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Bottom line: The reduction of 26.6% in the (shekel-denominated) deficit in trade in goods during 2013 seems to be a positive headline – and it is, as far as it goes. But that is not very far. The reduction in the deficit stems primarily from the fall in fuel imports, which in turn stems from the beginning of production at the Tamar offshore natural gas field in late March. The really important trade data for the year are that imports dropped by 8% and exports by 1.6% (in shekel terms). In other words, the strength of the shekel is dampening the level of activity in trade and, by extension, the whole of the trade-oriented Israeli economy. That’s the main take-away from the trade data, but there are several specific aspects worth highlighting:
- Statistics are dangerous – example 1: Import data for 2013 shows that imports of consumer goods rose by 9.2% over 2012 and imports of investment goods fell by 11.9%. Clear enough? Not really: Trend data show that imports of investment goods bottomed out in February 2013 and have been rising steadily ever since (that’s good news for the economy), while imports of consumer goods (and raw materials) were stagnant in the last third of the year.
- Statistics are dangerous – example 2: Over to exports, where full-year data show that high-technology exports rose a meagre 2% over the year, while exports of medium-high technology goods (notably, chemicals) jumped by 11% compared to 2012. But the trend data show that everything changed in mid-year. From June, high-tech exports have been rising smartly and medium-tech exports have been drifting lower (see graphs below).
- Generally, export performance in December was weaker, after several strong months.
- The trade deficit excluding ships and aircraft (which are volatile and ‘lumpy’), diamonds (which are a self-contained sector) and, critically, fuels, fell by 86% to only $$375mn. This should turn into a surplus in 2014, as Tamar production continues to expand.
Graph: Exports of Medium-High Technology Industries
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(Monthly, trend data, USD mn)
Graph: Exports of High-Technology Industries
(Monthly, trend data, USD mn)
