Israel Faces Soaring Prices Amidst Dubious Justifications

By Aryeh Stern

Prices across the board are on the rise. Recent days have seen a 5% increase in regulated prices for dairy, while companies like Coca-Cola and Tnuva are pushing prices up by as much as 25%.

These companies offer various reasons for the hikes, citing increased overhead costs such as wages, electricity, and local taxes. However, closer scrutiny in a Globes expose suggests doubts about the necessity of such measures at this time. Sometimes, even the companies’ own claims don’t align with the reality on the ground.

Shipping costs, often cited as a significant factor by food companies and major importers, have fluctuated. Bank Hapoalim’s chief markets economist, Modi Shafrir, notes that while shipping costs initially rose with tensions during the Swords of Iron conflict in October 2023, they have since declined significantly. Despite prices being higher now compared to pre-war levels, they remain consistent with those at the end of 2022.

Currency fluctuations also play a role. With a stronger shekel, importers have greater purchasing power, and although the shekel has weakened compared to early 2023, it has strengthened against the U.S. dollar since the onset of the war.

Global factors, such as commodity prices and import costs, don’t offer a clear rationale for price increases either. Meitav Investment House’s chief economist, Alex Zabezhinsky, told Globes that global import prices have remained stable, with no significant increase observed. He cautions that Israeli import price data are delayed, but international trends suggest stability.

Additionally, while wages in Israel have increased, particularly with the minimum wage rising 5.5% in April, data show that the food industry has been less impacted compared to other sectors. Zabezhinsky notes that labor costs in the food industry have risen less than the economy-wide average.

Two factors, power and local taxes (arnona), have seen recent increases, affecting importers’ profits. However, these rises alone don’t justify the sharp price hikes observed.

Overall, the available data fail to provide a compelling justification for the recent price increases by major companies. Zabezhinsky suggests that these announcements may be more reflective of companies seizing an opportunity rather than a genuine need to offset rising expenses.