In September 2014, the Consumer Confidence Index (CCI) reached its lowest level since the inception of the survey in May 2012. Both the Present Situation and Expectations indices reached their historic minimums during the month. On the one hand, the sharp drop can be attributed to the summer drought that negatively impacted agricultural incomes in the regions of Georgia, as was mentioned in the August 2014 CCI report. On the other hand, a substantial decrease in consumer confidence has been observed in both Tbilisi and the rest of Georgia. The overall CCI has decreased to -17.7 points (down by 4.4 points from August). Both the Present Situation and Expectations indices reached their historic minimums of -22.6 and -12.7 points (down by 4.8 and 4.0 points) respectively. In terms of annual comparison, the overall CCI has significantly decreased by 9.8 points compared to September 2013. In Tbilisi the overall CCI has dropped by 7.5 points, while in the rest of Georgia the decrease is even bigger at 10.9 points. Both the Present Situation and Expectations indices have decreased, by 11.3 and 8.3 points respectively, which is a sharp drop compared to the same period of the previous year. An annual comparison of the Expectations index shows a sharp fall following the consecutive increase of the past two months (of 1.3 and 1 point in July and August respectively). A few things to note:

• Probably the most interesting characteristic of the CCI in September 2014 is the gender differences in consumer confidence. Female respondents were the primary drivers of the overall CCI falling to its historical minimum. The overall CCI for females is -20.5 points (a decrease of 8.9 points), whereas male respondents have shown the opposite pattern, reaching -13.5 points (up by 1.3 points). Furthermore, compared to August 2014, the Present Situation Index increased by 2.8 points for males and decreased by 10.9 points for females. As for the Expectations Index, this stayed nearly the same for male respondents, but decreased by 6.9 points for females. In year-on-year terms, the decrease for both males and females is sharp in all components of the CCI. • In September, around 27% of males expected to spend more on major purchases; while in August 32% answered that question in the same way. Furthermore, 58% of male respondents stated that the financial situation of their households had stayed the same, whereas the same answer was given by 45% in the previous month. The responses males gave to other questions remained roughly the same as they were in the previous month • The level of consumer confidence in September was primarily determined by female responses to different questions. Current and expected spending on major purchases have significantly lowered for females. In September, around 33% of females thought that it was the right moment to make major purchases, while 45% thought the same a month earlier. Furthermore, around 41% thought that they will spend much less in the next twelve months, while 25% had the same expectation in August. The saving behavior of women also deteriorated. The September survey shows that 34% of females thought that it was the right moment to save, whereas a month earlier 46.1% thought the same. The same pattern is observed in terms of the future saving behavior of females: only 5.5% responded that it is likely they will save money in the next twelve months, whereas twice as many (11.2%) thought the same in August. In addition, 5.5% think that the economic situation has improved in the past twelve months – representing a decline of three times since August (where 17% thought so). Past CCI data shows that women are typically less confident consumers then men, with female consumer confidence falling directly after the harvest period. This pattern has not only clearly been sustained in September’s CCI, but has become much sharper. There are two main reasons for this. First of all, the summer drought has impacted consumer confidence due to lower than expected agricultural income. Secondly, the rise in petty crime, a subject that is being actively discussed in the media, is affecting impressions of the general situation in the country, which, of course, also impacts consumer confidence. • A year-on-year comparison of the Expectations Index shows a sharp decrease of 8.3 points following the period of consecutive improvements from June 2014. Expectations decreased in both Tbilisi and the rest of Georgia (RoG). In the RoG, after successive increases from May 2014, there was a sharp drop of 9 points compared to August 2013. In annual terms, expectations in Tbilisi have decreased by 6.5 points, which is a much bigger fall than in August 2014 (by 0.5 points compared to August 2013). Regional Peculiarities Interestingly, in September the overall CCI reached -17.7 points both for Tbilisi and the regions of Georgia. For the RoG the overall index sustained a decreasing trend after July 2014 and reduced by 3.7 points over a one month period. The drop in overall CCI is even bigger in Tbilisi, falling by 5.8 points. The decrease in the Present Situation Index is much greater in Tbilisi (by 8.3 points) than in the regions of Georgia (by 2.9 points). An explanation for this might be both the bad harvest in the regions, which would undoubtedly have impacted incomes in Tbilisi, and active debate in the media on the growth of petty crime, especially in Tbilisi. As for the Expectations Index, this shows a greater decrease in the RoG (by 4.5 points) than in Tbilisi (by 3.2 points). This provides further support to the previous argument regarding the bad harvest in regions and the expectation of a relatively small income in the future. For the regions of Georgia the biggest change was seen in the responses to the question regarding expected changes in making major purchases. In September, roughly 49% of respondents from the RoG answered that they will save less in the future, while 40% gave the same answer on this question in August. In August 2014, around 35% of respondents in the regions of Georgia stated that prices had risen a lot, whereas in September 42% stated that there had been a big rise in prices over the last 12 months. Over the month a noticeable change in responses to the questions regarding savings and current and future ability to make major purchases was observed in Tbilisi. The September survey shows that around 69% of respondents from Tbilisi thought that it was a good time for major purchases, while in August 75% thought the same. In September, 39% in Tbilisi said that it was a good time to save, whereas 50% said so a month earlier. A total of 46% of respondents from Tbilisi stated that they are going to spend less on major purchases, while 31% responded in the same way in August. Comparing Tbilisi and the rest of Georgia reveals some interesting patterns. For instance, more respondents in Tbilisi expect a rise in prices (around 62%), than in the RoG (around 50%). Furthermore, the results from the RoG shows that respondents have less ability to save and fewer expected to make major purchases. Being less willing to make major purchases is logical for Tbilisi, because most of Tbilisi’s residents are back from their summer holidays, where they would have spent a significant amount of their money. This is clearly seen in the change in respondents’ impressions of their ability to save. Furthermore, September is not the best time to make major purchases because the summer sales are over. Furthermore, in Tbilisi it is popular to buy grapes in autumn for making homemade wine. Considering that the prices of grapes have risen this year, this would have taken a significant amount of funds from Tbilisi’s “residential winemakers”. Although this kind of activity requires substantial funds, it cannot be considered as a major purchase. All of these factors explain the drop in CCI for Tbilisi. As for the rest of Georgia, the decline must primarily be due to the summer drought and the bad harvest. Furthermore, only 9% of respondents thought that the economic situation had improved in the last twelve months, while 15% thought the same in August. This reflects the general nihilism of the public about the general economic situation in the country.