| Amir Kahanovitz, Chief Economist, Phoenix-Excellence |
In Israel, it surprised on Wednesday, when it fell by 0.1% and after deducting the tax increase on disposable utensils, it fell by 0.2%. With an annual change, the index rose by 2.4%, and after deducting the one-time tax increase, it remained at 2.3%.
Another interesting deduction is that of cars and fuel, without which the index rose by only an annual change of 1.5%. Railway passengers probably do not understand what all the inflation talk is about, when they experienced a decrease of 1.5% in the past year. Is this time the surprise down in the index is no longer just coincidental, but evidence of a fading of some of the inflation engines? Definitely possible.
Some of the “corona” items that stand out in the index show a significant loss of momentum: Furniture and household equipment showed a monthly increase, but only because of the increase in the tax on HADP. The sub-item “Electrical equipment for the home” suddenly recorded a rare decrease.
However, towards the end of November, sea freight prices returned to rise, so it may be too early to eulogize the transit stations here. Another Corona item that showed a thunderous cooling, were hotel prices, which crashed at 13%, and compared to November 2019 they are now only 4.8% more expensive, so with them the transit is fading. What happened to hotels also gives hope to the “holding parties and events” section, which fell by 1.1% in November, but is still 7.6% higher than its pre-Corona level in November 2019.
Those who also stood out in the cooling of the index were the prices of restaurants and catering, which for the first time in 9 months and after an annual increase of 4%, suddenly stopped rising (0.0%). Like them, housekeepers and housekeepers (0.0%) stopped raising prices. But it did not end there, food prices surprised by a decrease in most products (only third decrease in the item since the beginning of the year) by 0.3%, the health item surprised by its first decrease in 7 months (0.2%), the clothing and footwear item continued to decrease (0.8%) , And travel prices abroad became lower (- 4.8%), both due to seasonality and of course the tremendous strengthening of the shekel.
In fact, the strengthening of the shekel can explain a great deal of the price declines noted, including, for example, the stagnation of drug prices in the health section, so that the downward trend in prices is still very much dependent on the continued strengthening of the shekel.
Why heat? Notable items that continued to push inflation were, as mentioned in the introduction, car prices (+ 1.3%) and fuel (+ 3.6%). To illustrate, if car prices persist at this rate for an entire year, they alone will contribute almost 90 bp to the annual index! Much much more than the potential addition of the huge housing clause (25% of the index).
And if we have already mentioned the elephant … the housing section has accelerated to 2.6% and it knows how to be a db. But not all of its subsections are sticky and you have to dig to see where the acceleration came from. Its sub-clause, which is not really sticky, is “owned housing services”, which can rise one month with an annual change of 3.7% and a month later to moderate to 2.4% (from experience). Another sub-item that is definitely sticky “Super Glow” is “Rent”, but in the November index it is still crawling at an annual change of 1.1%, compared to an average level of about 1.5% pre-Corona, and very far from its 2.9% of its brother “Services”. Owned housing. ” Despite the large weight of the housing clause, its fluctuations are very narrow and even if it accelerates from an average of 2.1% pre-corona to 3.1%, the addition to the annual inflation environment will still be only 25 basis points, less than small and volatile clauses can make it.
In conclusion, the November index was surprisingly down – and not as a result of a single rampant section. On the contrary, those who went on a rampage and may turn around again later this year, are the prices of fuel and cars that soared in November. The housing section is accelerating and is very likely to continue, but its section composition suggests that the pace is lower than reflected in the November index.
Meanwhile in the US, last night he updated his economic forecasts upwards, including to 3 increases, and announced his intention to accelerate the completion of the bond purchase program, and in response to what happened, we moderated? Make a gutta, they jumped! She seems to be laughing at the Fed’s “hawks.”
For 2022 – growth above 3.8% to 4.0% (and lowering the forecast for 2023 from 2.5% to 2.2%), downward unemployment, from 3.8% to 3.5%, inflation (PEC core) From 2.3% to 2.7% and the interest rate at the end of the year from 0.3% to 0.9% (three increases), but left its estimates for the long-term interest rate environment unchanged, at 2.5%. The Federal Reserve also updated the reduction to twice the rate.
Investors have barely commented on the interest rate the Fed is planning, perhaps because of the comment he added that what will really dictate policy is what will happen to the economy. Still, he addressed his optimistic forecasts for the economy and pushed inflation expectations up. Those who like a rise in the inflation environment, as is well known, are the real assets, especially the stock market, which is only looking for reasons to celebrate.
The author is the Chief Economist of Phoenix-Excellence. This review is provided as a service to readers only, and should not be construed as an offer, recommendation, substitute for the reader’s professional judgment or investment advice or investment marketing, purchase and / or sale and / or holding of the securities and / or financial assets mentioned or of securities and / Or any other financial assets.