Weak consumer demand will keep inflation low

ISRAEL - In Brief 18 May 2020 by Jonathan Katz
April's CPI (-0.3% m/m) was higher than expectations (-0.5%). This upward surprise came from housing rental prices, which continued to increase by 2.3% y/y, similar to last month, while we had expected some price moderation. Core inflation moderated to 0.2% y/y from 0.35% in March. We expect core inflation to remain low, offset by higher energy prices. Headline inflation is expected to reach 0.4% LTM. The trade deficit increased in March-April by 7.8%. Manufacturing exports contracted by 21%, more sharply than imports. New home sales declined by 39% m/m in March due to the shutdown. Consumer confidence declined sharply in April, supportive of weak PC demand. 9% of the private sector reported wage reduction due to Covid. Monetary policy: bond yields declined last week, apparently due, in part, to Bank of Israel bond purchases (our assessment). The next rate decision is on 25.5 and at this point we expect rate stability. The Bond Market: We see some factors further providing support for domestic government bonds: The MoF filled with the SEC enabling further issues abroad of up to 15bn USD which, if executed, will take pressure off the domestic market. The BoI continues to purchase bonds, following 13.2bn in March-April, a further 36.8bn is currently available under the current framework (which could be expanded). Israel joined WGBI in early May which should generate some foreign interest. Politics: The new broad unity government was sworn in yesterday (finally). Political stability is generally positive for policy, following 14 months of uncertainty and three elections. New corona cases remain very low: The economy continues to open up as the number Covid-19 infections h...

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this or its contents.