Search

Israel Consumer Prices Fall for First Time in More Than Year

By Calev Ben-David
August 15, 2011 12:14 PM EDT

Israeli monthly consumer prices declined in July for the first time in more than a year as food and clothing costs fell amid mass protests against the high cost of living.

Consumer prices declined 0.3 percent from June, the first drop since February 2010, the Central Bureau of Statistics in Jerusalem said today. The median estimate in a survey of 14 economists by Bloomberg was for an increase of 0.3 percent. The annual inflation rate was 3.4 percent compared with 4.2 percent in the previous month.

“The major contributor to the decrease was clothing and footwear, which decreased over 8 percent mainly due to seasonal factors, while the price of dairy and other food products went down by nearly 2 percent,” said Yoel Finkel, deputy director- general of the bureau. “This shows that the ‘cottage cheese revolution’ had impact.”

More than 100,000 Israelis joined a Facebook group boycott of cottage cheese to protest its rising price, prompting dairy companies including Strauss Group Ltd. (STRS) to lower the cost and the government to set up a committee to examine food prices.

Strauss Group Ltd. has declined about 9 percent since the beginning of July. The country’s largest food retailer, Shufersal Ltd. (SAE), has fallen about 11 percent during the same period.

Export Growth

Israeli export growth slowed in July to 0.6 percent amid signs that the economic expansion is slowing in the U.S. and the European Union, its two biggest trading partners. The Bank of Israel on Aug. 2 cut its forecast for economic growth this year to 4.8 percent in 2011 from 5.2 percent. Exports make up about 40 percent of Israel’s gross domestic product.

Economists’ 12-month inflation expectations declined to 2.9 percent from 3 percent a month ago, the central bank reported July 18, the first time this year that they have dropped below the upper limit of the target range. DS Securities & Investments Ltd., which is based in Tel Aviv, cut its 12-month inflation forecast to 2.4 percent from 2.7 percent on Aug. 7, citing expectations that the wave of demonstrations will lead to a moderation of price increases.

The breakeven rate, the average yearly inflation rate traders bet by 2013, fell to 2.4 today from 2.9 percent on July 28.

Inflation has exceeded the government’s 1 percent to 3 percent target range every month this year.

Bank of Israel Governor Stanley Fischer has increased the benchmark interest rate four times this year, leaving it at 3.25 percent for the past two months.

Two-year interest-rate swaps, an indicator of investor expectations for the benchmark rate, declined to 3.2 percent, from a high this year of 4.2 percent in April.

To contact the reporter on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.

Comments
More related content »