Consumer Price Index and Inflation Data for July and January-July 2014
Bottom line: The Consumer Price Index (CPI) rose by 0.1% in July — but it has risen by the same amount for the seven months ending in July! For the 12-month period through July the index shows a rise of only 0.3%. In short, as we have been warning for some time, the Israeli economy is slipping into deflation. Indeed, once housing prices are excluded, the data show that deflation is already here.
- The changes in the various sub-indices in July were minor and, for the most part, driven by seasonal factors. The fact that most sub-indices are showing a decline year-to-date (see graph below) is a better picture of the overall situation.
- The only area where prices were consistently rising is housing — and even here, the housing sub-index of the CPI, which measures rental prices, not sale prices, posted a decline in July.
- The rate of increase in the Central Bureau of Statistics’ Housing Index, which is not part of the CPI, fell to 7.7% in the year to May-June 2014 (the latest data available), from 9% in the year to April-May.
- Wholesale prices are falling sharply. The Index of Wholesale Prices of Industrial Output for Domestic Use fell by 0.6% in July and by 1.3% both year-to-date and in the trailing twelve months ending in July.
- The recent sharp drop in energy prices on global markets will find expression in price reductions in many sectors, both at the retail and wholesale levels, over the coming months.