Israel's GDP dropped 1.4% year on year

Israel's economy has been grappling with several troubling indicators since the war on Gaza began. Recent data reveals a slowing GDP, rising inflation, and a diminishing demand for government bonds. Israel's real GDP growth rate fell to 1.2% in the second quarter, highlighting deeper economic concerns. However, on a per capita basis, GDP actually declined by 0.4% . Consumer spending increased by 12% annually, after growing 23.5% in Q1. However, most of this growth was driven by necessities like food, gasoline, and electricity. Spending on luxury goods, such as clothing and furniture, fell by nearly 20%. The unemployment rate fell to a record low of 2.8% in second quarter. However, analysts say this low rate is due to a shortage of Palestinian workers and reservists not being counted in the labour force. The labour force participation rate also dipped to a staggering 62.7%, indicating a shrinking workforce. Inflation reached 3.2%, above the Bank of Israel's 1-3% target. Despite economic slowdown, the central bank kept interest rates at 4.5%. The shekel's volatility and government spending further fuel inflation risks.