Israel Revises Q2 GDP Growth Upward to 15.4% Amid Stronger Defense Spending

Israel's Central Bureau of Statistics (CBS) has revised its second-quarter GDP growth estimate back up to 15.4% at an annualized rate, recovering from a downward revision in September to 14.9%. More significantly, the updated data shows that the contraction in economic activity during the first quarter was milder than previously estimated, standing at 1.5% annualized compared to earlier figures of 1.7% and 2.2%.

Growth Composition and Government Spending

While growth has returned to the initial figure published in August, the internal composition of this growth has shifted considerably. Exports, excluding startups and diamonds, were initially estimated to have surged by 25.2%, dropped to 16.6% in the second estimate, and now stand slightly higher at 17.7%. Total exports, including startups, were revised from 35.2% down to 26.6%.

"The stability in overall growth despite lower export figures is driven primarily by government consumption, which was revised upward from 19.5% to 22.4%, largely fueled by a surge in defense expenditure from 14.7% to 20.4%."

Sector Performance and Private Consumption

Fixed capital investments weakened in the updates, dropping from 6.3% in the first estimate to 4.1%. However, investments in ICT sectors continued to stand out with an annualized increase of about 152%, albeit down from an initial 181%. Meanwhile, private consumption expenditure rose by 14.6% annualized in the second quarter, while private consumption per capita grew by 13.3%, led by a sharp 29.8% annualized surge per capita in durable goods such as vehicles and home appliances.

The business sector product, which serves as the growth engine for the private sector, increased by 17.7% at an annualized rate (4.2% in quarterly terms). The CBS noted that these figures remain preliminary, with the next update scheduled for November 16.