The big surprise of the October index is that there was no upward surprise. The consumer price index rose in October by only 0.1% – a figure much lower than the forecasts of analysts who expected an increase of 0.4% -0.5%.
The market was alert to a high index, partly due to Governor Amir Yaron’s estimates last Friday that there would be patience for inflation close to the upper limit of the target (3%), and against the background of a sharp rise in the US consumer price index.
The pressure was felt before the publication of the index, when in some banks the forecasts were updated to 0.5% this morning and the foreign banks expected a higher rate of 0.6%. Beyond that, a mere 0.1% increase while in the U.S. a 0.9% increase is exceptional.
The factors that contributed to the surprise in the October index were in the clothing and footwear items, which rose less than forecast, as well as flight prices, when the item on expenses for travel abroad and flights to Israel fell by 7.9%, partly due to falling flight prices.
Another surprise has to do with rental prices. While apartment prices continue to soar, with a rate of increase of 9.9% (the sharpest rate of increase in the last decade), rental prices have remained unchanged.
Since the beginning of the year, the inflation rate has been 2.6% and in the last 12 months (October 2021 compared to October 2020), the consumer price index has risen by 2.3%. The housing price index remains unchanged.
Significant price increases were recorded in clothing and footwear items which rose by 3.6% – below expectations, probably due to early promotions of stores, culture and entertainment which rose by 1.1% and food which rose by 0.9%. Significant price decreases were recorded in the items of fresh vegetables and fruits, which decreased by 2.5% and transportation, which decreased by 1.1%.
Against the background of disruptions in the global supply chain and the shipment of imported goods, the Ministry of Finance updated its upward inflation forecast earlier today. The Treasury raised its inflation forecast for 2021 by 0.1%, so that it is expected to average 1.5% (a change of 2.8% in the 12 months to end in December). The forecast for 2022 has been updated upwards by 0.5% to 2.1%.
Apartment prices have risen by about 10% a year
From a comparison of the prices of transactions made from August to September compared to July to August, it was found that apartment prices rose by 0.7%, thus completing an increase of 9.9% compared to the same period last year. This is the sharpest rate of increase in the last decade. According to Modi Shafrir, Mizrahi Tefahot Bank’s chief strategist: “The sharp rise in demand levels, in parallel with the decline in supply and the sharp rise in construction input prices (+ 4.8% + from the beginning of the year), support the continued rise in housing prices in the coming year.”
In the segmentation of changes in housing prices by district in the months of August-September compared with the months of July-August, price increases were recorded in the districts: South (1.6%), North and Central (1.5%), each and Haifa (1%); In contrast, price declines were recorded in the Tel Aviv (0.3%) and Jerusalem (0.1%) districts.
In the segmentation of changes in apartment prices by district compared to the corresponding period last year, August-September compared to August-September, price increases were recorded in all districts: Central (11.9%), Jerusalem (9.9%), North (9.6%), South (9.0%), Tel Aviv (8.8%) and Haifa (8.1%).
In the price index of new dwellings, it was found that their prices decreased in August-September compared to July-August by 1.2%, thus completing an increase of 8.3% compared to the corresponding period last year (August-September 2020). The percentage of transactions carried out with government support and participated in the calculation is 23.7% compared to 20.6% in the previous period (July-August 2021).
The national average price of a transaction for the purchase of an apartment was NIS 1.680 million in the third quarter of 2021, compared with NIS 1.685 million in the previous quarter.