Comparative price levels for food, beverages and tobacco


Data from June 2018.

Planned article update: December 2018

Highlights
Price levels for food and non-alcoholic beverages were 50 % above the EU average in Denmark and 38 % below the average in Romania in 2017.
Finland had the highest price level for alcoholic beverages in the EU in 2017, while Ireland was the most expensive for tobacco.
Price level index for food and non-alcoholic beverages, 2017
Source: Eurostat (prc_ppp_ind)

This article focuses primarily on price levels for food, beverages and tobacco in 38 European countries. The country groups included in the analysis are the 28 European Union (EU) Member States, 3 EFTA countries (Iceland, Norway and Switzerland), 5 candidate countries (Montenegro, the former Yugoslav Republic of Macedonia, Albania, Serbia and Turkey) and one potential candidate country (Bosnia and Herzegovina) and Kosovo[1].


Full article


Overview

Price levels for food, beverages and tobacco vary considerably across the EU Member States. In 2017, the prices for food and non-alcoholic beverages in Denmark were 150 % of the EU average, while in Romania they were 62 % of the EU average. Alcohol was priced in Finland at 177 % of the EU average, but at 65 % in Bulgaria. For tobacco the highest prices were observed in Ireland (208 % of the EU average), while the lowest were recorded in Bulgaria (51 %).


The results of the survey are expressed in price level indices (PLIs), which provide a comparison of countries' price levels with respect to the European Union average. Map 1 and Figure 1 show the 2017 PLIs for food and non-alcoholic beverages, while the tables present PLIs for sub-groups of products.

Price levels for food, beverages and tobacco

Table 1 shows the PLIs for four important groups: food, non-alcoholic beverages, alcoholic beverages and tobacco. These groups represent on average 16%, 2%, 2% and 3% of household expenditure respectively. For reference, the PLIs of total household final consumption expenditure (HFCE) are also presented. The highest and lowest PLIs per product group among the 28 EU Member States are marked in bold. The shaded fields indicate the highest and lowest PLIs among all 38 participating countries. At the bottom of the table, variation coefficients are provided for the euro area (EA-19), EU-15 (EU-15), the present EU-28 (EU-28) and the group of all countries participating in the program (All 38). The variation coefficient is defined as the standard deviation of the PLIs of the respective group of countries as a percentage of their average PLI.

The higher the variation coefficient, the higher is the price dispersion in the respective product group. Switzerland is the most expensive country for food, Norway for non-alcoholic beverages and tobacco and Iceland for alcoholic beverages within the group of 38 participating countries. Amongst the Member States, Denmark is the most expensive country for food and non-alcoholic beverages. Finland has the highest price level for alcoholic beverages in the EU, while Ireland is the most expensive for tobacco. The former Yugoslav Republic of Macedonia is the least expensive country of all 38 in all four product groups. Among the EU Member States, the lowest prices for food and non-alcoholic beverages are observed in Romania and for alcoholic beverages and tobacco in Bulgaria.

Price dispersion is most pronounced within the 38 country group, including both the high price EFTA countries and the mostly low price Western Balkan countries. Price dispersion is much less pronounced in the euro area than in the EU as a whole. The lowest price dispersion is found for non-alcoholic beverages, and the highest for tobacco, mainly due to large differences in excise taxation on the latter across the 38 countries.


Figure 1: Price level index for food and non-alcoholic beverages, 2017 (EU-28=100)
Source: Eurostat (prc_ppp_ind)


Table 1:Price level indices for food, beverages and tobacco, 2017 (EU-28=100)
Source: Eurostat (prc_ppp_ind)

Price levels for bread and cereals, meat, fish and dairy products

The results of the survey also provide an insight into the different sub-groups of products for all participating countries. Table 2 presents the PLIs for bread and cereals, meat, fish and dairy products. These groups represent on average 17 %, 23%, 5 % and 17 % of household expenditure on food, respectively. For comparison this table includes the PLIs for food as a whole.

Amongst all 38 countries Switzerland shows the highest price levels for bread and cereals as well as for meat and fish, while Iceland has the highest PLIs for dairy products. Within the EU Denmark is the most expensive country for bread and cereals, fish and dairy products, whilst Luxembourg is the most expensive for meat.

