Bethel Finance: Consumer goods prices up 18% in Israel in 2 years

www.bethelfinance.com
Prices of fast-moving consumer goods (FMCG) rose by an average of 18%in Israel in less than two years, between January 2010 and September 2011. Conversely, prices of FMCG's fell by 5.2% in the US over the same period, according to a global Nielsen study. FMCG's include food, beverages, cosmetics, and home cleaning supplies.

While prices of food and consumer goods in the US fell steadily from one quarter to the next, except for the first quarter of 2010, prices in Israel rose steadily throughout the period. FMCG prices in Europe rose by 22% during the period of the study, even faster than in Israel.

Consumer goods prices in Israel kept pace with the rise in Europe until the outbreak of the Cottage Cheese Protest last summer, which slowed the rate of price increases in the third quarter of 2011, resulting in a gap emerging with prices in Europe. Despite the protest, FMCG prices in Israel still rose by an average of 2.1% in the third quarter.

The rise in FMCG prices is not the whole story. According to media reports about price comparisons in the past months, prices in Israel are higher than in the US and Europe. Notwithstanding the rising prices in Europe, consumer goods are still much cheaper than in Israel. The differences are especially wide for food brands and international consumer product brands. One example is Gillette shaving foam, which costs considerably more in Israel than in Europe.

Other examples, according to Numbeo cost of living comparison website: a liter of milk in Israel costs 39% more than in the US and 7.3% more than in the UK; and a dozen eggs costs 77% more in Israel than in the US and 10.2% more than in the UK.

In Israel, the lack of competition and strong brands prevent real competition, resulting in high prices. It is no wonder that politicians submit private member bills in the Knesset, some of which are decried as populist, to try and restrain market prices. The latest bill, called the "Shame Law", by MK Shai Hermesh (Kadima), would require retailers to also mark the purchase price of a product on the label.