Israeli consumer prices decline in september after protests

Israeli consumer prices declined in September as protests and end-of-summer sales helped push down costs.

Consumer prices declined 0.2 percent from August, the Central Bureau of Statistics in Jerusalem said today. The median estimate in a survey of 15 economists by Bloomberg was that prices would be unchanged in the month. Annual inflation slowed to 2.9 percent from 3.4 percent.

“Inflation is moderating,” said Ori Greenfeld, head of the macroeconomics department at Psagot Investment House Ltd. in Tel Aviv. “Food prices have declined due to the consumer protests. Some companies have halted planned price increases and others have actually cut prices.”

Bank of Israel Governor Stanley Fischer, who had been raising rates for more than two years to battle inflation, reversed policy on Sept. 26 and cut the key rate by a quarter percentage point to 3 percent, citing the worsening global economic outlook. The change came amid a drop in expectations for inflation, which have exceeded the 1 percent to 3 percent target range every month this year.

Economists’ 12-month inflation expectations declined to 2.3 percent, the lowest since February 2010, from 2.7 percent a month earlier, the central bank reported on Sept. 20.

Prime Minister Benjamin Netanyahu’s Cabinet approved a program on Oct. 9 that aims to ease the cost of living after rallies brought hundreds of thousands of protesters onto the streets.

Demonstrations and Boycotts

The demonstrations and boycotts, which started in June over the cost of cottage cheese, prodded Tnuva Food Industries Agricultural Co-Op In Israel Ltd., which controls about 70 percent of the dairy market, to cut recommended selling prices by as much as 15 percent last week. Competitor Strauss Group Ltd. followed with reductions of 12 percent on some of its milk products.

The Bank of Israel cut its forecast for economic growth this year and next on Sept. 22, citing increased uncertainty about the global economy and a decline in the rate of growth in world trade. The economy will expand 4.7 percent in 2011 and 3.2 percent in 2012, the central bank said, lowering its forecasts from 4.8 percent and 3.9 percent.

The central bureau of statistics said Oct. 11 that the economy is expected to expand 4.9 percent this year.