Comparative prices for the EU

Rory O'Farrell: Eurostat has brought out an interesting publication today on comparative prices.

This index is based on consumer expenditure, so one should look at the detail. Ireland is still relatively expensive, the 5th most expensive in Europe for consumers.

There are some puzzling figures that often occur in these comparisons. Ireland imports clothing and electronics, but these are relatively cheaper in Ireland. We export food and non-alcoholic beverages, which are relatively more expensive. Its unclear quality is adjusted for, though they do their best. For example, I certainly consider Irish butter (and dairy products in general) to be of a higher quality to that available in Belgium. However, electronic goods can probably be easily compared across countries.

What I find most interesting is that restaurants and hotels are 29% above average (Italy is 7% above the average). This is interesting as in 2008 labour costs for Italy and Ireland were identical for this sector, and in Italy they have relatively increased. So the cause of higher prices must lie elsewhere (such as food prices, excise duty on alcohol, or rent).

Ireland is the most expensive for cigarettes and alcohol. But this needn't worry us to much from a structural competitiveness standpoint, as the high excise duty is part of our social policy which aims to curtail the consumption of such items.

Its also interesting to make a comparison to 'comparative price levels' which is an index based on the whole economy (including government and business expenditure). Here, in 2010 the Irish level is only 12.1% above the EU average, and 6.3% above the EU15 (the lowest for about 10 years). This shows that consumer prices are more out of line than prices faced by business and government.

Posted in: Economics

Tagged with: Prices

Dr Rory O'Farrell     @r_o_farrell

Rory O'Farrell is an economist lecturing in TU Dublin. He previously worked for the OECD and for NERI.