Bloomberg News

Israeli Consumer Prices Decline in September on Protests

October 14, 2011

(Updates with analyst’s comment and housing prices in fifth paragraph, food prices in sixth.)

Oct. 14 (Bloomberg) -- Israeli consumer prices declined in September as protests helped push down costs, bringing the annual inflation rate within the government’s target for the first time this year.

Consumer prices declined 0.2 percent from August, the Central Bureau of Statistics in Jerusalem said today. The median estimate in a survey of 15 economists by Bloomberg was that prices would be unchanged in the month. Annual inflation slowed to 2.9 percent from 3.4 percent.

“Inflation is moderating,” said Ori Greenfeld, head of the macroeconomics department at Psagot Investment House Ltd. in Tel Aviv. “Food prices have declined due to the consumer protests. Some companies have halted planned price increases and others have actually cut prices.”

Bank of Israel Governor Stanley Fischer, who had been raising rates for more than two years to battle inflation, reversed policy on Sept. 26 and cut the key rate by a quarter percentage point to 3 percent, citing the worsening global economic outlook. The change came amid a drop in expectations for inflation, which until September had exceeded the 1 percent to 3 percent target range every month this year.

Housing Costs

The “headline number does not suggest an automatic rate cut by the Bank of Israel this month,” said Tevfik Aksoy, the London-based head of emerging markets for the region at Morgan Stanley. The increase in housing rental costs, which climbed 0.9 percent for the month, “was still high,” he said. Housing purchase prices, which aren’t in the index, rose 0.8 percent.

Food prices declined 1.3 percent on the month, while fruit and vegetable prices declined 5.3 percent.

Economists’ 12-month inflation expectations declined to 2.3 percent, the lowest since February 2010, from 2.7 percent a month earlier, the central bank reported on Sept. 20.

Prime Minister Benjamin Netanyahu’s Cabinet approved a program on Oct. 9 that aims to ease the cost of living after rallies brought hundreds of thousands of protesters onto the streets.

The demonstrations and boycotts, which started in June over the cost of cottage cheese, prodded Tnuva Food Industries Agricultural Co-Op In Israel Ltd., which controls about 70 percent of the dairy market, to announce on Oct. 2 that it was cutting recommended selling prices by as much as 15 percent. Competitor Strauss Group Ltd. followed with reductions of 12 percent on some of its milk products.

The Bank of Israel cut its forecast for economic growth this year and next on Sept. 22, citing increased uncertainty about the global economy and a decline in the rate of growth in world trade. The economy will expand 4.7 percent in 2011 and 3.2 percent in 2012, the central bank said, lowering its forecasts from 4.8 percent and 3.9 percent.

The statistics bureau said Oct. 11 that the economy is expected to expand 4.9 percent this year.

--Editors: Louis Meixler, Karl Maier, Ben Holland, Heather Langan, Karl Maier.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at

To contact the editor responsible for this story: Andrew J. Barden at

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