As Israel emerges from its recession, more problems seem to lurk round every page of economic data.

The latest set of stats show consumers have returned to the shops in droves. Compared this time last year, October 2009 saw a 25%+ rise in the number of TVs and washing machines purchased. Ditto for cars etc, etc, etc.

Put that info together with rosy GDP predictions for 2010 and new incoming tourism,  things are looking pretty. More room for an upward move on interest rates?

And yet, maybe investors know better. The sharp increases in the stock exchange have come to a halt. Local exporters are deeply unhappy at the shekel’s strengthening against the dollar. Unemployment moved up sharply in September. 

Above all, the budget deficit has hit a record high of 39.8b shekels over the past 12 months – a sad high to report. This will fuel fears of future inflation.

Each of these factors pull in different directions on the Bank of Israel’s decision regarding the level of the rate of interest; keep it stable for now or continue to drag it upwards.

Exiting from a recession brings its own conundrums. Most other countries, who are behind in the economic cycle, should beware.