Migrating starlings fly across the sky, in southern Israel
Migrating starlings fly across the sky, in southern Israel December 28, 2015. Reuters

Israel's economic growth slowed in the third quarter as consumer spending weakened, though it still appears likely that high inflation will prompt another hefty Bank of Israel rate hike next week.

Gross domestic product grew an annualised 2.1% in the July-September period from the prior three months, the Central Bureau of Statistics said on Wednesday in its first estimate. A Reuters poll of analysts had forecast 2.0%.

The economy grew 7.3% in the second quarter, an upward revision from a prior 6.9% growth.

But Jonathan Katz, chief economist at Leader Capital Markets, said there were no signs of a "significant deceleration" in the third quarter other than in consumer durables, notably automobiles after a spike in the second.

On Tuesday, the statistics bureau said annual inflation rose to 5.1% in October from 4.6% in September, well above an official 1-3% target.

The Bank of Israel began to raise short-term interest rates in April and has since lifted its benchmark rate to 2.75% from 0.1%. The rate is widely expected to be hiked further, possibly to as high as 3.5%, on Monday.

Israel's economy grew more than 8% in 2021 and is expected to grow 6% in 2022 before slowing to 3% next year, according to central bank forecasts.

In the third quarter, private spending - which accounts for more than half of economic activity - declined 1.7% after a 9.3% gain the prior three months.

Exports, another large growth driver, grew 3.8% while investment in fixed assets rose 13% and government spending gained 6.5%. Imports rose 4.9%, mainly due to defence and diamonds.

Per capita GDP slipped 0.2% in the quarter amid high population growth.