Mizrahi Tefahot: High-Tech Exports Surge as Wage Growth Moderates
A weekly economic review by Mizrahi Tefahot Bank highlights a 5.3% surge in Israeli high-tech exports alongside a slowdown in average wage growth to 3.5%, easing inflation concerns for central banks.
The weekly economic review by Mizrahi Tefahot Bank indicates mixed but encouraging macroeconomic signals. While global and domestic economic activity shows robust vitality—reflected in a surge in Israeli high-tech exports and extensive job creation in the US—there is a simultaneous and significant moderation in the pace of wage growth in both markets. This trend helps alleviate inflationary concerns and provides central banks with greater flexibility in their upcoming interest rate decisions.
Israeli Labor Market and High-Tech Resilience
In the domestic arena, the Israeli labor market shows stability in the number of local employees, alongside a 1.2% increase in the number of foreign workers, a trend that helps mitigate labor shortages in the economy. Similar to the trend in the US, Israel is experiencing a substantial moderation in the average wage growth rate to 3.5%, a development that reduces the inflationary anxieties that were prominent in recent months.
Concurrently, the Israeli high-tech sector continues to break records with a 5.3% jump in service exports, reflecting an addition of $332 million in a single month. Despite a wide trade deficit, the strength of the shekel helps maintain balance in the current account.
Global Trends: US and Europe
In the United States, August saw an impressive addition of 162,000 jobs, primarily driven by the leisure, hospitality, and education sectors. Despite the employment growth, the annual wage growth rate moderated to 3.1%, easing fears of labor-market-driven inflationary pressures. Consequently, Federal Reserve officials have expressed doubts regarding the necessity of further interest rate hikes in the upcoming decision, provided inflation data does not surprise to the downside.
In Europe, the macroeconomic environment remains more challenging:
-
Preliminary data for August points to an inflation increase to 3.3%, driven almost entirely by surging energy, oil, and natural gas prices.
-
Core inflation, excluding energy and food, stands at 2.1%, close to the central bank's target.
-
Despite the moderation in core inflation, market expectations suggest the European Central Bank will raise its benchmark interest rate to 2.5% this week.
