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Thursday, 10 March 2016

The World Is Getting Cheaper (For the US)

  • New York among ten most expensive cities for first time in a decade
  • Strong dollar pushes US cities up global cost of living ranking
  • Singapore stays top but price and currency changes cause significant volatility elsewhere
  • Lusaka in Zambia is world's cheapest city

A strong dollar has delivered a relative rise in the cost of living for US cities in a year marked by price and currency volatility according to The Economist Intelligence Unit's latest Worldwide Cost of Living survey. The ranking, which compares the price of a weighted basket of goods across 133 cities, saw the 16 US cities surveyed climb up the ranking by an average of 18 places with New York and Los Angeles featuring among the ten most expensive cities for the first time since 2002.

This increase is set against a backdrop of global fluctuation, with falling oil and commodity prices as well as currency devaluations and geopolitical uncertainty playing a part.

"In nearly 17 years of working on this survey I can't recall a year as volatile as 2015" comments Jon Copestake, an editor of the survey, "falling commodity prices have created deflationary pressures in some countries, but in others currency weakness caused by these falls has led to spiraling inflation.”  

Singapore remains the world's most expensive city but is 10% less expensive compared to New York than it was last year.  Only eight cities of the 133 surveyed have seen their ranking position remain unchanged in the last 12 months. From the Japanese Yen to the Brazilian Real currency weakness has driven down the cost of living in cities around the world. Even accommodating Chinese measures to weaken the Renminbi, Chinese cities have become more expensive relative to their peers. Shanghai is now as pricey as Tokyo, which was the world's most expensive city for most of the last two decades.

The estimated 480,000 people planning on travelling to the 2016 summer Olympic Game stand to benefit  from a spectacular decline in the relative cost of living in Rio De Janeiro. The Brazilian city fell 52 places to 113th in the ranking and is now almost half as cheap as New York. However, with Brazilian inflation creeping into double digits last year locals are not seeing the benefits that visitors are. Ironically with Russia expected to host the next Football World Cup, Rio is now as cheap as Moscow, which was the sharpest mover, falling 63 places. Similar declines in St Petersburg have put the cost of living in Russia's second city on a par with that of Kiev.

However those attending Euro 2016 in France or the Copa America in the US will find fewer bargains on offer. Despite drastic declines in many Eurozone locations Paris remains the 5th most expensive city in the world (down from 2nd last year). Similarly a strong dollar is pushing up the relative cost of living across the US. Boston, the cheapest of the Copa America host cities, is almost 40% more expensive than Olympics host Rio and ranks 56th globally, alongside Amsterdam.

South Asian cities continue to offer the best value for money. India and Pakistan account for five of the ten cheapest cities. They are joined in the latest ranking by Lusaka, Zambia's capital which has seen its currency unwind on the back of weak copper prices and can now lay claim to being the world's cheapest city with a cost of living two thirds cheaper than  Singapore, the most expensive.

A summary of the full report can be downloaded at www.eiu.com/wcol2016

 

The ten most expensive cities in the world

Country

City

Index (New York=100)

Rank

Rank movement

Singapore

Singapore

116

1

0

Switzerland

Zurich

114

2

2

Hong Kong

Hong Kong

114

2

7

Switzerland

Geneva

108

4

3

France

Paris

107

5

-3

UK

London

101

6

5

US

New York

100

7

15

Denmark

Copenhagen

99

8

0

South Korea

Seoul

99

8

1

US

Los Angeles

99

8

19

 

The ten cheapest cities in the world

Country

City

Index (New York=100)

Rank

Rank movement

Zambia

Lusaka

41

133

-22

India

Bangalore

42

132

0

India

Mumbai

43

131

-1

Kazakhstan

Almaty

44

127

-9

Algeria

Algiers

44

127

-3

India

Chennai

44

127

2

Pakistan

Karachi

44

127

5

India

New Delhi

45

126

2

Syria

Damascus

46

124

2

Venezuela

Caracas

46

124

6

 

Biggest movers down the ranking in the last 12 months

Country

City

Index (New York=100)

Rank

Index move

Rank move

Brazil

Sao Paulo

55

107

-29

-57

Colombia

Bogota

55

107

-26

-50

Russia

Moscow

53

113

-31

-63

Brazil

Rio de Janeiro

53

113

-26

-52

Russia

St Petersburg

48

118

-29

-51

 

Biggest movers up the ranking in the last 12 months

Country

City

Index (New York=100)

Rank

Index move

Rank move

US

Minneapolis

87

24

2

24

US

San Francisco

82

34

2

25

UAE

Abu Dhabi

74

56

1

21

Argentina

Buenos Aires

73

62

5

28

 

For individual city/country or regional rankings and prices please contact the Economist Intelligence Unit.

 

ENDS

 

About The Economist Intelligence Unit

The Economist Intelligence Unit (The EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com

The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.

 

About the Survey

The Worldwide Cost of Living is a bi-annual Economist Intelligence Unit survey that over 400 individual prices across 160 products and services in 140 cities in 93 countries. The survey itself is a purpose built internet tool designed to calculate cost-of-living allowances and build compensation packages for expatriates and business travelers. It incorporates easy-to-understand comparative cost of living indices between cities. The online interactive survey allows for city to city comparisons, but for the purpose of this report all cities are compared to a base city of New York, which has an index set at 100.

 

Methodology

More than 50,000 individual prices are collected in each survey round conducted each March and September and published in June and December. EIU researchers survey a range of stores: supermarkets, mid-priced stores and higher priced specialty outlets. Prices reflect costs for more than 160 items—from food, toiletries and clothing, to domestic help, transport, and utility bills—in each city. These are not recommended retail prices or manufacturers’ costs; they are what the paying customer is charged.

Prices gathered are then converted into a central currency (US dollars) using a prevailing exchange rate and weighted in order to achieve comparative indices. The cost-of-living index uses an identical set of weights that is internationally based and not geared toward the spending pattern of any specific nationality. Items are individually weighted across a range of categories and a comparative index is produced using the relative difference by weighted item.

Cities are compared on a base and host location basis, where the index for a base city is set at 100 and the index of the host city is set as a proportion of this. In the case of this report the base city is set as New York.

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