Private consumption rebounds

ISRAEL - In Brief 31 Jan 2024 by Jonathan Katz
Private consumption has recovered quickly. Credit card purchases increased by 12% m/m in December following 8% in November, wiping out the 16% decline in October. This rebound in domestic consumption is due to the cancelling of limitations on activity and lack of Israelis traveling abroad. This private consumption recovery continued in January with many army reserves released from service, and many evacuees (who receive large government supports) moving from hotels into rented apartments. This “mini pent-up demand” effect will have some inflationary impact, but meanwhile the sharp appreciation of the shekel will have an offsetting effect. Petrol prices will increase by 1.6% in February, in line with our forecast. February’s CPI is expected to increase by 0.3% m/m (following 0.1% in January) and 2.5% y/y (down from 3.0% y.y in December 23). At this point we do not expect a rate cut on February 26, but this cannot be ruled out, depending on the shekel and January's CPI.

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