Excerpt from a collection of research issues:

  •      Over the past three years, the GDP price deflator has increased by a cumulative 4.4 percent, while the CPI has declined by 0.8 percent. This means that the increase in GDP in terms of the consumer product basket exceeded its (quantitative) growth.
  •         The relative increase in the GDP deflator reflects improved terms of trade for the economy—an increase in export prices relative to import prices.  This improvement is, to a great extent, a result of factors outside the economy—the decline in energy prices and the strengthening of the dollar relative to the euro—and to a lesser extent a result of domestic factors, chiefly the strengthening of the shekel.
  •       The improvement in the terms of trade (and the increase in the GDP deflator) made it possible to increase private consumption beyond the quantitative growth of GDP, in parallel with an increase in savings.
  •      Looking ahead, it is not likely that the trend of improved terms of trade will continue over time, or that the GDP deflator will continue to increase at a higher rate than the CPI.


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