Home Prices Turn Higher

Overall inflation unchanged in February, statistics bureau says

Ofer Vakhnin

The treasury’s celebration of a drop in home prices at the end of last year proved premature after the Central Bureau of Statistics reported on Wednesday that prices turned higher in the month to January 15.

The bureau said its index of home prices climbed 0.5% from December 15, 2016 to January 15, 2017, compared with the previous 30 days. Moreover, it revised its initial figure of a 1.2% decline in the month to December 15 to a more modest 0.5% drop. As a result, prices rose 6.3% in 2016.

Meanwhile, the CBS reported that consumer prices were unchanged in February after three months of deflation that saw prices fall 1.2%. The CBS said that in the 12 months through February, inflation was just 0.4%.

However, the trend figure for November 2016-February 2017 showed inflation at 1.2%, putting it inside the government’s target of 1% to 2% for the first time in a long time.

Ilan Artzi, investments manager at the Halman-Aldubi investment house, said the February consumer price index was higher than expected; most economists had expected another month of deflation.

But, he said, with the shekel’s recent strengthening against the dollar and falling global energy prices, the CPI would remain low in coming months. This week’s announcement by Prime Minster Benjamin Netanyahu and Finance Minister Moshe Kahlon that they plan a round of tax cuts soon will also weigh on prices, Artzi said.

“Annual inflation moved into positive territory back in July 2014, but it’s still very lower despite the fact that the economy is in full employment and wages are rising. The assumption is that the shekel’s appreciating is contributing a lot to this,” he said.

Although the U.S. Federal Reserve raised interest rates on Wednesday for the second time in three months to 1%, Israel’s low-inflation environment means the Bank of Israel won’t be following suit for a long time, Artzi said.