Another downside inflation surprise

ISRAEL - In Brief 14 Jul 2023 by Jonathan Katz
Another downside inflation surprise Inflation in June reflected price stability (zero change) and the annual rate declined to 4.2% y/y from 4.6% in May. There were several items which surprised on the downside including food items (up only 0.6%, half our estimate), housing prices remained nearly stable and decelerated to 6.9% y/y (from 7.6% last month). Furniture and home appliances declined by 0.8% m/m and apparel by 3% (seasonally). Core inflation (headline excluding fresh produce and energy) was up only 0.1% m/m and slowed to 4.5% y/y from 4.9% last month. The PPI (excluding energy) remained stable and decelerated to 0.8% y/y from 2.0% last month. Housing purchase prices (a separate survey not factored into the CPI) declined by 0.3% in each of the last two surveys and slowed to 7.6% y/y from 9.7%. Implication for monetary policy: June’s print reflects a broad deceleration in inflation. Clearly this print will support rate stability, with recent shekel appreciation a strong supporting factor. We expect monetary loosening to commence in early 2024.

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