The Israeli economy grew 3.4%, on an annualized basis, in the first quarter of 2025, according to the preliminary estimate of the Central Bureau of Statistics. GDP per capita rose by 2.2%, on an annualized basis, an encouraging figure after the declines in 2024.
However, despite the relatively positive growth, private consumption fell by 5%, on an annualized basis. Private consumption per capita fell by an even greater rate, with a decrease of 6.1%, on an annualized basis. The decline in private consumption at the beginning of 2025 marks a reversal of trend from last year, after a 4.1% rise in the fourth quarter of 2024.
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A fall in private consumption is often seen an indicator of declining consumer confidence and increasing concerns about the economic future. In the case of the first quarter of 2025, part of the decline is due to purchases being brought forward to the previous quarter, due to tax changes that took effect at the beginning of the year.
The most dramatic decline was in spending on sustainable products per capita, which was cut by 66.5%, on an annualized basis. The main factor behind this was a slowdown in the purchase of cars, after the sharp jump recorded in the fourth quarter of 2024, due to the advance of purchases due to tax changes that came into effect at the start of 2025.
At the same time, spending on semi-durable goods per capita (clothing, footwear, home textiles, entertainment and leisure products) fell by 21.4% year, on an annualized basis. However, current consumption per capita (food, beverages, personal services, housing, fuel and electricity) actually recorded a slight increase of 4.1%.
Business sector leads growth
The GDP of the business sector grew in the first quarter by 4.4% from the corresponding quarter of 2024, a figure that indicates a certain recovery of the private sector, after a decrease of 0.7% in 2024.
On the other hand, the state public consumption spending recorded a slight fall of 0.2% on an annualized basis – a change in trend, after the jump of 8.8%, on an annualized basis, recorded in the fourth quarter of 2024. Defense spending fell 15.6% in the first quarter of 2025 on an annualized basis, after a jump of 49.2% on an annualized basis in the previous quarter.
Published by Globes, Israel business news – en.globes.co.il – on May 18, 2025.
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