Harel Chief Economist Analyzes Inflation, Budget Deficits and US Markets
Harel Insurance & Finance's weekly review highlights an eventful week for global and Israeli markets, focusing on upcoming local inflation and Q3 growth data, surging state budget deficits, and shifting monetary policies in the US and Europe.
A busy week of critical economic indicators awaits markets in Israel and globally, ranging from local price and growth indices to US employment and inflation data, according to the weekly review by Ofer Klein, head of economics and research at Harel Insurance & Finance. The economic system is currently navigating between recovery signs and mounting inflationary and deficit pressures.
At the forefront of the local arena, the Central Bureau of Statistics is scheduled to release two key figures. The Consumer Price Index for October is projected to rise by 0.4%, driven primarily by seasonal price increases in flights and vacations due to the Sukkot holiday, alongside seasonal hikes in clothing and footwear with the entry of the winter collection, and increases in food prices. The following day, the CBS will release the initial growth estimate for the third quarter, which points to positive growth supported by real credit card purchases and a low unemployment rate.
On the fiscal front, the monthly state budget deficit surged in October to an annual peak of approximately 18 billion shekels, pushing the 12-month trailing deficit slightly up to 3.3% of GDP. Harel estimates that barring additional budgetary allocations to the Ministry of Defense, the deficit will reach about 4% of GDP by year-end, a level still lower than the planned targets.
Overseas, the political landscape in the US underwent a major upheaval following a historic midterm election outcome. In the markets, technology stocks recorded their worst week since April 2025 amid concerns over a slowdown in artificial intelligence investments. Meanwhile, the October US employment report surprised with the addition of 165,000 new jobs, more than double early forecasts, while the unemployment rate edged down to 4.14%.
