Published On: Wed, Nov 20th, 2013

The October 2013 CPI & Inflation

Pinchas-Landau

Bottom line: The October CPI rose 0.3%, much more than the consensus forecast of 0-0.1%. However, other than highlighting yet again the inability of the forecasters to handle the fluctuations stemming from seasonal factors, the latest data have no long-term significance. But they are sufficient to neutralize the yammering on the part of some analysts for another interest rate cut – at least until early 2014.

 

  • The main items behind the CPI’s rise were seasonal: fruit & vegetables – especially tomatoes (+64%!) and  clothing and shoes (move to winter wear);
  • The TTR (12-month trailing rate, i.e. the rate of inflation in the 12 months ending in October) rose to 1.8%, well above the analyst consensus of 1.5%. But the rate of inflation in January-October 2013 was higher, at 2.1% — reflecting low inflation in late 2012.
  • The overall increase of 0.3% masks a sharp divergence between inflation rates for the rich vs the poor. For the highest quintile of the population (measured by the level of disposable income per person), the October CPI rose by only 0.1%, because the relative weight of fruit and vegetables in these people’s spending basket is low, whereas petrol prices (which fell) are an important item. On the other hand, for the lowest quintile, the CPI rose by 0.5% — for the opposite reasons.
  • The Producer Price Index (PPI) fell by6 1% in October, mainly due to the fall in oil prices.

CPI-jan-oct-2013

 

 

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About the Author

- About Pinchas Landau is an economic and financial analyst, serving as a consultant to major financial institutions in Israel and abroad on domestic and global developments. After working in banking and investment, he moved to journalism in 1983 and served as financial correspondent of the Jerusalem Post and then as senior columnist for Globes, Israel’s business daily. He has written for many international newspapers, including the Wall Street Journal and Barrons, as well as numerous professional publications. Since 1996, Pinchas has been writing and publishing The Landau Report, a unique newsletter service which analyses economic, business and financial trends in Israel, as well as tracking Israeli and regional geo-political affairs and has attracted a global subscriber base. He has also been providing quarterly and annual reports on Israel for the Economist Intelligence Unit for 25 years. Landau is also an accomplished speaker, lecturing in English and Hebrew to audiences in Israel and overseas on a range of issues relating to Israel and the Jewish world. Born in London and educated at the London School of Economics, he and his family have been living in Jerusalem since 1976.

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