The cost of living index in Israel dropped by 0.6% last month, the steepest drop in four years, continuing a trend of very low inflation. The annual rate of inflation in Israel has been reduced to only 0.75%, lower than government targets, and lower than the rate of most industrialized countries, including the United States.
According to the Central Bureau of Statistics (CBS), falling vegetable prices and other basic commodities such as gasoline and clothing contributed heavily to the decline in the cost of living.
Prices for tomatoes, for example, fell sharply by 18.2%, cucumbers by 10.1%, gasoline by 6.1%, shoes and clothing by 8%, and vacation travel by 2.9%. Bucking the trend for January were eggplant prices, jumping by 35%, and higher prices for cigarettes, cosmetics, fresh fruit, and travel abroad. It should be pointed out that the index does not reflect February’s hikes in gasoline prices.
Overall, the CBS reports that prices for 75% of goods and services sold in Israel either fell or remained the same last month.
One explanation for the drop in prices may be the falling value of the U.S. dollar, upon which many Israeli prices, especially for rent and real estate, are based. The CBS is also using a new formula to calculate the relative importance of the various components making up the index. Housing costs, which are heavily influenced by the dollar, made up a larger proportion of the index in January, rising by 1%, from 20.7% to 21.7%.
January’s drop in consumer prices may lead the Bank of Israel to further lower interest rates, a move that many economists consider necessary to generate higher economic growth.
According to the Central Bureau of Statistics (CBS), falling vegetable prices and other basic commodities such as gasoline and clothing contributed heavily to the decline in the cost of living.
Prices for tomatoes, for example, fell sharply by 18.2%, cucumbers by 10.1%, gasoline by 6.1%, shoes and clothing by 8%, and vacation travel by 2.9%. Bucking the trend for January were eggplant prices, jumping by 35%, and higher prices for cigarettes, cosmetics, fresh fruit, and travel abroad. It should be pointed out that the index does not reflect February’s hikes in gasoline prices.
Overall, the CBS reports that prices for 75% of goods and services sold in Israel either fell or remained the same last month.
One explanation for the drop in prices may be the falling value of the U.S. dollar, upon which many Israeli prices, especially for rent and real estate, are based. The CBS is also using a new formula to calculate the relative importance of the various components making up the index. Housing costs, which are heavily influenced by the dollar, made up a larger proportion of the index in January, rising by 1%, from 20.7% to 21.7%.
January’s drop in consumer prices may lead the Bank of Israel to further lower interest rates, a move that many economists consider necessary to generate higher economic growth.