May CPI Falls More Than Expected as Home Prices Also Decline

Israel’s Consumer Price Index fell 0.3% in May, leaving annual inflation at 1.9% over the past 12 months. The decline was sharper than expected and came alongside a monthly drop in housing prices.

Among the main CPI components, fresh fruit fell 4.9%, transport declined 2.7%, and furniture and home equipment edged down 0.1%. Offsetting those decreases were price rises in fresh fruit at another point in the breakdown, which rose 6.7%, clothing up 1.9%, culture and entertainment up 1.1%, and housing up 0.6% for the month.

Within housing, rental data showed clear gaps between tenant groups. Rent rose 2.5% for tenants who renewed leases, while it jumped 6.8% for new tenants in units where renters changed. The report said these changes roughly reflect the annual rate of change in rent for those groups, because most tenants do not see their rent changed during the year under lease agreements that usually lack indexation mechanisms.

In the real-estate market, transaction data continued to point to falling apartment prices. The overall home-price index fell 0.3%, while the index for new apartments dropped 0.1%. Prices fell 2% in Jerusalem, 1.9% in Haifa, 0.9% in the South, and 0.7% in Tel Aviv. On an annual basis, the overall home-price index was down 1.3%, with declines in the Center region, Tel Aviv, Haifa and the South, and increases in the North and Jerusalem.