The composite state-of-the-economy index is a synthetic cyclical indicator for examining the direction in which real economic activity is moving, in real time (For details see the Working paper).
Hitherto, the index was calculated from the monthly changes in five components that reflect different aspects of real economic activity: the index of manufacturing production; imports, excluding capital goods; trade and services revenue; the number of employee posts in the business sector; and goods exports (excluding agriculture, fuel, diamonds, and ships and aircraft).
From February 2006 the index has a revised format--it now incorporates another element, services exports (tourism and other services: software, R&D, consultancy, and real estate intermediation). This component is calculated in the Bank of Israel Research Department, and is partly based on estimates produced by the Bank's Foreign Exchange Activity Department. Services exports have become an important component in the light of the structural change in Israel's economy, with the rise in the share of service industries in GDP and in export industries in particular, similar to the change in other advanced economies. Apart from this addition to the index, new weights have been assigned to all the components of the index, based on a sample from 1995 when the structural change mentioned above started. Table 1 shows the revised weights of the components of the index.