ISET

In February, the average cost of cooking one standard Imeretian Khachapuri fell to 3.29GEL, which is 3.4% lower month-on-month (compared to January 2015), and 4.8% lower year-on-year (compared to February 2014).

The main ingredient of Khachapuri is Imeretian cheese, and, naturally, its price is the main driver of ISET's Khachapuri Index. Over the years, we have been observing a sharp upward movement in the price of cheese from July till January, and an equally sharp downward movement from February till June. These seasonal price dynamics are closely tied to the annual production cycle of the Georgian dairy industry. The price of milk is the exact mirror of image of this production cycle. It goes up when there is little production, and goes down when there is plentiful supply.

In January, the average cost of cooking one standard Imeretian khachapuri fell to 3.40GEL. The Index lost 7% month-on-month (compared to December 2014) and 5.4 % year-on-year (compared to January 2014).

At 3.41GEL, Kutaisi has seen the largest drop in the Index (-11.8%). Tbilisi (3.41GEL) and Telavi (3.14GEL) experienced declines of 7.2% and 9.7%, respectively.

The greatest surprise in January was the (small, 1.1%) increase in the price khachapuri in Batumi, Georgia's coastal resort. At 3.65GEL, Batumi became the most expensive city for khachapuri lovers, 0.51GEL ahead of the cheapest city, Telavi.

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

The only one contributor to y/y deflation was the main component of the Khachapuri recipe - cheese (-13.8%) (see graph), while the prices of other components showed have increased: flour (+16.6%), milk (+5.4%), yeast (+7.6%), butter (+11.3%), and eggs (+1.3%).

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 USD (see chart), and a sharp decline in remittances.

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