Bank Leumi says that falling global commodities prices in the second half of 2008 are beginning to affect inflation in many countries, Israel included, and could significantly slow the sharp rise in prices seen last year. "This is one of main reasons why inflation in 2009 will probably be significantly lower than in 2008, and could even be negative," states the bank in its weekly macroeconomic survey.
Bank Leumi says that 12,800 new homes were sold in 2008, 7% fewer than in 2007. Petah Tikva and Tel Aviv had the highest sales. Housing sales fell steadily during 2008, with the decline worsening in the fourth quarter, as economic activity declined.
Monthly housing inventory continued to decline in the first half of 2008, reducing the supply. This trend reversed later in the year, and the bank therefore expects prices could stabilize or even fall during 2009, which will help bring down inflation. The bank cautions, however, that prices vary widely across the country.
Bank Leumi notes that housing and food were the two main items that drove the 3.8% rise in the Consumer Price Index (CPI) in 2008. The food item in the CPI rose 9.1%, contributing 40% to the rise in the CPI.
Bank Leumi's international comparison found that the rise in food prices in Israel was among the highest in the OECD. Israel's comparatively sound economic situation during the first half of last year may have helped households absorb the rise in food prices.
Published by Globes [online], Israel business news - www.globes-online.com - on February 5, 2009
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