January 15, 2016 FPI | Food Prices Hit Their Maximum
15 January 2016

Retail food prices, as measured by ISET-PI’s FPI, show a 3.4% increase y-o-y (that is compared to January 2015) and a 2.6% increase from the previous month (that is when January 2016 is compared to December 2015). Compared to the previous month the biggest rise in price happened for eggplant (33.3%), tomatoes (20.8%), and tangerines (14.3%).

While most of the products became more expensive few foods lost in price. The price of pork decreased by 3.9%, beef lost in value by 3.1% and tea’s price went down by 2.5%. Not surprisingly none of the fruits and vegetables lost in their value while cheaper products are available in such categories as meat and groceries.

Should consumers be worried about the increase in prices?

After quite a long period of relatively low prices (May 2015 - December 2015) food prices started to increase in January 2016 due to the seasonality and depreciation of Georgian Lari against USD. Since Georgians spend a considerable amount of their income on food even small changes in food prices are likely to have a significant impact on consumers’ budgets.

Even though prices for most of the products increased the overall effect on consumers depends on the distribution of food expenditures among food categories. Georgian consumer spends about 34% of total food expenditure on grocery products, 23% on meat and meat products, 18% on vegetables, 14% on milk and milk products, while fruits and non-alcoholic beverages account for (6%) and (5%) respectively. Since spending is not equally distributed among the categories, categories accounting for the highest share in HH spending are of particular interest. As it can be concluded from this distribution, a considerable amount of Georgian HHs’ spending (23%) goes to meat products and even more to groceries (34%), signaling that downward trends in these categories might soften the overall increase in prices.