Exclusivelly for The FINANCIAL
Imeretian Kchapuri Index: view from Kartli
According to our recipe, the average Tbilisi cost of cooking one standard Imeretian khachapuri in May was in the [2.4; 3.2] price range; the average price was 2.8 GEL.
Compared to April, the price of cooking one khachapuri decreased by 14%. We will compare our Kchapuri inflation measure to the official CPI estimate for April once it gets published in the third week of June.
From May 2010 till May 2011 the average price of Khachapuri increased by 19.7% (in the same month last year one could cook a khachapuri for just 2.35 GEL)! This is a lot higher than the official estimate of inflation for the period of April 2010-to-April 2011, which is “only” 13.5%.
Economics lesson of the week:
Looking at the above chart, it is easy to see that the price of Khachapuri fluctuates in clear cyclical manner. It goes up from early fall till the winter, reaching a peak just before Xmass, and then declining until late spring. Economists have long observed this phenomenon, which is quite characteristic for agricultural products the price of which greatly depends on the season. Hence, these up-and-down changes in prices are referred to as seasonal fluctuations. When reporting inflation estimates, statistical agencies are typically making so-called “seasonal adjustments”, reducing the relative weight of the purely seasonal price movements and allowing to produce more reliable forecasts.
About Khachapuri Index:
The International School of Economics at Tbilisi State University (ISET , www.iset.ge) has designed a simple and robust way of tracking inflation and the differences in the cost of living across Georgia’s major cities. Traditionally, inflation is tracked using a so-called consumer basket, consisting of goods consumed on a regular basis, the price of which is monitored over time. However, constructing a realistic basket of such goods is a rather complicated task since consumption habits change over time and across different cities. Therefore, ISET’s aim was to design an alternative way of tracking price inflation that would appeal to everybody. Unlike other indices used for calculating inflation, our "basket" includes only those ingredients that are needed to cook one Imeretian khachapuri (cheese, butter, flour, yeast, eggs, and milk) and energy imputs (gas and electricity). We conduct a monthly survey of the major markets in Tbilisi, Kutaisi, Batumi and Telavi to measure the month-to-month fluctuations in the prices of all relevant ingredients. The results are analyzed and compared with the official inflation estimates.
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