Among all 38 countries Romania is the cheapest country for bread and cereals, Poland for dairy products while the former Yugoslav Republic of Macedonia has the lowest PLIs for meat and fish. Among the EU Member States, the lowest price levels for bread and cereals is observed in Romania while for meat and dairy products in Poland. Fish has the lowest price level in Bulgaria.

The level of dispersion of prices is rather similar between these four product groups. Meat shows the highest price dispersion in all country groups. Within the EU, the lowest price dispersion is found for milk, cheese and eggs.

Table 2: Price levels for 4 subcategories of food, 2017 (EU-28=100)
Source: Eurostat (prc_ppp_ind)

Price levels for oils and fats, fruits, vegetables, potatoes and other food products

Table 3 shows the PLIs for three further groups of food products: oils and fats; fruits, vegetables and potatoes as well as other food products. These groups represent on average 3 %, 21 % and 14 % of household expenditure for food, respectively.

Among all 38 countries the lowest prices for oils, fats, fruits, vegetables and potatoes are observed in the former Yugoslav Republic of Macedonia and for other food products in Poland. The highest prices for almost all categories can again be observed in Switzerland, except for other food products which are the most expensive in Norway. Among the EU Member States, Poland is the most inexpensive country for oils, fats and other food products and Romania for fruits, vegetables and potatoes. Denmark is the most expensive country for oils and fats, other food and fruits, vegetables and potatoes.

Within these 3 categories, the highest price dispersion can be observed for fruits, vegetables and potatoes. (except EU-15)


Table 3: Price levels for 3 subcategories of food, 2017 (EU-28=100)
Source: Eurostat (prc_ppp_ind)

Price convergence

A comparison of the price dispersion within the EU observed on the basis of the surveys conducted since 2007 shows that for each main group of products dispersion in 2017 was lower than in 2007.

Figure 2 shows the development of the variation coefficient of the PLI for the various categories. A decrease of the variation coefficient for the Member States between 2007 and 2017 can be seen as an indication of price convergence for the respective product group. Price differences have decreased most for food and tobacco and least for alcoholic beverages.

Figure 2: Price convergence in the EU-28 by product groups, 2007 - 2017
Source: Eurostat (prc_ppp_ind)

Data sources

The data in this article are produced by the Eurostat-OECD Purchasing Power Parity (PPP) programme. The full methodology used in the programme is described in the Eurostat-OECD Methodological manual on purchasing power parities.

The PPP concept

Purchasing power parities (PPPs) are price relatives that show the ratio of the prices in national currencies of the same good or service in different countries. For example, if the price of a hamburger in France is EUR 2.84 and in the United Kingdom it is GBP 2.20, the PPP for hamburgers between France and the United Kingdom is EUR 2.84 to GBP 2.20, or EUR 1.29 to the pound. In other words, for every pound spent on hamburgers in the United Kingdom, EUR 1.29 would have to be spent in France in order to obtain the same quantity and quality – or volume – of hamburgers.

Published PPPs, usually refer to product groups or broad aggregates like gross domestic product (GDP) rather than to individual products. However, these aggregate PPPs are based on sample surveys of individual goods and services.

Price level indices

Price levels as presented in this publication are the ratios of PPPs to exchange rates. They provide a measure of the differences in price levels between countries by indicating for a given product group the number of units of common currency needed to buy the same volume of the product group or aggregate in each country.

Price level indices (PLIs) provide a comparison of the countries’ price levels relative to the European Union average: if the price level index is higher than 100, the country concerned is relatively expensive compared to the EU average, while if the price level index is lower than 100, then the country is relatively cheap compared to the EU average. The EU average is calculated as the weighted average of the national PLIs, weighted with expenditures from national accounts, corrected for price level differences.

Price level indices are not intended to rank countries strictly. In fact, they only provide an indication of the order of magnitude of the price level in one country in relation to others, particularly when countries are clustered around a very narrow range of outcomes. The degree of uncertainty associated with the basic price data and the methods used for compiling PPPs may cause minor differences between the PLIs and result in differences in ranking which are not statistically or economically significant.

