Some initial signs of wage inflation

ISRAEL - In Brief 05 Dec 2021 by Jonathan Katz

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Highlights of our weekly review:Signs of some wage inflationThe average wage increased by 1.7% m/m in September (sa).Average wage growth over the past two years is up 4.8% annual, accelerating from 4.1% last month.Wage pressure is more apparent in communications and information (up 9.2%), finance (7.2%) and construction (7%).Accelerating wage pressure is concentrated in certain sectors, but will be a factor supporting some inflationary pressure.Private consumption of services acceleratesPrivate consumption indicators point to further expansion, especially in services (up 16% saar in August-October, according credit card purchases).Total credit card purchases are up 7.3% saar in August-October, slowing from 17.2% in the previous three months.Chain store sales slowed to 0.4% saar from 2.2% in the previous three months.Private consumption growth appears to have shifted from goods to services. This more balanced consumption will support moderate inflation.FX: The shekel appreciated by 0.8% last week, both against the USD and the Euro.It will be interesting to note the amount of BoI FX purchases in November (to be released today).Recent shekel weakness appears to be due in part to a seasonal selloff of foreign investors closing positions towards end-year.The bond market has performed well recently, both due to lower US yields as well as shekel appreciation. The negative interest gap vis-à-vis the US has widened due to much lower inflation in Israel and a fairly positive fiscal posture. Fiscal numbers will be released this week.Important data this week: Monday: Broad unemployment for the 1st half of November: Incoming/outgoing tourism, the protocol of the last rate decision....