Aug. 15 (Bloomberg) -- Israeli monthly consumer prices declined in July for the first time in more than a year as food and clothing expenses fell amid mass protests against the high cost of living.
Consumer prices declined 0.3 percent from June, the first drop since February 2010, the Central Bureau of Statistics in Jerusalem said today. The median estimate in a survey of 14 economists by Bloomberg was for an increase of 0.3 percent. The annual inflation rate was 3.4 percent compared with 4.2 percent in the previous month.
““This shows that the ‘cottage cheese revolution’ had impact,” said Yoel Finkel, deputy director-general of the bureau, pointing out that “the price of dairy and other food products went down by nearly 2 percent.”
More than 100,000 Israelis joined a Facebook group’s boycott of cottage cheese to protest its rising price, prompting dairy companies including Strauss Group Ltd. to lower the cost and the government to set up a committee to examine food prices. Strauss Group Ltd. has declined about 9 percent since the start of July. The country’s largest food retailer, Shufersal Ltd., has fallen about 11 percent during the same period.
Export Growth Slows
The protests came as Israeli export growth slowed in July to 0.6 percent amid signs that the economic expansion is slowing in the U.S. and the European Union, its two biggest trading partners. The Bank of Israel on Aug. 2 cut its forecast for economic growth this year to 4.8 percent in 2011 from 5.2 percent. Exports make up about 40 percent of Israel’s gross domestic product.
“In light of recent economic figures, and what is happening in the global economy, the central bank won’t raise the rate and might even lower it, although maybe not this month,” said Modi Shafrir, chief economist at Tel Aviv-based I.L.S. Brokers Ltd.
Bank of Israel Governor Stanley Fischer has increased the benchmark interest rate four times this year, leaving it at 3.25 percent for the past two months.
Growth fell from 7.7 percent in the last quarter of 2010 to 4.6 percent in the first quarter of this year. The median estimate for growth of four economists surveyed by Bloomberg was 3.2 percent for the second quarter. Interest-rate swaps have dropped from a six-month high of 4.2 percent in April to 3.2 percent today, suggesting bond traders believe the central bank won’t raise rates as growth appears to slow.
Some Prices Lower
Clothing prices dropped 8.6 percent and shoes fell 6.3 percent, the bureau said.
“Several of the prices in the CPI were lower than expected, including some of those that rose, like housing,” Michael Sarel, chief economist at Harel Insurance Investments & Financial Services Ltd., said in a telephone interview from Ramat Gan, Israel. “It’s too soon to say that this indicates a weakening economy, although that may be clearer when the gross domestic product figure is published tomorrow.”
Economists’ 12-month inflation expectations declined to 2.9 percent from 3 percent a month ago, the central bank reported July 18, the first time this year that they have dropped below the upper limit of the target range. DS Securities & Investments Ltd., which is based in Tel Aviv, cut its 12-month inflation forecast to 2.4 percent from 2.7 percent on Aug. 7, citing expectations that the wave of demonstrations will lead to a moderation of price increases.
The breakeven rate, the average yearly inflation rate traders bet by 2013, fell to 2.4 today from 2.9 percent on July 28.
Inflation has exceeded the government’s 1 percent to 3 percent target range every month this year.
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