Despite the fact that the government has refrained from taking closure measures and extreme restrictions, the re-emergence of the virus has halted the recovery in private consumption, which accounts for 50% of the economy’s GDP. The halt was reflected, among other things, in a decrease of almost 14% in cash withdrawals from ISA ATMs (compared with July 2019) and in the halting of the trend of improvement in credit card spending in all major sectors of the economy, which began in June.
This means that the eruption of the corona has a clear impact on the Israeli economy, even when no policy of closures is adopted. This effect is also reflected in a renewed decline in consumer confidence that returned to the low of April – which was reflected in the results of the July Consumer Confidence Index published by the Central Bureau of Statistics (see box).
The test is based on data from the Shebaa Company (automatic banking services), which is also a major source for the Bank of Israel in monitoring the economy’s performance. The data includes all expenses on Israelis’ credit cards in Israel (cash and online) In credit cards abroad and expenses through checks.
The current data joins the data on a sharp decline in mall revenue in July, as reported in “Globes” (“Black July: The second wave hit malls, revenue fell by about 17% compared to last year”, 2.8.2020).
Decreased cash withdrawal with the return of the virus
Consumption data in July should be seen against the background of the fact that about a million Israelis, who tend to go abroad each year during the month, remained in Israel this year. On the other hand, data for the first days of August indicate some recovery in consumption, including in malls. Receive from industries that are not usually affected during a recession, especially food chains, where there was a 17% increase in the volume of daily expenditure in July this year, compared to July 2019.
In July, Israelis withdrew NIS 4.5 billion from ISA ATMs in banks, about NIS 1 billion less than the volume of withdrawals made in July 2019. In daily average terms, this is a decrease of 13.77% in cash withdrawals. This is about 40% of all ATMs in Israel, through which 60% Cash continues in the country.
The routine use of cash in Israel has been on a steady trend for the past two years, with signs of a declining trend, after increasing the use of cash at an annual rate of 6% in previous years. The sharp decline in July came after a recovery in cash withdrawals in June. Withdrawals in June 2020 were only 1.71% lower than withdrawals in June 2019.
A possible explanation for the declines in July is the renewed outbreak of the virus this month, which has raised Israelis’ fear of becoming infected while standing in line at the ATM and using it.
A hard blow to aviation, an improvement in hotels
As mentioned, the comparison of expenditure data for July 2020 with those of July 2019 is made against the background of a decrease of over 95% in the number of Israelis who went abroad this month: according to CBS data, only 25,000 Israelis traveled this year during July, compared to 1.138 million Released during July 2019.
The decrease in the volume of outbound and inbound tourism is reflected in the aviation and travel agencies industries, two industries that will be revamped in July in the days of correction: the volume of daily credit card purchases in the aviation industry in July was only NIS 74,399 compared to NIS 5.2 million in July 2019 (98.5% decrease). In travel agencies, the average daily expenditure on credit cards was NIS 5 million last month, compared with a decrease of 88% in July 2019) (88%).
In hotels and restaurants, there is an improvement in the volume of expenses, but the situation is still far from normal: in the hotel industry, Israelis ‘daily expenditure increased to NIS 14.3 million compared to June 10.9 million, but is still 24% lower than Israelis’ daily expenditure on hotels in July 2019. On the other hand, in the first days of August, there was an increase in the volume of daily spending on hotels, among other things against the background of religious consumers joining, who waited until after the 9th of Av fast.
In the restaurant industry, the recovery recorded in June stopped: the daily expenses of Israelis in restaurants amounted to NIS 45.3 million in July, a figure that reflects an 18% decrease compared to July 2019, but also lower than the average daily figure recorded in June this year, which stood at NIS 47.8 million. In the leisure and entertainment industry, there was a slight improvement of about 8% in the volume of expenses compared to June, but the average daily expenditure in July was about 20% lower than the expenditure in July last year.
Stability in the food and pharmacy industries
Another industry that stood out in the declines was transportation, with an emphasis on the public. Expenditure on public transportation, taxis and toll roads decreased by almost 50% in July compared to July last year (NIS 5.8 million on average for the year compared to NIS 10.8 million in 2019). The use of the private car also decreased, albeit on a smaller scale: spending on fuel decreased by about 20% compared to July this year and July 2019, although it should be borne in mind that the price of gasoline was also significantly lower.
Compared to the declines in expenditure in the tourism industries, leisure hotels stand out in favor of the food and pharmacy industries, which are not greatly affected. The average daily expenditure in the food chains (cash registers and online) in July was 17% higher than in July 2019. In July it was 58% higher than the daily expenditure in July 2019.
In the areas of clothing and footwear and electrical appliances and household goods, credit card expenses in July were higher than those recorded in July 2019, at rates of 13% and 6.5% (respectively), but still lower than those recorded in June this year. A possible explanation for this is that the jump in spending in June was an expression of subdued demand for these products, with many Israelis postponing the shopping planned in April and May, until the reopening of stores in these industries.