Rising Costs of Absorbing Newcomers Contributed to High Inflation in June

The mounting costs of immigrant absorption in Israel contributed substantially to the unexpectedly sharp rise in Israel’s inflation rate for June.

The 2 percent hike announced Monday, the highest for that month in six years, was driven mainly by higher rents, higher housing prices and higher mortgages.

All are directly attributable to last month’s 4.7 percent increase in the price of construction materials.

Building contractors raised their prices knowing that the housing authorities would pay what they asked rather than risk the sight of masses of homeless immigrants.

Other contributing factors were the 20 percent devaluation of the shekel since March, the higher costs of government-controlled utilities, such as water, electricity and telephones, and a 5.5 percent deficit in the state budget, again the result of absorption costs.

The rising inflation rate unfortunately has not reduced unemployment, which was up 8 percent in June.

The number of Israelis seeking jobs at the labor exchanges rose to 135,700, compared with 129,900 the previous month.

Nevertheless, there is a bright side to the economic situation. As inflation chugs along at an annual rate of 16 to 20 percent, the government, business and consumers adjust and plan accordingly.

That provides a stable atmosphere compared to the situation six years ago, when inflation ran out of control at 200 to 300 percent a year.

The June increase, though, was seen as a timely warning that unless corrective steps are taken, 20 percent could once again become the monthly inflation rate rather than the annual one.

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