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In September and October 2022, Orion carried out a field study of how uncertainty over the dollar exchange rate was shaping pricing behaviour across supermarkets, pharmacies, department stores, hospitals, doctors, fuel stations, restaurants, hardware and book stores, and schools. Prices were compared with the 2019–2020 structure in dollar terms, with the basket bought in lira and marked to the exchange rate on the day of purchase. Results from Beirut, Mount Lebanon, Zahle and Tripoli were closely correlated.
The study's main finding was a ratchet effect in retail pricing. Outlets priced goods at their own estimate of the exchange rate two to four months ahead and did not lower prices when the rate eased, on the grounds that earlier improvements had proved temporary. The result was a sharp divergence in experienced inflation depending on the currency in which households were paid, which was relevant at the time of writing to employers, lenders and policymakers assessing real incomes.
Key findings
- Retailers, restaurants and pharmacies priced in lira at a 15–24% premium to the prevailing dollar rate, so a market rate of 60,000 translated into shelf pricing at 69,000–74,000.
- Households paid wholly or partly in lira faced basket inflation of around 875% since the crisis, compared with a median of about 20% for those paid in fresh dollars.
- Trades, mechanics and technical services charged about 26.5% more than in 2020, while professional fees moved from 65% below to 29% above earlier levels between 2021 and 2022.
- Hospitals and insurers repriced at about 12% above 2020 in fresh dollars, and schools and universities at about 8% above 2019, after accepting lira in 2020–2021.
- Imported categories such as pharmacy items, clothing and tools showed the steepest dollar-based increases, at around 27%.
Archive: written in Oct 2022; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.