The Central Bureau of Statistics released the latest Consumer Price Index (CPI) data this evening, revealing a significant rise in inflation. The CPI for August increased by 0.9%, pushing the 12-month inflation rate to 3.6%. This surge in prices raises expectations that Bank of Israel Governor, Prof. Amir Yaron, will maintain the current interest rate, diverging from trends in Europe and the USA where interest rate cuts are being considered.

One of the sectors hit hardest by inflation is housing. Over the past two months, apartment prices climbed by 0.9%, while rental rates have surged, with contract renewals seeing a 2.8% increase and new leases spiking by 5.3%. Over the last year, apartment prices rose by 5.8%, with Haifa experiencing the sharpest increase at 9%, compared to Tel Aviv’s more moderate 3.6%.

The report also provided insights into changes in the real estate market that are not captured by the CPI. Apartment prices from June to July increased by 0.9% when compared to the May-June period. Price hikes varied by district, with Jerusalem seeing a 0.1% rise, Haifa 0.8%, the central part of the country 1.8%, Tel Aviv 1%, and the southern region 0.4%. Notably, in the northern district, where many residents have been evacuated due to the ongoing conflict, apartment prices fell by 0.2%.

In an annual comparison, apartment prices from June-July 2024 showed a 5.8% increase compared to the same period in 2023. Haifa led the rise with a 9% jump, followed by the Central District (7.6%), Jerusalem (5.8%), the North (5.6%), the South (4%), and Tel Aviv (3.6%).

The cost of residential construction also continues to rise. In August, the input price index for residential construction climbed by 0.2%, marking a 1.7% increase since the start of 2024. Over the past 12 months, this index rose by 2%, driven primarily by a 3.3% increase in labor wages and a 3.9% rise in equipment and car rental costs. Prices for construction materials remained stable in August, although iron prices rose by 1%, and stone and iron mesh increased by 0.8% each. Mortar prices, however, saw a slight decrease of 0.7%.

Meanwhile, the broader consumer market experienced a mixed bag of price movements. Fresh vegetable prices skyrocketed by 13.2%, transportation costs rose by 2.8%, and housing saw a 0.6% increase. Other notable rises included education, culture, and entertainment (0.5%), apartment maintenance (0.4%), and food (0.3%). Conversely, prices for clothing and footwear dropped by 1.1%, communication costs fell by 0.8%, and refined petroleum products saw a sharp 5.9% decrease.

In the industrial sector, the price index for local output rose by 0.1% in August, with a notable 0.9% increase in the index excluding fuels. Over the last 12 months, the industrial output price index for local destinations fell by 0.2%, though excluding fuels, it rose by 1.6%. Export prices in the industry saw a robust 2.8% increase in the second quarter of 2024.

As inflationary pressures persist, particularly in the housing and construction sectors, consumers and policymakers alike are bracing for the continuing challenges of a volatile economic environment.