Israel Revises Second-Quarter GDP Growth Up to 15.4% in New October Estimate

Israel’s economy grew at an annualized rate of 15.4% in the second quarter of 2026, an upward revision from the 14.9% estimate published in September, according to the Central Bureau of Statistics (CBS). The October 18 update puts the three-month increase at 3.6% on a seasonally adjusted basis and restores the annualized growth rate first reported in August.

The stronger estimate comes alongside a change to the preceding quarter: the CBS now puts the first-quarter contraction at an annualized 1.5%, less severe than the 1.7% decline shown in September’s figures. Taken together, the changes improve the measured performance of Israel’s economy over the first half of the year, although the unusually large quarterly rebound still needs to be read against the disruption that came before it.

The distinction between the two growth measures matters. A 15.4% annualized rate does not mean that Israel produced 15.4% more goods and services between April and June. It expresses the pace of the actual 3.6% quarterly increase as though that pace continued for four consecutive quarters. The CBS published the revised estimate in its October national accounts release, which remains an estimate rather than a final measurement of the quarter.

A Smaller First-Quarter Decline Changes the Comparison

The January-to-March decline is important because the second quarter followed a period of interruptions to economic activity during Operation Roaring Lion, Israel’s military campaign against Iran. Restrictions and absences from work weighed on activity earlier in the year. A return toward normal operations can produce a striking annualized growth rate even when the longer-running picture is considerably less dramatic.

The first-quarter estimate had already changed as more information became available. It stood at a 2.2% annualized contraction in the estimates used in August and was subsequently narrowed to 1.7%. The new 1.5% reading means the starting point for the second-quarter recovery was stronger than the previous data suggested. It would be misleading to treat the higher second-quarter number as a separate, newly observed burst of production that arrived in October; the statistical agency is revising its measurement of activity that occurred months earlier.

The updated figures also put annualized growth in the first half of 2026, compared with the second half of 2025, at 3.7%. That is above the 3.5% shown by the September estimate and 3.2% in the August estimate. The half-year comparison smooths some of the sharp movement between January-March and April-June, making it useful when evaluating how much of the second-quarter surge represents a recovery from a temporary drop.

A strong rebound and a weaker underlying trajectory are not mutually exclusive. Output can rise quickly as businesses reopen, households resume purchases and postponed activity goes ahead, without establishing that the same pace will persist in subsequent quarters. For that reason, the revision is evidence that the economy performed somewhat better than previously measured, not a projection for the rest of 2026.

Government Spending and Consumer Demand Support Growth

The composition of the rebound has shifted since the initial report. Private consumption increased at an annualized 14.6% rate in the latest second-quarter estimate, slightly below the 15.0% figure reported in September. On a per-person basis, private consumption rose 13.3% annualized. Purchases of durable goods per person, a category that includes items such as cars and household appliances, advanced 29.8% at an annualized rate, showing that some of the spending recovery was concentrated in purchases that households can defer.

Government consumption has taken a larger role in the revised account. Public spending is now estimated to have grown 22.4% annualized in the second quarter, versus 19.5% in the initial August reading. Defense-related consumption was revised up to 20.4% growth from 14.7% initially. The changes matter because headline GDP does not distinguish between an expansion driven by private-sector demand and one supported more heavily by government expenditure. Both add to measured output, but they can carry different implications for how durable the growth will be.

The export figures moved in the other direction. Exports of goods and services excluding startups and diamonds are now estimated to have risen 17.7% annualized, compared with 25.2% in August’s first estimate and 16.6% in September. Total exports, including the categories left out of that narrower measure, increased 26.6% annualized, below the initial estimate of 35.2%. The headline growth number has returned to its August level, but it is no longer backed by precisely the same estimates for trade.

Investment presents another mixed signal. Fixed-capital investment rose 4.1% annualized in the latest figures, unchanged from September but below the 6.3% initially reported. Investment in residential construction increased, yet spending on machinery and other equipment declined by 6.5%. These figures point to different conditions across investment categories rather than a uniform expansion in the capacity businesses are adding.

Imports also rose, consistent with the resumption of domestic spending and production. Higher imports can reflect stronger demand for consumer products or equipment, but they are subtracted in calculating expenditure-based GDP because the imported goods and services were not produced domestically. The direction of import growth therefore cannot, on its own, establish whether the quarter delivered an improvement in net trade.

A Headline Recovery With a More Modest Domestic Measure

Another qualification concerns production by Israeli companies abroad, which is treated separately in the CBS breakdown. Excluding that activity, second-quarter GDP growth is estimated at 13.8% annualized, below the 14.4% estimate on the same basis in August. That is still a rapid quarterly expansion, but it is lower than the 15.4% headline reading and points to why analysts should not use a single number to describe the condition of activity taking place within Israel.

The difference becomes more pronounced when looking across the first half of the year. On the measure excluding production abroad, annualized growth compared with the preceding half-year is estimated at 1.3%, rather than the 3.7% rate in the broader measure. The gap is one reason the latest GDP revision does not resolve concerns about the strength of domestic demand and output after the wartime interruption.

The Bank of Israel’s September 1 monetary-policy statement had already highlighted this distinction in the earlier data. It said second-quarter GDP was 6.2% above its fourth-quarter 2025 level when expressed in annual terms, but only 3.8% higher after excluding production abroad by Israeli firms. Those figures are from the bank’s assessment at the time and should not be mistaken for the newly revised October estimates.

The central bank also described a recovery from first-quarter disruptions alongside continuing supply constraints, and it noted that many business-survey balances remained below their levels before March. In July, its research staff forecast GDP growth of 4.0% for 2026 and 5.5% for 2027, projections conditional on assumptions about security developments, labor availability and public spending. They cover whole calendar years and are not directly comparable with one quarter’s annualized growth rate.

The monetary-policy setting gives the next data another point of relevance. The Bank of Israel reduced its policy rate to 3.25% on September 1, citing more moderate inflation but also uncertainty over fiscal and geopolitical developments. The GDP revision by itself does not dictate a change in interest rates: policymakers also have to consider inflation, employment, supply conditions and the composition of growth.

The CBS figures are subject to further revision as additional source data become available. Another national accounts update is scheduled for November 16, when there should be more evidence to judge how much of the second-quarter rebound carried into the second half of 2026.