• Supply chain problems, government actions, fall in incomes and changes in lifestyle due to the coronavirus (Covid-19) pandemic have impacted prices across the globe.

• Currency fluctuations caused by Covid-19 saw cities in the Americas, Africa and Eastern Europe become less expensive since last year, while Western European cities have become costlier.

• With many shops closed during lockdowns, the prices of essential products have been more resilient than those of non-essential goods.

• Supply chain problems and increased demand pushed up prices of consumer electronics, while a fall in demand led to the steepest decline in clothing prices.

• The EIU expects many of these price trends to continue into 2021, as spending will remain restricted and prices under downward pressure.

Hong Kong, Paris and Zurich are the world’s most expensive cities, according to The EIU’s 2020 Worldwide Cost of Living (WCOL) Survey. The survey, which compares the price of a basket of 138 items in about 130 cities around the world, sees the two European cities gain four places over their previous ranking to overtake Singapore and Osaka. 

Singapore and Osaka, which have been dislodged from their joint-first with Hong Kong, find themselves at fourth and fifth ranks, respectively, with Osaka tying with Tel Aviv. 

The movement of Paris and Zurich to join Hong Kong at the top spot was spurred on by the rise of the Euro and Swiss Franc against the US dollar, as well as the comparative decline in the cost of living in the two Asian cities that previously sat at the top of the table.

The COVID-19 pandemic has caused the US dollar to weaken while western European and north Asian currencies have strengthened against it, which in turn has shifted prices for goods and services. The pandemic has transformed consumer behaviour, as lockdowns and trends such as working from home have increased the prices of consumer electronics and meal-at-home kits have taken the place of restaurant dining for middle-class families.

Although much will depend on the course of the pandemic, we expect many of the above price trends to continue into 2021. With the global economy unlikely to return to pre-pandemic levels until 2022, spending will remain restricted and prices under downward pressure. Many price-conscious consumers will prioritise spending on staples, home entertainment and faster internet access. Big-ticket items, as well as clothing and out-of-home recreation, will continue to struggle.

UPASANA DUTT, HEAD OF WORLDWIDE COST OF LIVING AT THE ECONOMIST INTELLIGENCE UNIT

New York, the city the index is benchmarked against, and Los Angeles both fell compared to their ranking in the last index. New York fell to joint seventh with Geneva, and Los Angeles fell to ninth, a spot it shared with Copenhagen.

The coronavirus pandemic has impacted spending habits all over the world, with the prices of essential goods proving more resilient than those deemed non-essential. However, this translates to prices for staples, such as coffee, cheese, rice and orange juice, remaining flat, rather than necessarily increasing.

Clothing was the only category to see an average fall in the index, despite a shift to online retailing, many consumers delayed wardrobe changes. On the other hand, consumer electronics (categorised within recreation) saw the largest rise, in line with the entire category. This particular rise can be attributed to production shortages and increased demand as people moved to working from home.

This year’s biggest mover was Tehran, which saw a move up the rankings of 27 places, as the country faces US sanctions and a consequential reduced supply of goods.

Download a free version of the report “Worldwide Cost of Living”