The first consumer price index for 2021 was as expected negative and decreased by 0.1 percent, but less compared to the normal seasonality of the January indices

The index, which was slightly higher than expected, does not change our assessment that the Bank of Israel will leave the interest rate unchanged next week and continue to focus its activity on purchasing foreign currency.

The sharp rises in world commodity prices continue to be reflected in the prices of construction inputs (up 0.6). In our estimation, this trend will continue in the next two months and will affect apartment prices.

The first consumer price index for 2021 was as expected negative and decreased by 0.1 percent, but less compared to the normal seasonality of the January indices. A drop in electricity, clothing and footwear prices were the main contributors to the drop. But a rise in the housing index (0.3%) along with a rise in car prices contributed to an upward surprise. As a result, inflation in the last 12 months has risen to minus 0.4 percent.

According to our initial estimates, the February index will rise between 0.1 and 0.2 percent, mainly due to the rise in the price of fuel, and the March index is expected to rise by 0.3 percent due to a seasonal rise in the price of food and recreation (when they open). It is important to note that there is still uncertainty regarding the estimation of some of the sections by the CBS, especially in the aviation, leisure and leisure industries. Our forecast for the next 12 months rises slightly to 0.8 percent.

This forecast takes into account the updated consumer price index weights released a few days ago. The weights are updated every two years based on a household expenditure survey.

However, the crisis led to unusual changes in consumption due to the closure of entire industries that particularly affected: travel abroad, vacations, fuel and restaurant meals. 20.2%). No major changes were recorded in the other main items, but we expect another update in early 2021 with the opening of the industries and a re-increase in the weight of transportation in the index.

The index, which was slightly higher than expected, does not change our assessment that the Bank of Israel will leave the interest rate unchanged next week and continue to focus its activity on purchasing foreign currency.

Prices of owner-occupied dwellings, which are not part of the price index, have accelerated in recent months and increased by 4 percent in the last 12 months (until mid-January) and as previously noted, the increase was supported by a variety of actions To investors.

At the same time, apartment construction costs continued to rise rapidly, as estimated in previous reviews, with the construction input index rising by 0.6 per cent, only due to a rise in raw material prices (1.1%) while wages remained unchanged. Thus the sharp rise in commodity prices and the jump in shipping costs continue to be reflected in the prices of construction inputs. We believe this will lead to a further increase in construction inputs in the next two months as well.