Inflation Pressures Fall in August but Housing Prices Rise

Data release on Thursday showed that there were signs of easing in inflation in Israel, after costs had been rising for months, but there was still a surge in residential housing prices.

CPI data

According to the Central Bureau of Statistics (CBS) the Consumer Price Index (CPI) in Israel saw a drop of 0.3% in the previous month, which brought down the rate of yearly inflation to 4.6%.

The CPI has seen gains of 4.1% since the beginning of the year. This index is regarded as a measure of inflation because it keeps track of the average cost of household items like transportation, clothing and food.

However, housing prices are not included in the calculation of the CPI, as they are tracked separately. Monthly prices had risen in July at their fastest pace recorded in a decade.

This had resulted in the annual inflation rate surpassing 5%, but August saw the inflation numbers finally cool down a bit.

All major categories that are tracked by the Central Bureau of Statistics saw prices decline in August, with residential housing being the only exception.

There was a 1.6% drop in the prices of footwear and clothing, while a 3.5% drop was seen in the costs of transport items and communication.

A 0.9% gain was recorded in outlays on entertainment and culture, while a 2.2% rise was also seen in prices of apartment maintenance.

Housing prices

Between May and July, prices of apartments across Israel saw a jump of 1.3%, which makes it a rise of 17.9% in the last 12 months.

The only decrease in housing prices was recorded in Tel Aviv, as they dropped by 0.1%. There has also been a rise in rental costs.

A 5.8% increase was recorded in the average price of new contracts in the previous month, while a 3.7% increase was seen in the average price of renewed leases.

Other figures

As opposed to the Organization for Economic Cooperation and Development (OECD), the inflation rate in Israel has remained relatively low.

According to the latest figures, the inflation rate in July had been around 10.2%, which was a 0.1% decline from the previous month.

This number indicates the first time that the average inflation rate has fallen amongst the group of developed nations, which had last occurred back in November 2020.

As compared to a number developed countries, the rate of inflation in Israel is significantly lower, but its housing market has remained red hot.

The cost of living has also increased significantly and this has prompted the Bank of Israel to take action. Like other central banks around the world, it has also had to take steps.

This includes increasing the interest rate significantly in this year, after keeping it low in the last few years due to the COVID-19 pandemic.

Further rates are also expected in the event that inflation does not come down, something that global central banks have had to contend with because of stubbornly high inflation.