Positive surprise: Consumer price index rose in May by 0.2% - housing rose by 0.9% in March-April

A big surprise with the publication of the consumer price index: the index for the month of May rose by only 0.2%, just like in May last year, and below the forecasts of the analysts who expected it to be between 0.5% and 0.7%. Because of this, the annual inflation rate remains at 2.8% and still meets the target set by the government (1%-3%).
The annual inflation may allow the Bank of Israel to reduce the interest rate on July 8, and it seems that there will be a difficult dilemma for the central bank whether to reduce the interest rate as in the European Union or to avoid a reduction as was the case yesterday in the USA.
Notable price increases were recorded in the sections: fresh fruit which increased by 10.3%, clothing and footwear which increased by 2.2%, food and culture and entertainment which increased by 1.0%, each, miscellaneous which increased by 0.5% and housing and furniture and home equipment which increased by 0.4%, Each. Notable price decreases were recorded in the sections: fresh vegetables which decreased by 2.4% and transportation which decreased by 1.7%.
In the monthly rent for the tenants who renewed a contract, an increase of 2.5% was recorded, and for the new tenants (apartments in the sample where there was a change of tenant) an increase of 3.7% was recorded.
The input price index in residential construction increased in May 2024 by 0.5% and reached 130.7 points compared to 130.1 points in the previous month. Since the beginning of the year, this index has increased by 0.7%. In the last 12 months, the input price index in residential construction rose by 1.2% due to the increase in labor wages by 1.9% and equipment and car rental by 3.3%.
Apartment prices continue to soar: according to the Housing Price Index of the CBS, which is published together with the Consumer Price Index but is not part of it, housing prices in the months of March-April this year rose by 0.9% compared to the previous two months (February-March). This follows a similar increase in the previous index. A segmentation by districts shows that price increases were recorded in all districts, with the Haifa district leading in the increase in apartment prices. Haifa district (1.6%), Tel Aviv district (1.1%), South district (0.9%), Jerusalem district (0.8%), Central district (0.6%) and North district (0.5%).
In an annual comparison of the transaction prices carried out in the months of March-April 2024 compared to March-April 2023, it appears that the annual apartment price index jumped by 2.1%. When segmented by districts, price increases were found in all of them, and once again the Haifa District leads with 6.6%, the North District (3.7%), the South District (3.6%)ֿ, the Jerusalem and Central Districts (1.9%) and the Tel Aviv District with an annual increase of only 0.1%.ֿ
The price index for new apartments in the months of March-April also increased by 0.9% compared to the previous two months. Of all the transactions of new apartments, the rate of transactions within the framework of government support decreased from 25.1% in the previous period (February- March 2024) to a rate of 21.7% in the current period. The price index for new apartments excluding transactions with government support rose by 0.8%. At the same time, the annual new apartment price index decreased by only 0.3%, compared to a more significant decrease of 1.6% in the previous index and 2.1% in the index before that.