Based on fourth-quarter industrial output and sales figures, a deep recession is on the horizon, warns Israel's Manufacturers Association.

The association's chief economist, Shuky Abramovich says that Q4 figures were down to levels last seen in the 1980s. The indicators were partly dragged down by construction and tourism, the sectors hardest hit by the upsurge of violence between Israelis and Palestinians beginning in late September.

The data is based on a survey of 190 industrial plants, reviewing fourth quarter figures as well as forecasts for the first quarter, 2001.

Abramovich said the Q4 survey indicates that industrial growth has halted. Since industry is the engine pulling the economy, conclusions can be drawn about the economy in general too. Trends in the hi-tech industry are similar, Abramovich said, albeit with different figures.

The security crisis is only partly to blame for the industry's dire straits, Abramovich said. Another important factor is the ongoing erosion of export profitability stemming from currency exchange rates and rising salary levels. Q4 figures reflect serious downsizing, which is expected to continue through Q1 2001.

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In the weighted index of industrial sectors, an output of 300 indicates stability. Any figure above that reflects growth, anything below indicates reduced activity.

Industrial output for Q4 2000 was 252, the lowest figure since 1980.

By comparison, industrial output in Q3 2000 was 341, and in Q2 it was 333. The sharpest fall in Q4 2000 was in quarrying and construction, and rubber and plastic products. On the other hand, the output in food products and electronics went up.

Sales in the domestic market in Q4 2000 totaled 236 on the index. The last time a similar figure was recorded was in 1985, when domestic sales scored 244.

Sales in Q3 2000 rated 338; in Q2, 310; and in Q1, 284. The figure for Q4 1999 was 311.

The market sectors that suffered hardest in Q4 2000 were quarrying and construction, rubber and plastics, and metal and electricity. Electronics and food were hit too, but not as hard. The forecast for domestic sales for Q1 2001 is 277.