Price level for consumer goods and services, 2008

In 2008, the price levels in general were highest in the northern European countries. Southern and central European countries as well as the United Kingdom were average, while countries in the east and south east of Europe had the lowest price levels. For household final consumption expenditure, Denmark and Norway had the highest price levels; 41 and 39 per cent respectively above the average price level of the 27 EU member states (EU27). The former Yugoslav Republic of Macedonia, Bulgaria and Albania had the lowest price levels; around 50 per cent below the average of EU27.

Financial crisis takes its toll

Some effects of the financial crisis could be seen in the results. A depreciation of a country’s currency against the euro will make the country cheaper in comparison to other countries and this will manifest itself as a decrease in the relative price level for the country. For example, in previous surveys, Iceland was among the most expensive European countries together with Norway. However, after a depreciation of the Icelandic currency of 45 per cent between 2007 and 2008 compared to euro, Iceland now appears with a more moderate price level seen from abroad. An equivalent effect could be seen in the price level indices for the United Kingdom (depreciation of 16 per cent between 2007 and 2008).

Norway most expensive for several product groups

Norway is the most expensive country for six out of 12 product groups in the survey; food and non-alcoholic beverages, alcoholic beverages and tobacco, clothing, footwear, transport services and restaurants and hotels. However, there are exceptions. For the product group communication, the Norwegian price level is 13 per cent below the average of EU27. The price level for furniture, carpets and other floor coverings is also moderate in Norway; only 8 per cent above EU27.

Differences in taxation

A contributing factor to the high Norwegian price levels for some product groups is differences in taxation across countries. This especially concerns the indices for alcoholic beverages and tobacco, as well as restaurants and hotels and personal transport equipment. In such a coherence it is also important to notice that a high price level is often correlated with a high level of income. The indices in this article exclusively show relative differences in price levels between countries, and should not be interpreted as indicators for the purchasing power of the population in different countries.

Highest price dispersion for alcoholic beverages and tobacco

As a part of the survey results, one could also take a closer look at the price dispersion between the countries (variation coefficients). Alcoholic beverages and tobacco is the product group with the highest price dispersion. For this product group, the Norwegian price level as an example is four times as high as in Bulgaria. The large differences are mainly due to differences in taxation between the countries. The product groups transport services and restaurants and hotels also have a high price dispersion. One reason could be that the price level of services tends to correlate with countries’ widely different relative income levels. Furthermore, consumer services are less exposed to global competition than consumer goods.

Consumer electronics, clothing and footwear are the product groups with the lowest price dispersion.

A total of 37 European countries participated in the survey: The 27 EU member states, the three candidate countries (Croatia, the Former Yugoslav Republic of Macedonia and Turkey), three EFTA countries (Norway, Iceland and Switzerland) and four Western Balkan countries (Albania, Bosnia-Herzegovina, Montenegro and Serbia).

The results of the survey are expressed in ”price level indices”, which provide a comparison of a country’s price level with respect 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 and vice versa.

Read more in Eurostat’s ”Statistics in Focus” .

Tables:

• Table 1 Price level indices and variation coefficients for groups of goods and services 2008. EU27=100