Employment and income in the regions of Georgia strongly depend on agricultural performance during the harvest season, which starts from August and finishes at the end of October. The summer of 2014 was one of the driest in recent years, which has already negatively affected the harvest of one to two year cultures like wheat, sunflower, maize, etc.. Consequently, the impact of the drought was reflected in the Consumer Confidence Index in August. Both its components, the present situation and expectations indices, declined in the regions of Georgia. Moreover, a fall in the Expectations Index was observed for the first time after a four-month consecutive increase. In contrast, Tbilisi shows the opposite pattern with increased consumer confidence for both the present situation and expectations indices. This can be explained by the active business season due to commence in September after the summer vacations. More precisely, the overall CCI has decreased to -13.7 points (down by 1.9 points from July). The Present Situation Index has decreased by 2.4 points, reaching -17.8 points – the lowest point since August 2012. The Expectations Index has also fallen by 1.3 points reaching -8.7. In terms of annual comparison, the overall CCI remained nearly the same (up by 0.04 points). Interestingly, the overall CCI in Tbilisi is 1.1 points lower than in same period of last year, while it has increased by 1 point in the regions. Furthermore, the Present Situation Index has decreased by 3.5 points, which was mainly driven by the decrease of the index in the regions of Georgia. As for the Expectations Index, it increased by 3.6 points compared to August 2013. A few things to note: • In year-on-year terms, a comparison of the Present Situation Index for the regions of Georgia, shows a significant 4.2 points decrease.

This indicates that the economic situation in the regions has worsened as compared to August last year. As income in the regions of Georgia significantly depends on agriculture, this can be attributed to a bad harvest following the drought. • Compared to the previous month, expected unemployment has also grown in the regions. A total of 31% of respondents outside Tbilisi indicate that unemployment will grow in the next 12 months. Furthermore, the current and expected ability to save is very low: 80% of respondents in the regions of Georgia say that it is not at all likely that they will save any money in the next 12 months and 57% say that they are running into debt. This pattern is similar in Tbilisi, where 76% and 46% of respondents answered in the same way, respectively. • Responses to the question regarding making major purchases further worsened in August, with 41.5% respondents believing that it is the right time to make major purchases, compared to 51% who thought so in June and 44% who thought so in July. • Expectations concerning the future financial situation have not changed significantly over the month. In August, 45% of respondents thought that their financial situation will improve in the future. As for the present financial situation, only 15% of respondents stated that it has improved over the last 12 months. • There has been a small decrease in the overall CCI regardless of the education level of the respondents. The Present Situation Index for people without higher education decreased by 3.6 points, while falling an insignificant 0.2 points for those with higher education. The opposite picture is observed for the Expectations Index, which decreased by 2.3 points for respondents with higher education and by only 0.6 points for the rest. In year-on-year terms, the overall CCI has significantly improved for respondents with higher education (up by 5.5 points) and decreased for the population without higher education (down by 1.1 points). Interestingly, the Present Situation Index for those without higher education has significantly decreased by 4.8 points as compared to August 2013, while sharply improving by 6 points for the population with higher education. The Expectations Index has improved for both groups in year-on-year terms (by 5 points for respondents with higher education and by 2.6 points for those without). • Consumer confidence in terms of gender shows a slight improvement for women (up by 0.4 points), while a sharp fall for men (down by 4.5 points). Furthermore, the same pattern is observed in the Present Situation Index, which has fallen by 7 points for men, while having improved by 1.5 points for women. As for the Expectations Index, this has decreased for both genders, however the decrease for males is 2.1 points and only 0.7 points for females. Regional Peculiarities In August 2014, after four months of consecutive growth, the CCI dropped significantly in the regions of Georgia. Eleven out of twelve CCI questions had worse responses as compared to the previous month. Both CCI components, the Present Situation Index and the Expectations Index, thus experienced a decline of 5 and 4 points respectively. The most dramatic change in people’s confidence outside the capital was related to expected unemployment: in August 2014, 31% of respondents in the regions of Georgia thought that number of unemployed people in the country would increase over the year, while 22% thought the same in July. Unlike the regions of Georgia, Tbilisi citizens have more optimistic views about the future, they also assess the present situation more positively. The Expectations Index, as well as the Present Situation Index, gained 2.7 points, thereby increasing the overall CCI for Tbilisi by the same amount. The most significant improvement was detected in questions concerning expected spending and saving. For example, in August 2014, 28% reported that in terms of the general economic situation it was a fairly good moment to save money, while only 14% said the same in July. The most pronounced differences between Tbilisi and the rest of Georgia are detected in questions related to major purchases and savings. In August, a total of 56% of Tbilisi citizens thought that it was the right moment for people to make major purchases, while only 33% thought in the same way outside the capital. Similarly, 23% of respondents in the capital thought that it was the right moment to save money, compared to 19% in the rest of Georgia. Some CCI questions have retained pretty stable and clear trends, while others are more volatile and are harder to interpret. For example, responses to the question “over the next 12 months, how likely is it that you will save any money?” have not changed significantly since December 2013, with about 72-78% of respondents regularly reporting that it is not at all likely. Responses to the question “how do you expect prices will change in the next 12 months?” are also quite stable. During the last four months, 26-28% of respondents reported that prices will stay about the same, while 37% on average say that prices will increase at the same rate. In August 2014, 35% of respondents stated that their financial situation worsened during the last 12 months, 50% said that it had stayed the same and 15% reported improvement. This distribution of answers is the worst since May 2012, when the CCI survey was first started. For the purpose of comparison, in November 2013 only 20% reported a worsening of the financial situation.