Israel’s Consumer Price Index (CPI) rose by 0.2% in July, the Central Bureau of Statistics reported this afternoon.
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An increase of 0.4% in services prices, which offset a fall of 0.1% in the cost of goods, accounted for the increase in the PPI last month. Egg prices, which had been surging because of the avian flu outbreak, reversed and fell 24.2 per cent. Energy prices were down 0.6 per cent after two months of gains. Overall producer prices were down 0.8% in July from a year earlier, while core prices were up only 0.6%.
Over the past 12 months, producer prices for final demand goods and services have declined 0.8 percent.
But inflation pressures are likely to remain benign due to the strong dollar, falling oil prices and China’s recent devaluation of its currency. This was the sixth straight 12-month decline, and lower energy is playing a role in that.
A strong dollar and weaker oil prices are keeping a lid on inflation, which has some economists believing that the Federal Reserve will be hesitant to raise interest rates next month.
“It adds to the steady drum-beat of solid indicators that suggest the economy is getting off to a much better start in the second half of the year and further increases the odds towards a September rate hike by the Fed”, said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
The stock index futures in the U.S. and prices for Treasuries dropped following the release of information.
Activity in mining rose 0.2% while utilities fell 1%.
Ian Shepherdson, chief economist for Pantheon Economics, said that “the strength of the dollar means that goods prices will be constrained for the foreseeable future”.
Food prices were up 0.6% during June.
The personal consumption expenditures index, the Fed’s preferred inflation gauge, rose 0.3 percent in June from a year earlier and has been below the Fed’s 2 percent goal since May 2012.
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Last month, wholesale gasoline prices rose 1.5 percent after gaining 4.3 percent in June. In addition to the big drop in egg prices, pork prices fell 5.7 percent while fish and corn prices both increased.
