The consumer price index for January, which will be published today, is expected to fall by 0.3%

A huge shipwreck is reported at the entrance to California ports and reflects one of the most notable disruptions in world supplies. According to reports, there are 35 huge ships inside the ports and another 25 outside, some of which have been waiting 12 days to unload.

By comparison, by this time they could have crossed another line of the Pacific. The delay is attributed to a jump in demand for physical products (including on the transition from consumer services to goods) along with a shortage of CA, due to illness in Corona. Due to the traffic jam not only does the transport increase but in other places ships do not arrive and it does not seem close.

The economy has been cut off from the market – US retail sales excluding fuel, restaurants and vehicles soared in 2020 at a high rate of years and are expected to continue to soar 8.1% this year as well, the sharpest rate in 20 years, according to the Consumer growth partners base scenario. Under the assumption that the epidemic will be curbed by mid-summer.

The strong demand is reflected in both the company reports and the profit forecasts in the US and Asia, which have already returned to their pre-crisis level (in Europe, by the way, are still in the pit). The good results result in the closing of multipliers, which in turn supports an increase in the overall yield environment. Those for 10 years in the U.S. rose over 1.2% on Friday.

In Europe, a surge in electricity tariffs is reported due to an extreme increase in demand associated with an unusual cold wave. The rise in prices will probably not affect inflation for a year, when it subsides when the cold wave passes, but if it continues until the end of winter, it will add more to the base effect of oil and transport prices and lead to a sharp jump in annual inflation in the coming months. Many inflation traders are running with the trend, although it has a high chance of fading afterwards.

There is no doubt that US administration assistance programs, which have cumulatively reached $ 5 trillion (a quarter of the economy), are pushing for growing demand and short-term inflationary pressures. But it also causes a few other things: businesses to be optimistic and increase capital investment (which is also reflected in raising capital) and high government debt, which guarantees lower future public spending. That is, on the one hand an increase in production capacity and on the other hand a decrease in aggregate demand, a recipe for a price environment decreases in the medium term, when the effects materialize.

Despite the brief warming of inflation, central banks continue to insist on monetary expansion – the Central Bank of Mexico lowered interest rates over the weekend, even though domestic inflation rose above expectations. The bank has signaled an intention to continue with further interest rate cuts at least as long as inflation does not exceed its upper limit of 4%. Which shows that central banks intend to take advantage of the upper limit to continue to support the economy.

Today, Monday, February 15, 2001, the consumer price index for January will be published in Israel, which is expected to fall by 0.3%, against the background of many external effects, including updates in electricity tariffs, property taxes, car taxes and more. The index will be calculated on the basis of new weights, with the most notable changes being the increase in housing, transport and health items, and on the other hand a decrease in clothing.

We must in this context correct in relation to the explanation given on Thursday – the weights were determined as stated on the basis of the consumption survey of the years 2018-19 (and not of 2020), but unusually the CBS tried to make a number of adjustments to change consumption in the corona crisis and use credit card expenditure data. There they identified items that experienced an unusual change (a total of 12% of the index) and across the board accounted for a third of the change in them for a sustainable change in weights. According to the CBS, these weights will be tested on an ongoing basis and it is possible that another weight correction will be carried out in the coming year. The true weight level of 2020 will only be accepted in 2023.

Recall that in our estimation the update of the weights will later lead to a lower inflation figure than would have been obtained had it not been for the change.

On Tuesday, the growth figure for the fourth quarter and for 2020 as a whole will be published in Israel. We expect a contraction of only 2.8%, although in the fourth quarter the economy was under tightening restrictions, such a surprisingly strong figure will support the shekel.