Consumer, Producer and Housing Prices in October 2019
November 21st, 2019
Bottom line: Both the CPI (Consumer Price Index) and the MPPI (Manufacturing Producer Price Index for the Domestic Market) rose in October, in line with expectations. However, the underlying trend has decisively changed over recent months: the annual rate of increase in the CPI, which had begun to rise in late 2017 (from negative levels), peaked around 1.5% in mid-2019 and has since declined to around 0.5%.
Impact on monetary policy: The CPI is forecast to increase at an annual rate of around 1% over the next year. That is the lower end of the Bank of Israel’s target range, virtually ruling out rises in interest rates – but not a cut.
- The CPI rose 0.4% in October. Year-to-date (YTD), this index has risen 1% and in the trailing twelve months (TTM) by 0.4%
- The MPPI rose 0.2% in October. YTD this index has fallen 0.5% and in the TTM it has fallen by 3.1%. Excluding fuel prices, these declines have been much smaller – 0.1% and 0.3% respectively.
- The rise in the CPI was driven by seasonal factors, notably clothing and shoes, as well as fresh produce. Hotel prices fell.
- Unexpectedly, apartment rental prices fell, albeit only by 0.1% — but their TTM rate has halved, from 2.7% in February to 1.3% in October.
- On the other hand, house prices – not included in the CPI — seem to have resumed their upward trend this year, after falling for most of 2018. They rose 0.2% in the latest period (August-September) and 1.9% in the TTM period through August-September 2019.