Fruit more expensive in March
Photo: Visual/Photos
March CPI rises 0.5%
Analysts surprised by last month's consumer price index, following pre-estimations pointing to rise of up to 0.2%. Fruit and vegetable prices up 3.6%, housing prices increase by 1.6%; inflation totals 3.6% in past 12 months
The Consumer Price Index (CPI) rose by 0.5% in March compared to February, the Central Bureau of Statistics (CBS) said Tuesday, following four months of price reductions in light of the recession.
Price-hikes were mainly recorded in the following categories: Fruit and vegetables (3.6%), housing (1.6%), transportation (1.6%) and food (0.4%). The clothing and footwear category, on the other hand, saw a price reduction of 3.9%.
Analysts were surprised by this figure in light of pre-estimations pointing to a stable CPI or a price-hike of up to 0.2%. Since the beginning of the year, the CPI has fallen by 0.1% on the backdrop of rise in unemployment, the cutting down of production and the drop in demands.
Despite Crisis
Gali Berger, Calcalist
Data relate to months of January, February compared to same period last year. 'When there are economic problems and pressure mounts, people look for ways to emerge from this circle. A couple can spend an entire evening for NIS 100,' says owner of Cinema City compound
The inflation rate in the past 12 months (March of 2009 compared to March of 2008) totaled 3.6%, surpassing the Bank of Israel's inflation target of 1-3%.
According to the Bank of Israel's publications in March, the capital market estimates that the inflation in the next 12 months will stand at 0.6%, with banks and investment houses estimating that the price-hike over this period will total 0.7%.
The CPI represents the inflation progress rate – the rise in prices, and it affects mortgages, saving plans and rent. When it rises or falls, the prices in these industries are updated accordingly. It also serves as a measure for the Bank of Israel's freedom of action when determining the interest rate in the economy.
When the prices rise slowly, or when the prices are in a steady decline (deflation), the Bank of Israel can decrease the interest rate in order to encourage growth, without risking a high inflation.
'Economy not growing stronger yet'
Ori Yehudai, chairman of the Manufacturers Association's Finance Committee and president of Frutarom, said in response to the data that "in spite of the relatively high CPI, the economy's situation and the rise in unemployment will support a low inflation, and the inflation rate is expected to total only 1% this year."
Yehudai called on the Israeli government to handle the financial crisis, noting that the business sector's credit crunch was not being dealt with effectively.
"Both the Bank of Israel and the Israeli government must focus their activity in order to significantly and swiftly ease the credit crunch distress the business sector is suffering from, in order to prevent an ongoing rise in unemployment and encourage growth."
Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, said in response, "At this stage we must not mistaken the CPI rise by an unexpected level of 0.5%, as it is partially affected by a seasonal price-hike. This increase does not reflect a rise in consumption and must not be seen as a sign that the economy is growing stronger.
"Nevertheless, we must take into account the fact that in the past 12 months the rise in prices totaled 3.6% - a clear signal to the Bank of Israel not to reduce the interest rate, as such a reduction has no real benefit and will unnecessarily hurt the public of savers."