The impact of exchange rate changes on PLIs

PLI for a given country is calculated as its purchasing power parity (PPP) divided by its annual average exchange rate to the euro. This implies that exchange rate movements have an impact on the PLIs. A depreciation of a country's currency against the euro will make the country cheaper in comparison to euro area countries and this will show as a decrease of the relative price level expressed in the PLI. The major price level changes observed in 2017 can be at least partly explained by fluctuations of country's currencies against the Euro. In 2017, the national currency of Iceland showed the largest appreciations against the Euro (appreciation of 10% between 2016 and 2017) while Turkey and United Kingdom showed a large depreciation (23% and 7% respectively between 2016 and 2017).

Organisation

Within the framework of the Eurostat-OECD Purchasing Power Parities (PPP) programme, surveys on prices of household goods and services are carried out cyclically by the National Statistical Institutes (NSIs) of 38 countries. Each survey cycle comprises 6 surveys, each related to a particular group of household consumption products. As 2 surveys are run per year, the whole survey cycle takes 3 years to conclude, before the next cycle starts. The prices used for this publication were collected in spring 2015 and extrapolated to annual average prices for 2017 using detailed consumer price indices. The PLIs presented in this article are based on annual national average prices for about 440 goods in total. The expenditure shares reported in this article are based on national accounts data for 2017 and represent the average over all participating countries. The national accounts data are also used as weights in the aggregation of detailed PLIs to aggregate PLIs such as for household final consumption expenditure (HFCE).

Definition of the product groups

The product groups presented in the article include the following types of products:

  • bread and cereals: rice, other cereals, flour and other cereal products, bread, other bakery products, pasta products;
  • meat: beef and veal, pork, lamb, mutton and goat, poultry, other meats and edible offal, delicatessen and other meat preparations;
  • fish: fresh, chilled or frozen fish and seafood, preserved or processed fish and seafood;
  • milk, cheese, eggs: fresh milk, preserved milk and other milk products, cheese, eggs and egg-based products;
  • oils and fats: butter, margarine, other edible oils and fats;
  • fruits, vegetables, potatoes: fresh or chilled fruit, frozen, preserved or processed fruit and fruit-based products, fresh or chilled potatoes, frozen, preserved or processed vegetables and vegetable-based products;
  • other food products: sugar, jams, marmalades and honey, confectionery, chocolate and other cocoa preparations, edible ice, ice cream and sorbet, food products n.e.c.;
  • non-alcoholic beverages: coffee, tea and cocoa, mineral waters, soft drinks and concentrates, fruit and vegetable juices;
  • alcoholic beverages: spirits, wine, beer;
  • tobacco: tobacco.

Context

Purchasing power parities (PPPs) are indicators of price level differences across countries. PPPs tell us how many currency units a given quantity of goods and services costs in different countries. PPPs can thus be used as currency conversion rates to convert expenditures expressed in national currencies into an artificial common currency, the purchasing power standard, eliminating the effect of price level differences across countries.

The main use of PPPs is to convert national accounts aggregates, like the gross domestic product (GDP) of different countries, into comparable volume aggregates. Applying nominal exchange rates in this process would overestimate the GDP of countries with high price levels relative to countries with low price levels. The use of PPPs ensures that the GDP of all countries is valued at a uniform price level and thus reflects only differences in the actual volume of the economy.

PPPs are also applied in analyses of relative price levels across countries. For this purpose, the PPPs are divided by the current nominal exchange rate to obtain a price level index (PLI) which expresses the price level of a given country relative to another, or relative to a group of countries like the EU.

The common rules for the provision of input data, and for the calculation and dissemination of PPPs, are laid down in Regulation 1445/2007 of 11 December 2007.

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Comparative price levels (tec00120)
Price and volume convergence between EU Member States (tec00121)
GDP per capita in PPS (tec00114)


Purchasing power parities (PPPs), price level indices and real expenditures for ESA2010 aggregates (prc_ppp_ind)
Convergence indicators (prc_ppp_conv)

Notes

  1. This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of Independence.