The November index continued to tell what we all feel in our pockets: inflation in Israel continues to race upwards, with the annual inflation rate accelerating from 5.1% to 5.3%, core inflation accelerating from 5.0% to 5.3%, and inflation in the service sectors accelerating from 5.7% to 6.3%; And according to Guy Beit-Or, the chief economist of Psagot Investment House, it is estimated that this has not yet reached its peak.
However, as a citizen who sees what is happening in the national real estate bubble, he also believes that “the main story in the November index was again the housing section, which jumped another 0.6% and completed an annual rate of 6.4%, when from month to month every contract opened in the sample of the CBS, renewed at levels Much higher prices (recall that each month only a few percent of the CBS sample renews a contract or changes a tenant). The bad news is that the prices in the housing section of the index react significantly behind what is happening in the actual real estate market, which will keep the general inflationary environment in Israel higher over time.
“The good news is (depending on which side of the deal you are on) that the Israeli real estate market is in advanced cooling processes with a significant decrease in activity and the movement of buyers. This means that during the first half of 2023 we will already begin to see price declines in the real estate market, which will eventually also roll over at a later stage to the rental market. However, another vision for the time since in the meantime housing prices in Israel continue to accelerate with another 1.2% in signed transactions in the months of September-October, and completed an annual increase of 20.3%, an acceleration compared to last month when they stood at 19.8%.
“The second problematic component is of course the food section where the annual rate accelerated from 5.0% to 5.5% when looking ahead, the many publications in the media over the past few days signal that the price increases in the food market are still ahead of us so these developments continue to be a major risk as far as the upcoming indices are concerned At the same time, the producer price index jumped by 1.2% in November, among other things, the food product production output index jumped by 0.8% and 7.6% in the last year, signaling that price increases in the food sector are still expected to continue.”
What can be learned from the November index as far as the Bank of Israel is concerned?
“What bothered the Bank of Israel in the previous decision is still expected to bother it in the upcoming decision as well – core inflation, and inflation in the service sectors continues to be high and accelerating – note that unlike the USA, Europe and Great Britain, in Israel we have not yet reached the peak of inflation, but it is well beyond to the corner”.
Beit-Or further states that “It will be interesting to see if in the upcoming decision the Bank of Israel will begin to hint to us that it is going to look “beyond” the ongoing increase in housing inflation, when at the same time we expect them to also emphasize the moderation in product inflation – as Powell has been doing in recent weeks. On the other hand, the governor will surely emphasize that inflation in the service industries in Israel continues to be too high.”
Following the publication of the apartment price index Messer The president of the Association of Builders Builders, Raul Sargo: “No temporary figure will change the simple fact that Israel lacks hundreds of thousands of apartments. Every day that passes there are more people who need apartments and fewer apartments available to them. The new government must set a goal of a jump in the amount of land that the state will sell and the release of the regulatory traffic jams that prevent construction, otherwise we will see here Another outbreak of price increases as early as later in 2023.”
Dobi Amitai, chairman of the presidency of the business sector said, that “despite the use of the interest rate tool, we are witnessing that the rate of inflation is still on the rise. According to the best estimates and indicators that indicate a global slowdown, this is a trend that can also be seen in the Israeli economy, and it is taking a heavy toll on the business sector. Now, Israel’s economy is at a critical turning point and The new government is charged with the responsibility of making decisions that will lead us to growth. The more the Israeli government chooses a policy of budget expansion and wage agreements that will increase the average wage in the economy – these actions will fuel inflation and the Israeli economy may fall into recession at the same time as high inflation – stagflation. National responsibility is required in these days and we must enter to discuss a package deal”