Israel’s consumer price index (CPI) exceeded expectations in August, registering a monthly increase of 0.5%, pushing the annual rate to 4.1%, according to data released by the Central Bureau of Statistics. These figures not only exceeded early market estimates but also pushed past the upper limit of economists’ forecasts.

While the market anticipated a monthly CPI increase of approximately 0.4% in August, the actual figures have raised concerns about rising inflationary pressures. Economists had also predicted that the annual rate of increase would reach 4%, but the actual 4.1% rise has amplified these concerns.

Among the notable contributors to the CPI increase in August were transportation (1.8%), entertainment (1.3%), and housing costs (0.7%). In contrast, the clothing and footwear sector witnessed a significant decline of 2.5% in prices.

One of the most alarming aspects of the report is the continued surge in rent prices, particularly for new tenants. The rent in this segment saw an eyewatering jump of 8.4%.

Adding to the economic complexity, the housing market showed mixed signals. Comparing transaction prices from June to July 2023 to those from May to June 2023, apartment prices decreased by 0.1%. On the other hand, the annual apartment price index increased by 3.2%.

The North recorded the highest annual price increase at 6.6%, followed by Haifa at 6.4%, the South at 3.7%, Jerusalem at 2.9%, the Center at 2.2%, and Tel Aviv at 1.9%.

These figures reflect a concerning trend in housing, as prices have been declining for the fourth consecutive month. Despite this, the rental market appears to be moving in the opposite direction, causing growing unease among tenants and policymakers.

Economists and policymakers will closely monitor these developments as they grapple with the dual challenge of addressing rising inflation and finding solutions to stabilize housing costs. The unexpected CPI increase in August serves as a stark reminder of the economic uncertainties that Israel continues to face.