Israel Consumer Price Index Expected to Surge Amid Broad Price Hikes

Economists from Pasternak Shem expect Israel's upcoming Consumer Price Index (CPI) report for August to show a significant increase, with forecasts ranging from 0.7% to 0.9%. This anticipated jump is attributed to rising costs in fuel, flights, and housing.

The Israeli stock market concluded the Hebrew year with strong performance, as the TA-35 index rose 41.5% and the TA-125 index climbed 36%, making the Tel Aviv Stock Exchange one of the world's best performers. The Israeli shekel closed the year around 3.02 against the US dollar, and the Bank of Israel's interest rate was lowered from 4.5% to 3.25% within less than a year.

Globally, US Treasury bond yields have surged, with the 10-year yield nearing 5%, its highest level since 2023. This rise is driven by a combination of high oil prices, expectations of interest rate hikes, and persistent inflation. Brent crude oil jumped 8.7% to $104.6 per barrel, further exacerbated by a drone attack that halted Saudi Arabia's main oil pipeline bypassing the Strait of Hormuz, potentially reducing global oil supply by 6% this year.

In the US, the August CPI rose 0.4%, keeping annual inflation at 3.4%, both in line with expectations. However, core inflation decreased to 2.4%, its lowest since March 2021. Fuel prices, up 3.9% in August and 27.4% year-on-year, were a primary driver of the overall CPI increase. Consumer sentiment in the US has fallen, with inflation expectations for the next year jumping to 4.6%, leading markets to price in a 90% probability of a Federal Reserve interest rate hike.

In corporate news, Oracle reported strong earnings with revenues of $19.35 billion, a 30% increase, and earnings per share of $1.92, exceeding expectations. Despite this, its stock fell in pre-market trading. Adobe also reported revenue growth of 13% to $6.76 billion, surpassing forecasts, but its shares declined in late trading.