Our forecast for growth is slightly lower than the Bank’s optimistic forecast (5.0-4.5 percent), with the main difference being the Bank’s very optimistic forecast for an increase in private consumption over the next two years and our inflation forecast for 2022 higher.
In Israel – a recent improvement in unemployment data before the closure is tightened. US – A weak employment report is expected on Friday.
Just before the restrictions on the third quarantine began, the Israeli labor force survey for the first half of December showed a decline in the broad unemployment rate to 12.7 percent with a decrease in the number of temporarily absent workers (mainly Knesset) to 5.6 percent, along with a 4.8 percent unemployment rate. Thus we returned to the level of unemployment that was on the eve of the second closure in early September, but the figure is already less relevant due to the expectation of a return to increase due to the new restrictions.
In the US this coming Friday, the latest employment report for 2020 will be published and the initial estimates indicate a zero increase, as well as according to the total weekly requirements for unemployment benefits.
China continues to increase its influence – this time on Europe. European service companies will be able to benefit from the move.
After almost 7 years of negotiations (only Angela Merkel was already in power when the negotiations began), the EU and China agreed in principle on a new trade agreement in which China would allow European companies more free access to the Chinese market without the need to transfer technology to the local partner. Increasing transparency and legal protection. On the other hand, the union has waived clauses that force Chinese companies operating in the union to protect human rights. The road to signing is still far away and only now will the administrative echelons begin to sit down and discuss the details, but to the extent that this matures into an agreement it will be particularly beneficial to European service companies, which unlike industrial companies, still have limited access to China.
Tonight in the US – Small elections mean a lot
The re-election for 2 seats in the Georgia State Senate will end tonight (the vote count will probably last until the weekend). Given the crucial importance of the election, the total expenditure of the parties along with other bodies (according to media reports) is greater than the total expenditure. According to early polls, the race is close (more than the presidential race) and only if Democrats win 2 seats will they be able to turn the Republican majority in the Senate because of the tie-breaker given to the vice president.
In this scenario they will be able to pass in legislation much more generous transfer payments to the population ($ 2000 per person instead of 600 at present) alongside higher chances that long-term investments in renewable (green) infrastructure will also be passed in legislation. On the other hand, it should be borne in mind that such a win will also allow the president to realize promises that are less positive for the capital market such as his desire to double the national minimum wage and raise corporate taxes. According to recent polls, the race is close – we have to wait and see.
In the country
As expected, the interest rate remained unchanged. In view of the arrival of the vaccines, the two scenarios of the Bank of Israel’s forecasts have been updated upwards. The rapid pace of the immunization process in Israel at the moment, increases the chances of the more optimistic scenario materializing. At the same time, the Bank’s forecasts for inflation and interest rates in the years 2022-2021 remained very low.
A recent employment report before the third closure showed an improvement in the broad unemployment rate, but the trend will be reversed in subsequent publications.
In the world
Today marks the end of the second round of the most expensive Senate elections, with only a victory in the two seats for the Democrats leading to a significant change.
On Friday, the latest employment report for 2020 will be published and the initial estimates are not encouraging. The influx of households from apartments in city centers to homes in the periphery continues to push up house prices.
China and the European Union have finally reached an agreement in principle on a new trade agreement, but are only now beginning to go over the small details. If this is realized, it will be especially good with the service companies in Europe.
Sentiment from manufacturing companies in China remains high even at the end of 2020, but the continued rise in raw material prices is hurting margins.