August Inflation Holds Steady at 1.5%, Driven by Fuel and Travel Costs

Consumer inflation in August remained stable at 1.5%, mirroring the rates seen in July and August of the previous year, according to accountant Majd Karam. This steady inflation rate provides the Bank of Israel room to continue lowering interest rates, as inflation is a key factor in monetary policy decisions. Karam explained that inflation impacts not only daily consumer goods but also salaries tied to the index, mortgage loans, retirement savings, and rental costs.

Transportation costs saw a significant rise of 2.7% in August, primarily due to a 7.2% increase in gasoline prices, pushing the price per liter to 8.09 shekels. While subsequent tax reductions in September lowered the price to approximately 7.75 shekels, these changes are not reflected in the August figures. Travel expenses also contributed to the inflation, with a 9% increase in costs for overseas and domestic flights, accounting for about 0.4% of the overall index rise. Hotel and guesthouse prices climbed 12%, and car rentals increased by 25%, though car insurance saw an 8% decrease.

Other sectors showed mixed trends. Culture and entertainment prices rose 2%, housing increased by 0.6%, and vegetables were up 3%. Conversely, fruit prices dropped 2%, clothing fell 0.8%, food decreased 0.5%, and home furnishings declined 0.3%. Karam attributed the summer increases in travel and related services to heightened demand.

In the real estate market, the housing price index, which is separate from the consumer price index, rose 0.2% monthly between June and July, following a 0.1% increase in the prior month. Annually, the decline in apartment prices narrowed to 1.2%. The central region saw a 0.3% monthly increase, with Tel Aviv experiencing a 0.7% rise, while other areas showed varied price movements.

For the first time, the Central Bureau of Statistics is publishing a separate quarterly index for used apartment prices, which is not influenced by government incentives on new properties. This index revealed a 1.2% decrease in used apartment prices in the second quarter compared to the first, led by Jerusalem (-3%) and Tel Aviv (-2%). New apartments, however, saw a 0.5% monthly increase but a 0.2% annual decrease, nearing 2024 summer levels. Karam cautioned that official real estate price data relies on reported closed deals and may not fully reflect current asking prices for unsold properties.