Mizrahi-Tefahot Bank in a worrying forecast: what will happen to prices in Israel in August?

Yoniin Penning, chief strategist at Mizrahi-Tefahot Bank, has released a weekly review focusing on U.S. market fluctuations, the consumer price index, credit card spending, the summer surge in Israelis traveling abroad, and the interest rate decision in the United Kingdom.

"United States: The U.S. market continues to be volatile along the curve, despite the Fed’s 'no change' announcement, which was delivered in a hawkish tone. This brings the long end of the curve to historically very high levels, which, in our assessment, are unlikely to be sustained. The primary factor we attribute to this phenomenon is AI-related capital expenditure (Capex)."

The PCE price index corrected downward in June, primarily due to fuel costs. Looking ahead to August, the outlook is inflationary given current oil prices. Nevertheless, most indicators, including private consumption spending, suggest that consumer activity is nearing its upper capacity limit.

GDP data for the second quarter shows weaker growth than expected, relying on consumer spending and increased investment in AI. Some optimism can be found in the University of Michigan’s consumer sentiment index for July, though a renewed rise in oil and fuel prices is likely to erase this fairly quickly.

In Israel: Total credit card usage remained positive through the end of July. A moderation in ongoing indicators, such as fuel and dining-out purchases, likely reflects the high volume of travel abroad. However, a decline in flight purchases, in seasonally adjusted terms, suggests an expectation of price stability heading into August.

In the United Kingdom: The Bank of England also avoided raising interest rates at this stage, amid growing doubts regarding the secondary impact of energy prices on the overall consumer price index.