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Companies Survey for the First Quarter of 2012
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  Business sector activity expanded in the first quarter of 2012, checking the slowdown trend reflected in the survey in the second half of last year.
  The expansion in activity was most pronounced in industrial output, accompanied by an increase in the inventory of finished products, a slight improvement in sales to the domestic market, and a drop in exports.
  Companies expect activity to continue to expand in the coming quarter as well.
  Average inflation expectations among companies participating in the survey are within the range defined as price stability, and stand at 2.5 percent.
  The current Companies Survey is the last one to be published by the Bank of Israel. It will be replaced by the Survey of Business Trends that the Central Bureau of Statistics began publishing in May last year. The process of changing to the new survey will be completed toward the end of 2012.
Reports from companies and businesses, and particularly the weighted net balance, show that business activity expanded in the first quarter of 2012, checking the slowdown trend that was observed in the second half of last year (Figure 1). The net balance of the major activity component is positive in all the industries surveyed, particularly manufacturing. The probability of slowdown, which is calculated in the leading index of the survey, is below 50 percent, which reflects companies' optimism about the future compared with the existing situation. Against all these, most of the net balances are lower in the review quarter than they were during 2010 and the beginning of 2011, and industrial exports have dropped.
Manufacturing output grew in the first quarter of 2012, accompanied by an increase in inventories of finished products. Against this, according to the survey, domestic sales did not increase, exports dropped, and orders for the coming quarter remained unchanged; in commerce an increase in sales was recorded, but, similar to the previous quarter, the increase was not statistically significant. With that, expectations of companies in the sector are for a marked increase in sales in the next quarter. Business services companies reported a slight increase in revenue, but salesin Israel and abroadare still holding steady. The most salient finding for the industry in the review quarter is companies' optimism about the coming quarter, and particularly with regard to orders from abroad; the hotels industry recorded a non-significant increase in activity, similar to the net balances during 2011. Activity in the industry reached a peak toward the end of 2010, and the net balances since then reflect stability at a high level; transport and communications companies reported an increase in activity, and orders for the coming quarter show a continuing increase at a similar rate; from the responses of construction companies, there does not appear to have been any change in activity in the industry, while output prices continue to rise. In recent quarters, there has been a significant worsening of demand constraints and some supply constraints, such as a rise in input prices and greater financing difficulties. Against this, the price-of-land constraint has eased. Companies' expectations for the coming quarter are of stability in the industry. Average inflation expectations for the next 12 months remained at 2.5 percent; on average, companies expect the exchange rate in twelve months time to be NIS 3.9/$, similar to expectations in the previous quarter.
The Research Department reports that the findings of the Companies Survey for the first quarter of 2012 are based on the responses of 510 companies in various sectors of the economy. The survey questions are qualitative: companies are asked to report on the direction of change of the various variablesincrease, decrease, or stabilityand to indicate the intensity of the change"great" or "slight". The results are analyzed by means of the "net balance," which is defined as the difference in the overall reports between the percentage of companies reporting an increase and the percentage reporting a decrease. In calculating the net balance, the direction of change as reported by the companies is taken into consideration, but not its intensity. Therefore, a net balance of zero indicates stability in activity, a positive net balance indicates an increase, and a negative net balance a decrease. The intensity of the change can be inferred from the size of the net balance. The Research Department adds that the data of the Companies Survey generally matches the macroeconomic and industrial data of the economy. The advantage of the data in the Survey lies in their being readily available and their providing rapid information relative to other data sources (National Accounts data and current indicators, such as industrial production).