Treasury: Food prices up 36% in past decade

inflation
inflation

Israel's Ministry of Finance says that the spurt in prices is substantially greater than the rise in the Consumer Price Index.

The Ministry of Finance Chief Economist department has stated clearly that food prices in Israel soared 36% in 2004-2012, due mostly to increased concentration of the main food manufacturers. The Ministry of Finance says that the spurt in prices is substantially greater than the rise in the Consumer Price Index during this period, and was not correlated with the pace of GDP growth.

In a review published today, the Ministry of Finance says that the nominal aggregate profit of the major food manufacturers in 2005-2012 skyrocketed 3.4 times over - a 278% increase in real terms. The average salary in these companies grew only 23% in real terms during this period, and their expenses in comparison with their turnover did not change significantly.

The Ministry of Finance chief economist analyzes the profit margin and amount of aggregate profit in the food sector in 2003-2012, and the changes in the level of concentration in the sector during this period. According to his findings, profit margin and aggregate profit jumped from 4% in 2003 to 9% in 2010, then dropped slightly to 8% in 2011 due to the social protest, and to 7% in 2012.

The Ministry of Finance notes that despite the decline in profit in 2011-2012, it is still significantly higher than the profit in the first half of the preceding decade.

The Ministry of Finance adds that the major food manufacturers posted a rise in profit in 2012, while profits in the sector as a whole (including the small manufacturers) declined. Partial figures for 2013 indicate continued growth in profit for that year.

The Ministry of Finance examined the 20 largest food producers in Israel, and found that the sharp drop in profit among the food companies in 2002-2005 (when their profit was almost halved) came at a time of economic recovery from the recession of the second intifada and the shekel appreciation during those years. The food companies' profit rose steeply in 1997-2002, while the shekel was depreciating sharply.

"Even if the shekel appreciation in 2006-2008 played a role in the rise in the food companies' profit margin, this variable cannot by itself explain the changes that took place in the food companies' profit margin over the past two decades," the Ministry of Finance wrote.

Published by Globes [online], Israel business news - www.globes-online.com - on August 2, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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