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Analysis and Recommendations

The survey results show that the prices of goods were affected by variables compared with the months during which the survey was conducted (from November 2006 to May 2007).

Prices were compared after classifying the goods as to whether they were imported goods or locally made ones. In general, figures showed that there was a significant price increase in December to the point that the prices of imported goods increased by 12 percentage points compared to their earlier levels, hence scoring a minor effect on local goods whose prices rose marginally and such effect only appeared two months later, i.e. in February 2007, which scored a significant rise in prices of imported goods. The following Chart shows the reality of the rise in prices of imported consumer goods that affected in general the prices of goods and cause a significant increase in price levels.

The results showed over a period of 6 months fluctuations in prices of imported goods between an increase and decrease; See Chart (2), as we find that prices of locally made goods affected in an inverse order with prices of imported goods. It is clear that prices began to decline from December 2006 to January 2007 where prices of imported goods have stabilized during the period. Then, they declined sharply in February to record an increase then to stabilize later around the zero point once again in March 2007. However, prices did not remain as they were in March as they rose once again in April 2007. This increase is attributed to the Formula 1 event which had a direct impact on process and resulted in a general increase. This increase in prices continued in general in May 2007 by 3 percentage points (Chart 3), which meant that the increase was less than that in April 2007 which has recorded an increase by 6 percentage points. On the contrary, upon examining prices of imported consumer goods only they began to stabilize in May 2007.

On the other hand, the significant increase in prices of imported goods has a marginal effect on the prices of locally produced goods but such effect occurs two months later, hence a minor gradual increase is scored compared with the significant increase in prices of imported goods. The above Chart shows the aforesaid comparison between prices of local goods and how they are impacted by the increases in prices of imported goods, especially during February. In April 2007 the effect of the rise in prices of imported goods was direct as it resulted in the increase of consumer good prices in general.

If we compare prices according to the classification of goods and items, the basic increase in prices in December 2006 was mainly in goods and beverages while prices of other kinds of goods remained relatively stable. According to the above, it is clear that foods and beverages have a significant share of the change in prices of imported goods. In April and May there was a considerable increase in prices of imported foods and beverages in April 2007 which affected their prices in the same month and caused a slight rise in the same month. In spite of the instability of prices of imported goods especially foods and beverages, the prices of locally produced foods and beverages were not affected by increase or decrease during April and May 2007 and the price curve was relatively stable.

The following Chart shows the rise in prices of imported food and beverages by 15 percentage points in December 2006 and the fall at the rate of 7 percentage points in February 2007. It was noted that there was a considerable increase in prices in April 2007 by 7 percentage points while prices of local foods and beverages were stable in April and May 2007.

In general, the survey recorded in February 2007 a general and overall decline in prices of imported goods at the rate of 8 percentage points the highest of which was in prices of other goods and services which scored 13 percentage points compared with the prices of foods and beverages which fell by 7 percentage points as mentioned above (See Chart 5).

As for locally produced goods, they show a general increase in prices with the highest levels shown in other local goods at the rate of 25 percentage points in February 2007 compared with prices of local foods and beverages which slightly rose to almost stable levels at the rate 5 percentage points (See Figure 6).

On the contrary, consumer goods scored a considerable increase in prices especially foods and beverages continued in April 2007 and the increase was slight in May 2007. The following Chart shows the rate of price increase in April 2007 compared with May 2007. The following Chart shows the rate of price increase in April 2007 compared with February 2007 when prices fell.

We are already aware that prices of other local goods scored a significant fall in prices by as much as 40 percentage points in December 2006 to show a steady increase afterwards to peak in February 2005 by 25 percentage points. Then, prices began to fall gradually to stabilize at zero point in May 2007. The following Chart shows the changes in prices of other local goods between decline and increase around the stable point.

As for housing, the goods included in it are classified on the basis of local and imported goods thus of the difficulty of applying this condition upon classification. The majority of goods in this category are imported and service goods that cannot be measured on the basis of being local and imported. Thus, the analysis results recognized housing goods and service as housing items in general. We also found them relatively stable over the period covered by the survey from November 2006 to March 2007, except for February when a significant increase in prices of housing goods and services was scored at the rate of 40 percentage points. Such increase we could attribute to the general increase in prices of imported goods whose effect was witnessed at a late stage on the majority of local goods two months later, i.e. in February 2007 (See Chart 9). In addition, the index witnessed a considerable increase in housing services in April at the rate of 22 percentage points, which was attributed to Formula 1 which seemed to have a significant impact upon prices directly especially housing, food and beverages as we explained earlier. Such rises in prices continued in May but at levels estimated at 10 percentage points.

Therefore, the results of this Survey are very realistic and logical to a great extent as they clearly show the effects of price changes on the prices of other goods. A price change in one category of goods results in an associated change in prices of other goods especially the correlation between prices of imported goods and prices of local goods. In addition, although there is a relationship between imported goods and locally made goods, yet the price effect in terms of rise and fall does not come at the expense of their relationship with each other but there is also the impact of external surrounding factors that directly affect changes in market prices. As we explained earlier, holding such event as Formula 1 in Bahrain attracted many foreign visitors to the country which led in turn to promotion of tourism and trade exchange which directly affected the CPA Index and resulted in its rise due to the increase in various goods and items such as foods and beverages, other goods and services and even housing.

In addition, the real prices was the worrying phenomenon during the period between December 2006 and January 2007 which prompted the Ministry of Industry and Commerce to intervene to control process following the significant price rises in December 2006 as reflected in the local press. Prices began to stabilize in the following months after the Commerce Ministry’s intervention except in April 2007 which broke the rules because of holding Formula 1.

Last Update: Tuesday 17 July 2007