Rising Food Prices in Israel Create A Cost-of-Living Crisis

Israel’s food prices have surged by 2.9% to 6% in the first quarter of the Israel-Hamas conflict, according to a recent report by State Comptroller Matanyahu Englman. This sharp rise comes amid substantial cuts in manpower and production within the country’s food industry, with production levels reportedly down by 50% and workforce reductions of 18%. The report sheds light on Israel's high concentration in the food and goods markets, which has amplified the impacts on the cost of living.

Comparative Purchasing Power and the Rising Price Index

Israelis currently experience significantly lower purchasing power compared to consumers in France, the United States, and England. The report notes that purchasing power, when measured against hourly wages, is around 300% lower in Israel than in these countries. Since 2011, food prices (excluding fruits and vegetables) have risen by 23%, while the cost of fruits and vegetables alone has increased by 37%.

Limited Import Ratios and Geographic Concentration

Israel’s import-to-GDP ratio is just 23.4%, much lower than the OECD average of 47%, limiting the country’s access to diversified and potentially more affordable goods. Additionally, around 25% of Israel’s major stores are highly concentrated in specific geographic areas, further restricting consumer options and contributing to elevated costs.

The Need for Reform and Government Action

Despite rising prices and the added strain from the ongoing conflict, the ministerial committee on cost-of-living issues has convened only seven times since its formation in June 2023. Englman called for Israel’s leadership to reassess existing reforms and ensure they are equipped to tackle the country’s cost-of-living challenges.