The Consumer Price Index (CPI) for January has caused consternation among economic analysts. The index fell by 0.6%, twice as much as forecast. Excluding the housing item, the index fell by 0.7%. This is the largest monthly drop in the CPI since July last year, and the largest drop for a January in the past four years.
The annual inflation rate is now running at just 0.75%, below the bottom end of the government's target range (1%). The fall in prices in January allows the Bank of Israel to make a further 0.2% cut in its key interest rate. The rate for March will be announced this Monday, February 21.
Basic inflation, that is, the CPI excluding housing and fruit and vegetables, amounts to 1.5% for the past twelve months, double the rise in the general index over the same period.
In January, the CPI was affected by a revision in the index's composition. The steepest price falls were recorded in tomatoes (18.8%), cucumbers (10.1%), clothing and footwear (8%), and vehicle fuels and oils (6.1%). Only a few products and services rose in price substantially: eggplants (35%); fresh fruit (3.8%); cigarettes (3.1%); soaps and cosmetics (1.3%); and overseas travel (1%).
Seven out of the ten main categories of the CPI fell in January. The three that rose were: health (0.3%); furniture and home equipment (0.5%); and miscellaneous (1.2%).
The Wholesale Price Index fell 0.1% in January. The Residential Construction Inputs Index rose 0.8%.
Published by Globes [online], Israel business news - www.globes.co.il - on February 15, 2005