Inflation in Israel Moderates Despite Rising Apartment Prices: CPI rose by 0.4% in February

The Central Bureau of Statistics announced today that the consumer price index (CPI) in Israel rose by 0.4% in February, slightly surpassing expectations. However, the rate of inflation for the past 12 months moderated to 2.5% in February, compared to 2.6% in January 2024. Despite this, the trend of escalating apartment prices in Israel persists.

The CPI increase in February was primarily driven by seasonal items, notably fresh fruit, which surged by 10.7%. Conversely, clothing items saw a notable decrease of 2.5%, along with a 0.6% decline in housing services owned by tenants.

The rental market continues to experience significant hikes, with a 3% increase for contract renewals and a 4.5% increase for new contracts. The slowdown in inflation was attributed to the exclusion of relatively high data from February 2023.

After a reversal in the previous CBS data, indicating a return to rising apartment prices, the latest figures also show an uptick in the housing sector. Between December 2023 and January 2024, apartment prices rose by an average of 1.2%, compared to a 0.7% increase in the preceding period.

The southern district saw the sharpest increase at 1.8%, followed by Haifa (1.5%), Jerusalem (1.4%), and the center and Tel Aviv (1.1%). Despite this, overall apartment prices experienced a 0.6% decrease over the past year, amid previous months' declines.

Initial forecasts suggested a 0.3% increase in the February price index, largely due to seasonal and consumer goods price changes. Consequently, the inflation rate was expected to moderate to around 2.5%.

The Monetary Committee of the Bank of Israel is set to announce the economy's interest rate on April 8. Governor Prof. Amir Yaron indicated a potential interest rate decrease once inflation stabilizes below the Bank of Israel's upper target limit of 3%. Minutes from committee discussions in February revealed a split opinion, with one member advocating for a rate cut, while four others preferred to maintain the status quo.

The recent data underscores a shift in apartment price trends, with a rebound in transactions during November-December 2023, resulting in a 0.7% increase compared to the preceding period of October-November 2023.