August CPI seen climbing at least 0.4%

Econmists expect the rise in the consumer price index for August to be similar to the rise in the July index driven by the weakening of the US currency.

By SHARON WROBEL
September 11, 2007 20:58
2 minute read.

Economists expect that the August consumer price index to be released this afternoon will show a rise of somewhere between 0.4 percent and 0.9% following a sharp 1.1% increase in July, due to the fall of the shekel against the dollar over those months and an increase in home, electricity and food prices. "We expect the consumer price index for August to be up 0.7%, similar to the rise in the July index driven by the weakening of the US currency which reached its peaks at the end of July and beginning of August," economists at Leader Capital Markets told The Jerusalem Post. "The housing price component of the index is expected to be up 2.5% in August contributing 0.5 percentage points to the 0.7% rise of the consumer price index." In addition, economists at Leader predicted that August fruit and vegetable prices rose by 5% and general food prices including flour and bread went up 1% offset by seasonal declines in prices of clothing and footwear and oil. Michael Sarel at Harel Insurance Investments, meanwhile, predicted for a 0.4% increase for the CPI with housing component making up 0.3 percentage points of that amount before falling 0.6% in September partly as a result of the reverse trend of the strengthening of the shekel. Ayelet Nir at IBI investment house expected a 0.5% rise in August ahead of a 0.5% fall in September, matching next month's projection by economists at Leader. At the same time, economists at Israel Discount Bank projected the consumer price index would be up 0.6% in August before heading down 0.3% in September. "We often see a par between the economists' predictions for the consumer price index of around 0.2% but this time the par has widened significantly mainly due a certain sense of uncertainty regarding the correlation between the shekel/dollar exchange rate and its impact on the consumer price index and the question of whether housing prices will continue to rise," said Harel's Sarel. "All the same, we expect that without a dramatic change in the US dollar and a moderate increase in the shekel, inflation is forecasted to stay within the upper range of the central bank's price stability target of between 1% and 3% by the end of the year at around 2.5%." Similarly, economists at Leader predicted that inflation will rise to 2.5% by the end of the year but looking ahead said the the 12-month forecast inflation was expected to total 2% on further strengthening of the local currency.


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