for the past 21 months. The Israeli survey, conducted partly during Israel’s summer offensive in the Gaza Strip, showed a “conspicuous” decline in export orders, industrial production and employment, Hapoalim said.
It is “reasonable to assume” the fighting had an effect on the measure, with domestic demand falling due to the war, it said. “Economic indicators are pointing to a real contraction in economic activity in the third quarter,” Hapoalim said. “While a postwar recovery is expected, it is too early to tell if a recovery will actually take place in the fourth quarter, given the weakness in the economic indicators.”
Bank Hapoalim cooperates with the Israeli Purchasing and Logistics Managers Association in the publication of data on the purchasing managers' index in Israel. Purchasing managers' indices are leading indices that can forecast changes in growth trends; these indices draw extensive global coverage and affect financial markets. Indices include the American ISM index, the European PMI index, and the global index published by JPMorgan Chase Bank.
The index is calculated based on the responses to six questions provided by purchasing managers at leading industrial companies in the Israeli economy. The methodology for computing the index is consistent with the prevalent methodology worldwide for the calculation of purchasing managers' indices. The Israeli index is included in the calculations of the European and global purchasing managers' indices.
