Israel Consumer Price Index (CPI) in January rose by 0.6%, hitting the upper end of economists' forecasts

Housing prices continued to rise, with November-December data showing a 0.4% increase, reflecting an annual surge of nearly 8% in 2024. The Consumer Price Index for January was calculated using an updated methodology, incorporating a new weighting system and a revised base period (2024 average = 100 points). Over the past twelve months (January 2025 vs. January 2024), the CPI increased by 3.8%.

Significant price increases were recorded in fresh fruit (up 2.5%), miscellaneous expenses (up 3.3%), home maintenance (up 2.1%), food (up 1.0%), and rent (up 0.4%). Conversely, clothing and footwear saw a notable drop of 4.2%, fresh vegetables declined by 2.0%, and housing services for owner-occupiers fell by 0.7%.

Rent prices showed a 2.6% increase for tenants renewing contracts, while new tenants (in units where there was a tenant turnover) saw a 3.3% rise.

Construction Input Index Surges by 2.6% in One Month—A Statistical Distortion?

The Construction Input Price Index for residential buildings rose by 2.6% in January 2025, reaching 137.1 points compared to 133.6 points the previous month. This sharp increase includes both price changes occurring in January and an adjustment for wage costs in the construction sector, covering the period from October 2023 to December 2024. Essentially, for an extended period, labor costs were not properly accounted for in the index, despite contractors' repeated complaints—this time, justifiably so. As a result, these costs were suddenly reflected in the January index, creating a data distortion that misrepresents the real cost trends in the construction sector.

Excluding labor costs, the Construction Input Price Index still rose by 1.0%. Over the past year, it has increased by 5.3%, largely driven by a 9.2% rise in labor costs and a 3.2% increase in equipment and vehicle rentals. The price index for materials and products climbed by 1.3% in January, with sharp increases in ready-mix concrete (up 5.2%), mortar (up 4.0%), wall and floor tiles (up 1.8%), and marble (up 1.1%). On the other hand, prices for glass (-5.5%), construction iron (-2.3%), and iron mesh (-1.3%) declined. The wage index for construction workers jumped by 4.5% in January 2025.

Meanwhile, the Producer Price Index for industrial output intended for local markets rose by 1.4% in January 2025 compared to December 2024, reaching 122.3 points from 120.6 points the previous month.

Housing Prices Increased by 0.4%

An analysis of housing transaction prices (not included in the CPI) for November-December 2024 compared to October-November 2024 revealed a 0.4% price increase. Regionally, prices rose in Jerusalem (1.2%), the North (1.2%), Haifa (0.3%), and Tel Aviv (0.6%), while the Central region saw a slight dip (-0.1%). Prices for new apartments increased by 0.7%.

On an annual basis, comparing transactions from November-December 2024 to the same period in 2023, housing prices rose by 7.3%. Regional data showed declines in Haifa (-11.1%), Tel Aviv (-9.4%), the North (-9.2%), the Center (-5.7%), the South (-4.9%), and Jerusalem (-3.1%). The annual index for new apartment prices increased by 4.4%. The national average price for a residential unit in Q4 2024 stood at 2.33 million shekels, marking a 2.7% increase from the previous quarter (2.27 million shekels).

עוד תכניות

From February onward, the Consumer Price Index is expected to follow a significant downward trend, with estimates suggesting a decline of up to 0.4%.

Updated CPI Weights: Higher Housing and Travel Costs—What Does It Mean for Inflation?

As it does every two years, the Central Bureau of Statistics has updated the weighting of the CPI components to reflect changing consumer spending patterns. The latest revision highlights an increase in the weight of rental expenses (7.7%) and overseas travel (4.5%) within total monthly expenditures, while the weights of fresh produce (3.1%), clothing and footwear (2.7%), and telecommunications services (2%) have been reduced.

Harel Financials forecasts that the higher weighting of travel expenses will lead to greater monthly volatility in the CPI, with sharp increases around holiday seasons followed by declines afterward. However, if foreign airlines resume full-scale operations in Israel, airfare prices could decrease throughout the year, potentially accelerating the disinflationary trend, especially in the latter half of 2025.

These periodic adjustments to the CPI weights are conducted in accordance with International Labour Organization (ILO) guidelines to ensure that the index accurately reflects shifts in household consumption patterns and reduces statistical biases. The latest update is based on household expenditure surveys conducted in 2022 and 2023, covering approximately 9,440 households representative of the entire Israeli population.

December Data Recap

The December 2024 Consumer Price Index declined by 0.3% compared to the previous month (November 2024), exceeding economists’ expectations of a 0.1% decrease. Notable price increases were recorded in clothing (1.9%), healthcare (0.4%), housing (0.3%), and food (0.2%). Meanwhile, fresh produce prices dropped sharply (-5.6%), as did costs for recreation and entertainment (-2.0%) and footwear and transportation (-0.8%).

The Construction Input Price Index for December 2024 increased by 0.3%, reaching 133.6 points from 133.2 points in November. Excluding labor costs, the index still rose by 0.3%. The most significant material price hikes were seen in mortar (2.6%) and ready-mix concrete (2.2%), while construction stone (-3.5%), construction iron (-1.3%), iron mesh (-1.2%), wall and floor tiles (-1.1%), and fire safety equipment and elevators (-1.0% each) saw price declines.