Israelis say they are worried about the economy, but it’s not stopping them from spending.
A survey conducted by AC Neilsen found that 65% of Israelis believe the national economy is in recession, while only 8% think the situation will improve by next year. Some 19% are worried about lack of job security (compared with an average 17% among Europeans and 14% throughout the world), and 60% have reduced spending on clothing, Haaretz reports.
Yet, food spending is up. Over the last two weeks of July, coffee shop chains reported a surge of 20% growth in sales, while sales at fast food chains soared 25% to 30%. Entertainment and recreation spending has also increased from 9% to 17%, in museums and hotels, in particular.
In addition, while exports of Israeli goods has slumped, exports of the Israelis themselves has been going strong, with just over 1.5 million travelers passing through Ben Gurion International Airport in July — 6.6% more than the year before.
Dan Ariely, a prominent thinker in psychology and behavioral economics at Duke University, offered an explanation:
“I assume that there is currently a slowdown in large expenditures on new cars or home renovations, and is compensated for through spending on leisure activities,” he said, adding that during the summer months, consumers are willing to spend more because of vacations. They can close the wallet later, when the school year starts, they reason.
“It doesn’t seem proper to spend money on something permanent,” says Ariely. “For example, when you buy a new car you pay in installments and this is a long-term obligation, while the summer is something temporary. The same can be said about the holidays.”
Uriel Lederberg, CEO of the Paamonim organization that counsels families struggling to manage their finances, expressed concern about the situation.
“To fulfill the desire to go out and go shopping, more people are borrowing more money from more places, beginning with bank loans, credit cards and finance companies, to employer loans and extended payments to credit companies, which are, for all purposes, loans,” Lederberg observed.
“Our attention is focused on the broad population of the lower middle class, near the midpoint, that bring home perhaps NIS 15,000 [a month]. They are the core of consumerism and its driving force — and they’re in a bind,” explains Lederberg. “But the big problem is that they don’t feel it.”
Lederberg foresees the situation worsening in October, after the Chagim. Meanwhile, many families permit themselves to spend money they don’t have.