Worldwide Cost of Living 2023 (The Economist)

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Of the ten categories in our price index, utility prices rose the most slowly over the past year, reflecting the waning ³ impact of Russia's invasion of Ukraine in 2022.

Chinese cities have fallen in the rankings, with four cities on our list of biggest movers down, amid ⁴ slow economic recovery after the pandemic, subdued ⁵ consumer demand and depreciation of the currency ⁶. The Russian cities of Moscow and St Petersburg experience the biggest drop in the rankings as sanctions ⁷ weakened the rouble.

We continue to exclude the city from our global inflation average to avoid skewing ⁸ the calculations.

Many cities across the world continue to struggle with a cost-of-living crisis, which has sent prices soaring ⁹ over the past two years.

The supply-side shocks that drove price increases in 2021-22 have reduced since China lifted ¹⁰ its covid-19 restrictions in late 2022, while the spike ¹¹ in energy prices seen after Russia invaded Ukraine in Februray 2022 has also eased. In some advanced economics, such as the US, Australia and the UK, consumer demand has proved surprisingly resilient ¹² to the aggrasive pace of monetary tightening ¹³ that started in 2022. EIU estimates that global consumer price of inflation (CPI) in 2023 will come in at 7.4%, the same rate taht our avarage WCOL inflation suggests, down from the 9.2% CPI reported for 2022.

Zurich moved up from six place to Singapore at the top, bumping ¹⁴ New York (which tied with Singapore for first place last year) down to third place. As our WCOL index relies on converting local-currency prices into US dollars (as a common currency), Zurich's rise partly reflects the strength of the Swiss Franc, as well as high price for groceries, household goods and recreation ¹⁵.

Tying for third place ¹⁶ this year is anothe Swiss city, Geneva, followed by Hong Kong in fifth and Los Angeles (US) in sixth position.

However, our 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 ¹⁷ some goods in Tel Aviv, thereby affecting prices.

The cheapest city in our rankings is still Damascus, even though its WCOL price basket rose by 321% year on year in local-currency terms (amid lifting of government subsidies ¹⁸ and devaluation of the currency, which increased import costs) .

Prices have also been buoyed ¹⁹ by strong inward investment, particularly in Mexico.

Utility prices are rising slowly; food prices continue to surge.

Meanwhile, inflation in grocery items have been particularly sticky as many food manufactures and retailers ²⁰ passed on higher costs to their customers. EIU's commodity index of food, feedstuffs ²¹ and beverages, despite having fallen year on year, is still over 50% higher for 2023 than it was in 2019, owing to ²² difficulty in shipping grains and other foods out of Ukraine and Russia, as well as weather events affecting harvests across the world.

Inflation in east Europe has been rapid across the categories, from domestic help (at 13.2%) to groceries (at 9.7%). The result is that 9 of the 13 eastern European cities have risen in the WCOL rankings, and by a hefty ²³ average of nearly 17 places.

The slowdown in flation in 2023 has been, at best, modest. In 2024 we expect the lagged ²⁴ impact of interest-rate rises to slow down economic activity, and in turn, consumer demand. But upside risks remain-further escalations ²⁵ of Isreal-Hamas war would drive up energy prices, while a greater than expected impact from El Nino would push up food prices even further. Regional disparities ²⁶ may also widen, with developed contries coming close to meeting central bank targets of 2% CPI, but many developing markets could continue to see prices soar.

The survey has been designed to enable human resources and finance managers to calculate cost-of-living allowances and build compensation packages for expatriates ²⁷ and bussiness traverllers.

These include prices of food, drink, clothing, household supplies and personal care items, home rents, transport, utility bills, private schools, domestic ²⁸ help and recreational costs.Items are updateed or revised ²⁹ periodically to reflect shifts in purchaseing habits.