| Guy Beit Or, Chief Economist of Psagot Beit Investments
Inflation in Israel has not yet reached its peak, and in October, we saw how food and housing prices continue to climb.
The rate of inflation accelerated from 4.6% to 5.1%, and core inflation accelerated from 4.7% to 5.0%. The index in the service industries increased by 0.5% and the annual rate slowed slightly from 5.8% to 5.7%.
The food section jumped by 1.0% and the annual rate accelerated to 5.0% when price increases were recorded in the prices of poultry, fish and meat, honey, cream and milk.
In our assessment at Psagot, the process of food price increase in Israel has not yet reached its limit – although the level of food prices in Israel is high compared to the rest of the world, but when food prices in the US and Europe are rising at a rate of 13-14%, we estimate that it will be difficult for the marketing chains in Israel to withstand the pressure The price increases that are coming and are expected to continue on the part of the manufacturers and importers.
Sections of the Consumer Price Index in Israel
The housing section continues to be strong when it increased by 0.6% and completed an annual rate of 6.2% compared to 5.6% last month. The data shows that for 3.0% of the tenants in the sample, where there was a change of tenant, the rent increased by 6.2% and in the apartments where the contract was renewed, the rent increased by 3.7%.
Overall, the rent section rose 0.5% and the owned housing services index rose 0.3% to complete an annual increase of 5.6% compared to 5.3% last month.
Apartment prices have not yet started to cool down according to the latest data, but in advance we note that these are prices that were correct for the August-September period. During this period, housing prices increased by 1.1% and the annual rate accelerated from 19.0% to 19.8%.
We will emphasize that in the current data on taking out mortgages and the volume of transactions, a significant decrease in activity is evident and therefore it is only a matter of time until the increases in apartment prices stop and next year we estimate that we will even begin to see a decrease in prices in the Israeli housing market.
However, the effect on the consumer price index comes significantly behind the price and sales data – and therefore we will continue to see upward pressure from the direction of the housing section of the index during the coming months as well.
What does this mean for the Bank of Israel looking ahead to next week? In the end, core inflation accelerated, service inflation continues to be high – and unlike what we see in the US, the annual rate of inflation here has not yet peaked.
When we take these data into account, along with the latest evidence of further acceleration in wages in the Israeli economy, and this along with the fact that the US, the UK and the Eurozone raised interest rates by 75 basis points in November – the October index reinforces our assessment that the Bank of Israel He will also raise you by another 75 NB next week.
The author is the chief economist of the Psagot Investment House and has no personal interest in the subject of the review. This review is not intended to be a substitute for investment marketing that takes into account the data and the special needs of each person.