Data released today by the Economist Intelligence Unit (EIU) shows that the global cost-of-living crisis is not over yet, even though inflation has moderated.
This year’s Worldwide Cost of Living survey (WCOL) found that, on average, prices had risen by 7.4% year on year in local-currency terms for over 200 commonly used goods and services.
This marks a decline from the record 8.1% increase reported last year, but price growth remains significantly higher than the trend in 2017-21.
Although this year’s survey covers 173 of the world’s major cities, the global average has been calculated by excluding Kyiv (which was not surveyed in 2022) and Caracas (which continues to face hyperinflation), as was the case last year.
Singapore regained the top of the rankings for the ninth time in the past eleven years, tying with Zurich (Switzerland). While Zurich’s rise reflects the strength of the Swiss franc and high prices for groceries, household goods and recreation, Singapore continues to see high price levels across several categories.
The city state has the world’s highest transport prices, owing to strict government controls on car numbers. It is also among the most expensive cities for clothing, groceries and alcohol, due to its success as a premier location for business investment.
On average Asian cities saw a low price increase of 3.2% in local-currency terms. Like last year, the exception was Karachi in Pakistan, where prices rose by over 20% year on year. Wide diversity among Asian cities means that the region accounts for two (Singapore and Hong Kong) of the top ten and three (Ahmedabad, Chennai and Karachi) of the bottom ten cities in our index.
Low levels of inflation have led to 46 out of the region’s 58 cities covered in our survey falling down the rankings.
Four Chinese and two Japanese cities are among the biggest movers down the ranks. In fact, all the 19 Chinese cities covered in our survey have noted declines, mainly owing to slow post-pandemic economic recovery and subdued consumer demand, as well as a weaker renminbi.
Tokyo and Osaka in Japan have fallen down the ranks by 23 and 27 spots, respectively. This reflects Japan’s persistently low level of inflation compared with most other countries as well as negative interest rates, which have led to the yen depreciating against the US dollar.
In contrast, price rises have not significantly moderated in 2023 for Australia and New Zealand, but the seven cities covered in our survey also fell down the ranks. This is largely owing to the currencies of both countries weakening against the US dollar.
Overall, our top ten this year consists of two Asian cities (Singapore and Hong Kong), four
European cities (Zurich, Geneva, Paris and Copenhagen), three US cities (New York, Los Angeles and San Francisco) and Tel Aviv in Israel.
However, the survey was conducted before the start of the Israel-Hamas war, which has affected the exchange rates in Israel and may have made it harder to procure some goods in Tel Aviv, thereby affecting prices.
EIU expects inflation to continue to decelerate in 2024, as the lagged impact of interest-rate rises starts impacting economic activity, and in turn, consumer demand. But upside risks remain—further escalations of the Israel-Hamas war would drive up energy prices, while a greater than expected impact from El Niño would push up food prices even further.
Regional disparities may also widen, with developed countries coming close to meeting central bank targets of 2% CPI and many developing markets seeing prices soar.
Upasana Dutt, head of Worldwide Cost of Living at EIU, said: “The supply-side shocks that drove price increases in 2021-22 have reduced since China lifted its covid-19 restrictions in late 2022, while the spike in energy prices seen after Russia invaded Ukraine in February 2022 has also eased. Asia continues to see relatively low price increases on average, with four Chinese and two Japanese cities among the biggest movers down the ranking this year. Despite upside risks, we expect inflation to decelerate further in 2024, easing price rises globally.”