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COUNTRY INSIGHTS

Another downside inflation surprise
ISRAEL · In Brief · 14 Jul 2023

Another downside inflation surprise Inflation in June reflected price stability (zero change) and the annual rate declined to 4.2% y/y from 4.6% in May. There were several items which surprised on the downside including food items (up only 0.6%, half our estimate), housing prices remained nearly ...

Rates on pause, further tightening will depend on the shekel
ISRAEL · In Brief · 10 Jul 2023

Rates on pause, further tightening will depend on the shekel The Bank of Israel decided to maintain policy rates stable at 4.75%, stressing that present rates are already restrictive enough. The decision was supported by the lower-than-expected CPI in May and resulting deceleration of inflation (...

We are leaning towards a rate hike today
ISRAEL · Report · 10 Jul 2023

1. We see a 60% probability of a rate hike today. Sticky service price inflation, a tight labor market, wage pressure, a weaker shekel and fairly steady growth will support further tightening. 2. Politics continue to impact markets, as the coalition presses forwards with cancelling the “reas...

Rate hike likely on Monday
ISRAEL · In Brief · 09 Jul 2023

We see a 60% probability of a 0.25% rate hike on Monday to 5.0%. What supports further tightening? Inflation remains sticky and accelerating in the service sectors. Granted, core inflation did slow to 4.9% y/y in May from 5.3% in April, but this was due to a sharp deceleration of core goods to 1....

Signs of increasing wage pressure
ISRAEL · In Brief · 05 Jul 2023

Wage growth appears to be accelerating. Average wages in May were 5.4% above that one year ago, accelerating from 5.1% y/y in April (according to initial data from the CBS). Detailed wage data exists only for April and points to rapid wage growth in manufacturing (6.4% y/y), retail (6.6%) and foo...

Steady economic growth and a weaker shekel will support tightening
ISRAEL · Report · 03 Jul 2023

1. Private consumption picked up modestly in March-May on employment growth and the public sector wage bonus. 2. The shekel continued to weaken last week as the coalition plans on pushing forward with part of the judicial overhaul. 3. Steady growth and a weaker shekel will support a rate h...

Steady economic growth and a weaker shekel will support tightening
ISRAEL · In Brief · 30 Jun 2023

Recent economic news has been on the positive side. Credit card purchases (in real terms, sa) increased by 1.2% in May following 0.2% in April (revised up from zero). Trend data points to growth of 1.1% saar in March-May following growth of 0.7% in the previous three months. Private consumption i...

A brief macro review: week of June 26, 2023
ISRAEL · Report · 26 Jun 2023

1. Recent economic indicators have been mixed, with manufacturing and exports expanding but PC demand weak. 2. Declining residential starts/completions will reduce supply and support some price pressure. 3. We still expect a rate-hold decision on July 10, but much will depend on shekel ...

Israel Weekly Macro Wrap Up 25.6.23
ISRAEL · In Brief · 25 Jun 2023

Politics: Although the political environment remains uncertain, the worst-case scenario of replacing the committee to appoint Supreme Court judges with a majority of coalition representatives no longer appears to be on the table. Last week, two new members were appointed to the committee from the...

Low CPI and strong shekel likely to support rate stability
ISRAEL · Report · 20 Jun 2023

1. Inflation surprised on the downside in May, but service prices continue to accelerate. 2. The labor market remained tight in May, with unemployment holding steady at 3.6%. 3. Macro fundamentals remain shekel supportive although recently political uncertainty has been the main driver. ...

Labor market remains tight
ISRAEL · In Brief · 19 Jun 2023

The labor market remained tight in May and at full employment. Unemployment remained stable at 3.6% (seasonally adjusted data) while the rate of participation in the labor market improved slightly to 64.2% from 64.1%. More people are looking for work than previously and finding employment (theref...

Low CPI and strong shekel likely to support rate stability
ISRAEL · In Brief · 18 Jun 2023

Inflation in May surprises on the downside Core inflation slows to 4.9% y/y from 5.3% in April. Much of the surprise was due to lower-than-expected seasonal impact. Prices of goods have moderated, while prices of services (including rental prices) have accelerated. We expect inflation to reach 2....

May’s CPI surprises sharply downwards
ISRAEL · In Brief · 15 Jun 2023

Core inflation moderates sharply Inflation in May was up 0.2% m/m, below the consensus range of 0.5%-0.6% (we had expected 0.5%). Inflation in the past 12 months declined to 4.6% from 5.0% last month. May’s CPI was influenced by stability in food prices (expectations were for a 0.5% increase or m...

Sharp shekel appreciation likely to prevent a further rate hike
ISRAEL · Report · 12 Jun 2023

1. This fiscal deficit will likely reach 1.8%-2% GDP this year, and 2024 will be more challenging. 2. Economic activity remains fairly robust, according to the latest business survey. 3. The recent sharp shekel appreciation will moderate inflation and reduces the chances of further tighteni...

Sharp shekel appreciation likely to prevent further rate hike
ISRAEL · In Brief · 11 Jun 2023

Fiscal data continues to support credibility in 2023, 2024 could be more problematic The fiscal deficit is gradually increasing as tax revenues decline, but the pace appears modest. The fiscal deficit reached 0.6% GDP in the last 12 months, up from 0.3% last month. Tax revenues are down 7.8% y/y ...

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