September’s CPI was in line with expectations

ISRAEL - In Brief 15 Oct 2021 by Jonathan Katz

---

September’s CPI was in line with expectations Inflation in September rose by 0.2% and 2.5% y/y (up from 2.2% in August). Core inflation accelerated to 2.1% y/y from 1.9% last month. The main items which surprised on the upside were processed food prices (up 0.6% and 2.7% y/y) and fruits and vegetables (up 4.1% m/m). There are strong seasonal factors in food items over the Jewish holidays which fell in September this year (somewhat earlier than most years). Furniture and home appliances were up 0.8% m/m and 4.3% y/y, and vehicle prices rose 1.1% and 4.5% y/y, both impacted by global trade disruptions and higher shipping costs. Meals away from home rose by a moderate 0.2% m/m and 3.2% y/y. Domestic vacation prices declined by a sharp 15.4% m/m with travel abroad restrictions lifted, in part (but up 19.7% y/y). Travel abroad prices decline by 0.3% (up 4.3%). Parties and events (weddings) declined by 0.6% m/m. Housing (rental) prices increased by 1.8% y/y (similar to last month), and ownership equivalent rental prices were up 1.9% y/y similar to last month. We had expected this pace to accelerate, in part due to slow housing completions and strong demand from hi-tech sector workers. Meanwhile, housing ownership prices (a separate survey, not factored into the CPI) increased by 1.2% m/m and by 9.2% y/y (up from 7.9% last month). Bottom line: Although there are items which continue to be impacted by global disruptions (vehicles, home items), domestic service prices are in a downward trend (following the impact of “pent-up demand”), such as vacations, and events, while restaurant prices are nearly stable, as are rental prices (y/y). We expect inflation to reach 1.4% in the NT...