Inflation and housing prices in Israel are rising faster than seen for many years, according to new official figures released Monday, continuing a worrying trend for the economy.
Israel’s Consumer Price Index (CPI) rose an unexpected 1.1% in July and an annual 5.2% compared to July 2021, the fastest yearly rate in 14 years, according to the latest report published by the Central Bureau of Statistics. The inflation rate is well beyond the upper range of 3% forecasted by the Bank of Israel.
The CPI is a measure of inflation that tracks the average cost of household goods like food, clothing, and transportation. It excludes housing prices which are tracked separately.
The newest housing report by CBS shows that prices rose at an annual rate of 17.8%, the fastest in a decade. Far from slowing down in response to interest rate increases, house prices rose by 2% between May and June, compared to the period from April to May.
Although Israel’s inflation rate is lower than in the US — where the rate appears to be slowing to 8.5% for July — the combination of price increases, interest rate rises, uncertainty in the technology sector, and fairly stagnant wages creates one of the most difficult economic environments in recent years.
High as this may seem, the rate is below the OECD average of 9.6% for May, the last month for which data is currently available.
The rising cost of living in Israel is high on the agenda ahead of another round of elections in November. According to a recent survey by the Israel Democracy Institute (IDI), 44% of Israeli respondents said a given party’s economic platform and its plan for addressing the rising cost of living were the main factors influencing their decision when voting on November 1.
The cost of fresh fruit jumped by 8.5%, transportation by 3.3%, and culture and entertainment by 1.2%, according to the CPI. Goods like school bags, toiletries, and cosmetics also saw a rise. Clothing and footwear dropped by 4%.
The other key area that saw a substantial price rise is fuel. Over the last month, prices have risen by 8.7%, with increases over the last year topping 108%.
Since the start of the year, the CPI increased by 4.4%
In housing, prices are up in all regions except for southern Israel and have risen most steeply in Jerusalem and in the north over the last month. But every part of the country has seen double-digit increases over the last year.
The average price of an apartment now stands at NIS 1,880,900 ($580,623) for the second quarter of 2022, an increase of NIS 80,000 ($24,695) from the first quarter of the year, according to CBS.
In Tel Aviv, the average price for an apartment is now more than NIS 4,000,000 ($1,234,777), while in Ramat Gan, Kfar Saba, and Jerusalem, average prices are over NIS 2,500,000 ($771,736).