2.7% Rise in Consumer Price Index for June is Lowest Since Feb. 1979

The modest 2.7 percent rise in the consumer price index in June — the lowest increase since February, 1979 — was hailed by government sources this week as a vindication of Finance Minister Yoram Aridor’s economic policies. He succeeded in bringing the annual inflation rate slightly below 100 percent, his stated goal when he replaced former Finance Minister Yigal Hurwitz last year.

But the June decline, aided by an unexpected 13 percent drop in the price of fruit and vegetables, was seen in opposition circles to be the result of a government freeze on prices initiated as an election campaign ploy and only temporary. According to Yeruham Meshel, Secretary General of Histadrut, “We have yet to see whether the government will be able to keep its election promises of moderate price rises.”

Avraham Shavit, president of the Manufacturers Association, said he was not and never has been impressed by the consumer price index whether it goes up or down. “Everything in Israel is linked to the index and therefore nobody really suffers. Only the State is not linked to the index … the problem is dollars, not the index,” he said.

Although consumer prices have declined somewhat since Aridor took office, they did so at the cost of unprecedented government spending. The Treasury

printed some 3.7 billion Shekels in April, May and June in an effort to keep prices stable.

Moreover, the downward trend may not last. The retail price index went up five percent in June, a relatively high rate likely to affect consumer prices in the coming months. There was also a moderate increase in the cost of petroleum, including gasoline, which could cause a nine percent increase in the price of electricity which would affect the entire economy.