The consumer price index rose by 0.3% in March, the people of Israel learned yesterday. Wealso read that analysts were shocked, shocked, at the increase, as they'd thought it would drop, not rise. Yet people wonder: surely the analysts shop? Surely they feel that prices are rising everywhere they look?
TheMarker took a hard look and found that prices of commonly used consumer products rose by 13% in the last we months. Staples such as flour, fruits and vegetables, pasta and bread rose by 25% to 60%. As Passover approaches, it's fair to say that the spike in commodities has arrived, and it's hitting hard.
Economists say that the poorest people in Israel are living in an inflation environment much higher than the bare CPI figures indicate, and that what you suspected is true: Your money really is buying less.
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"The main story of the CPI is that commodity and food prices in the world rose," says Migdal Capital Markets economist Yossi Schwimmer. When food prices rise, the poor are hit hardest. The poorest 10% spends an average of 19% of income on food, compared with 11% for the uppermost decile, he explains.
The rich spend more of their income than the poor on cars, foreign travel and electronics, which haven't risen by the same kind of percentages as food, explains economist Shlomo Maoz of Excellence. Therefore, they tend to feel the inflation environment relatively less.
In short, the naked consumer price index figure doesn't tell the full story. The sharpest price hike during the last year was for the most basic product of all: flour, which rose by an average of 60% in the first quarter of 2008 compared with the same period of 2006. A kilo of flour from the Ashdod mill costs NIS 4.08 now, compared with NIS 2.40 last week, an increase of 70%.
Pasta rose by about 25%, puddings by about 17%, and the price of bread - the kind under government control - increased by 29%.
Describing the increase in cooking oil as "13.5%" in the last year misses nuances. For example, canola oil produced by the Olive Tree company rose by nearly 28% in the last year, to NIS 13.39 per liter. What's happening? Spiking commodity prices in world markets, that's what. Wheat, corn and soybeans have risen by 50% to 90% for a variety of reasons, including the mania for biofuel made using agricultural products that would otherwise have been eaten. Another major reason is the growing appetite in increasingly prosperous emerging markets for meat, which requires more grain to feed the beasts.
Moving onto fruits and vegetables, the consumer price index claims that March prices were 5.3% lower than February's, which is a head-scratcher for anyone who lugged a shopping basket to the shuk. Against March 2006, the price of fruits and vegetables rose by nearly 19%, which sounds more realistic. But based on records at the Agriculture Ministry, TheMarker has found that the real figure is much higher now: Prices in the first week of April were 25% over last year's, mainly because of the damage that the cold snap in winter caused to crops. Also, Israeli farmers tend to prefer exporting their produce to Europe, when possible, where they get better prices.
Let's look at Agriculture Ministry figures. They show that in a year, eggplants have risen 85% to NIS 8.25 per kilo. Hothouse tomatoes have increased by 135% to NIS 10, alligator-skinned avocados are up 118%, lemons by 205% and Golden Delicious apples have increased by 53% to NIS 6.75 per kilo.
Food isn't the only thing rising in price. Cooking gas has increased by 25% in the last year. The price of electricity has risen 14% in a year, also because of the increase in commodities, specifically oil in this case. That caused a meteoric increase in the price of plastic, by the way, which is made using fossil fuel.
The Society of Israel Plastics & Rubber Industry says that from 2000 to 2007, the price of polystyrene, used mainly in making disposable items including food packaging, increased by 92%, PVC increased by 79% and polypropylene, used to make tougher items such as chairs, soared by 179%.
StoreNext surveyed retail chains throughout the country in all sectors, and calculated presenting an average price (per kilo or liter) of all products in the category. As a result, each of the categories, such as milk, pasta or flour, includes dozens or even hundreds of products.
In the pasta category, for instance, the price of all noodle and pasta products were checked, including organic and whole wheat, spaghetti and lasagna sheets in various forms.
Dairy products included the price of white spreadable cheeses in various sizes, including flavored or those with added components, hard (yellow) cheese in slices and block form in the dairy case, all types of cultured milk products, milk and soy-based beverages and dessert products. Produce prices were obtained using various methods: The review was conducted based on data from the Ministry of Agriculture, which includes all fruits and vegetables. Consumer prices were calculated based on data from the ministry, plus an average 50% retail price differential.
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