Global| Jul 15 2005Israel's Consumer Prices Are Flat in June; Wholesale Prices Flat, but Up More Than 5% in Year
Summary
Israel's monthly price data were reported today by the Central Bureau of Statistics. The June consumer price index, like that in the US, was flat. It had risen 0.2% in May. The year-on-year rate is a mere 0.3%. For wholesale prices, [...]
Israel's monthly price data were reported today by the Central Bureau of Statistics. The June consumer price index, like that in the US, was flat. It had risen 0.2% in May. The year-on-year rate is a mere 0.3%. For wholesale prices, the index for June fell 0.4%, although prior increases have put the year-on-year rate at 5.1%.
It's interesting to see in the first graph that the consumer and wholesale indexes moved along pretty much the same trend until 2002. Since then, the consumer price index has been almost flat, while the wholesale index has continued along its former trend or even somewhat stronger. Wholesale prices are domestic prices, those charged by manufacturers selling their finished output "at the factory gate". Input costs are likely a major determinant, and over the last five years there has been some correlation with oil prices, 57%, as seen in the second graph. Notably, this relationship was not so clear in prior years, but perhaps the wide swings in the oil market since 2000 have had an impact on this smaller country.
But then how can consumer prices be so stable? A quick look at the value of the shekel will give a good clue. In the third graph, it is seen to run very close to the level of the CPI. The foreign exchange rate is no trivial matter for the final price level. For the economy as a whole, imports run right at 50% of GDP. With imports so important, prices of imported products matter a great deal to pricing, so the fact that the shekel has steadied and even improved against the US dollar since mid-2002 has probably helped greatly in flattening the Israeli CPI. 
| % Changes; Yr/Yr calculated from NSA | June 2005 | May 2005 | Year/ Year | December/December|||
|---|---|---|---|---|---|---|
| 2004 | 2003 | 2002 | ||||
| Consumer Prices: "General Index" (SA) | 0.0 | 0.2 | 0.3 | 1.2 | -1.9 | 6.5 |
| Memo: Exchange Rate: Shekels/US$ | 4.4849 | 4.3737 | 4.5166 | 4.4820 | 4.5483 | 4.7378 |
| Wholesale Prices (NSA) | -0.4 | 0.6 | 5.1 | 7.6 | 3.3 | 6.9 |
| ex Fuel (NSA) | 0.4 | 0.2 | 4.1 | 5.2 | 2.9 | 5.6 |
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
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