Inflation in Israel surges to 4% amid rising apartment prices

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The consumer price index in Israel rose by 0.8 percent in April 2022, in keeping with early projections. The rate of inflation in the past 12 months has now reached 4 percent – a record since 2011. Housing prices continued to rise in February and March as well, culminating in a 16.3 percent leap in the past year.

The CPI was impacted mostly by seasonal price rises. According to the Central Bureau of Statistics (CBS,) the main price hikes were in the categories of fresh vegetables, which rose by 5.5 percent; clothing – a 2.8 percent rise; transportation (2.3 percent) and culture and entertainment (1.5 percent.) On the other hand, communications prices dropped by 1.2 percent.

Food prices (other than produce) kept rising in April, jumping 0.6 percent in a single month. Sharp rises were seen in fish and poultry, rising by 5 and 3.9 percent respectively. Other categories rising sharply in April were education, culture, and housing, in light of a sharp rise in the hospitality, leisure and travel category – up 11.1 percent over the past month, which included the Passover holiday.

Another category impacting the index sharply was transport, in light of a 7.1 percent jump in the price of airline tickets and vacations abroad. The rise is attributed mostly to the drop in the rate of the shekel, which has forced Israelis to pay more for services priced in foreign currency.

Housing up 1.9%

Housing prices in Israel (which are not part of the consumer price index) continued to rise sharply. Apartment prices were up 1.9 percent in February-March compared to those months last year. That means apartment prices have spiked 16.3 percent during the preceding 12 months.

Prices rose all over the country, with the northern district increasing the most at 2.9 percent. The national average price of a new apartment reached 1.76 million shekels ($517,000) in the first quarter of 2022.

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Analysts expected prices to increase at a relatively sharp rate of 0.8-0.9 percent, due to seasonal fluctuations as well as the global hike in goods and energy prices. The Bank of Israel is trying to check the rising inflation, which is expected to continue to increasing for the next few months, and then taper off. S&P’s projection, which has left Israel’s rating unchanged at AA-, is for Israel’s 2022 inflation to reach 3.8 percent. The Bank of Israel is expected to raise interest rates to a relatively high threshold of 0.75 percent.