Israeli inflation hits six-year low in 2012

Price index 1.6% driven by reductions in prices of vegetables, cellular communications phone tariffs

By Gabe Fisher 16 January 2013, 9:40 am 2

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Crowds at the Mamilla shopping mall in Jerusalem (photo credit: Abir Sultan/Flash 90)

After numbers revealed a larger-than-projected budget deficit in 2012, inflation figures for the year continued to indicate an economic slowdown.

The year-end summary released by the Central Bureau of Statistics on Tuesday revealed that the increase in the price index hit a six-year-low 1.6 percent, well within government target projections of 1-3%.

The low index was driven by reduced prices in fruits and vegetables (3-29%), mobile phone tariffs (10% due to competitive market reforms), Internet services (10%) and education, where reforms in preschools drove down average prices by 6%.

However, prices of other necessities rose over the year, including housing (3.4%), electricity (8.8%), health services (5%), dairy products (4.1%) and gasoline (5.1%). Municipal taxes (arnona) rose 3%, and the price of cigarettes increased some 20%.

Projections indicate that the inflation rate will remain at a similar low, 1.8%, for 2013, despite low interest rates — another indication that the Israeli economy is slowing down.