Mapping the World’s Prices 2014 – Deutsche Bank Report

One of my favorite research reports is the Deutsche Bank annual survey of global prices relative to the U.S.  . Just like the previous editions, it is a comprehensive overview of prices and price indices of a wide array of goods and services from around the world.  In order to ensure that prices in USD are comparable across countries, they do a great job of using products that are standard across countries or have close substitutes.

As in previous years, Australia is overall the most expensive major economy while the United States is still generally one of the cheapest developed countries.  Canada is moderately more expensive, which is predictable given Purchasing Power Parity (PPP) in Canada versus the U.S.  has traditionally been between 78-85 cents USD on the Loonie, depending on the study you look at (actual spot f/X is hovering between 91-92 cents USD today).  For all you economic novices, simply divide those two numbers, to derive my back-of-envelope calculation of the extent to which the U.S. (outside of New York or San Francisco, of course), is ‘generally’ cheaper than Canada.  Brazil remains very expensive for a developing country. However, partly due to recent exchange rate movements, Australia and Brazil have had their prices tempered in US dollar terms.

Most important, Japan is no longer an outlier in most categories due to a weaker JPY and the cumulative impact of years of deflation. There are many cities in the world that are now more expensive than Tokyo !!!!

The Random Walk: Mapping the World’s Prices 2014  -DBAG AG 2014

Figure 1: Relative price levels as implied by IMF’s PPP (US=100): The PPP conversion rates as published have been adjusted with actual foreign exchange rates (as on 07 April 2014 for 2014 figures) to derive the implied price levels.


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