The average cost of cooking one standard Imeretian Khachapuri in the first month of 2015 dropped to 3.40 GEL, which is 7.4% lower month-on-month (m/m, that is compared to the previous month), and 5% year-on-year (y/y, that is compared to the same month of last year).

Such a sharp decline of the Kh-Index is related to the record low Georgian consumer sentiment. In January 2015, ISET's Consumer Confidence Index (CCI) reached a new minimum of -25.8 points (down by 3.3 points from December) reflecting four consecutive months of Georgian Lari (GEL) devaluation against the USD (see chart), and a sharp decline in remittances.

At the end of January, the GEL/USD exchange rate stood at 2.06, representing a drop of 17 and 30 tetri, m/m, and y/y, respectively. As a result, Georgian consumers, many of whom carry dollar-denominated loans and mortgages, are extremely concerned about current and expected inflation, as demonstrated by people's responses to ISET's CCI survey.

Remittances from the largest remitting countries Russia, Ukraine, and Greece fell quite dramatically in y/y terms: by 43%, 68%, and 11%, respectively. Representing a large chunk in the incomes of many poor Georgian families, remittances directly affect people's demand for goods and services, keeping the lid on inflation, as measured by the official Consumer Price Index (CPI) and ISET's Khachapuri Index.