Consumer Price Index And Inflation Data For February

Bottom line: The Consumer Price Index (CPI) declined again in February, this time by 0.2%, after January’s 0.6% plunge. February’s fall was in line with expectations, but that doesn’t change the underlying fact – that the annual rate of inflation is steadily falling. Indeed, the CPI net of its housing component (which measures rentals, not purchase prices) rose by only 0.6% in the 12 months through February, compared to 1.2% for the overall index (see graph).

• Clothing prices were the primary contributor to February’s decline, as they were in January. Together with footwear, the apparel sectors pushed the CPI down by 0.15%. The explanation is probably – still – unseasonably warm weather.
• A  broad range of sub-indices also declined, including fresh vegetables, telecommunications costs, petrol, milk and frozen meat,although each on its own  contributed relatively little to the overall decline.
• Going in the other direction was the housing sub-index. This rose by 0.4%, reversing most of its fall in January.
• On the other hand, the House Price Index, which is not part of the CPI, hardly rose (0.1%) in the latest report (covering Dec 2012–Jan 2013 tto Dec 2013–Jan 2014). As a result, the rate of increase over the preceding 12 months dropped sharply, to 6.3% in this latest report, from 8% in the previous one.
• Most of the other price indices published by the Central Bureau of Statistics also fell in February, raising concerns that deflationary forces are becoming stronger in the Israeli economy.