CPI declines by 0.7 percent, bigger drop than expected
The Consumer Price Index fell by a surprising 0.7% in June, the Central Bureau of Statistics reported on Friday. Forecasters, among them the Bank of Israel, did expect a fall in the index but not such a sharp one. The expectation was for a fall of 0.2%.
In recent months the inflation rate has again turned negative, and figure for the 12 months to June is minus 0.2%. Prices of fresh fruit and produce fell 8.7% last month, clothing and footwear prices fell 5.4% and the home maintenance item fell 1.1%, following a 14.5% cut in the basic price of water.
Home prices in April-May 2017 rose slightly, by 0.1%, from March-April 2017. In comparison with the April-May period in 2016, prices rose 4.5%. The Central Bureau of Statistics stresses that these are not final figures, as there are presumed to be transactions in April-May this year that have not yet been reported.
In the announcement of its decision to leave its key interest rate unchanged last week, the Bank of Israel said on inflation: “The annual inflation rate is slightly below the target, but the inflation environment remains low: Inflation expectations for up to the third year [ahead remain] below the target range. The increase in nominal wages, the strong economic environment, and inflation worldwide will act to increase the inflation rate, while the appreciation that has occurred in the shekel, increased competition in the economy and measures adopted by the government to reduce the cost of living will act in the opposite direction.”
In May, the CPI rose 0.4%, and home price index rose 0.5%.