Price Levels of Food, Beverages, and Tobacco 2024: How Ireland Compares

Introduction

Purchasing Power Parities (PPPs) are indicators of price level differences across countries. PPP surveys run by the CSO are funded by the European Union through annual grants administered by Eurostat. PPPs indicate how many currency units a given quantity of goods and services will cost in different countries. PPPs can thus be used as currency conversion rates to convert expenditures expressed in national currencies into an artificial common currency, eliminating differences in price levels across countries. This artificial common currency is referred to as the Purchasing Power Standard (PPS). PPPs are indicators primarily designed for comparison between countries rather than for comparison over time.

The PPP concept

In their simplest form, 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 Norway is NOK 80 and in Ireland it is EUR 3.00, the PPP for hamburgers between Norway and Ireland is NOK 80 to EUR 3.00, or NOK 26.6667 to the euro. In other words, for every euro spent on hamburgers in Ireland, NOK 26.6667 would have to be spent in Norway 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 Index (PLI)

Price levels as presented in this release 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 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 with the EU average, while if the price level index is lower than 100, then the country is relatively cheap compared with the EU average. The EU average is calculated as the weighted average of the national price level indices, 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 affect in such a case the 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

The price level index 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 price level indices. A depreciation of a country's currency against the euro will make the country cheaper compared with euro area countries and this will show as a decrease of the relative price level expressed in the price level index. The price level change for Turkiye observed in 2024 can be at least partly explained by fluctuations of country's currency against the Euro. In 2024 the national currency of Turkiye showed a large depreciation (38% between 2023 and 2024).

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 36 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 2024. The Price Level Indices (PLIs) presented in this article are based on annual national average prices for 508 goods in total. The expenditure shares reported in this article are based on national accounts data for 2024 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).

In Ireland the CSO priced 456 items and collected 4,855 prices. The prices were collected online from Dublin-based outlets and in shops in Dublin City, mainly supermarkets and specialty stores e.g. butcher shops, fishmongers, off licence stores etc. Price collection took place online and instore from April to May 2024.

Purchasing Power Parities (PPPs) are mainly designed for:

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 the analysis 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 which expresses the price level of a given country relative to another, or relative to a group of countries like the EU27. 

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.

PPPs are not designed for:

• Strict ranking of countries without taking statistical error margins into account
• Calculating national growth rates
• Industry-specific output and productivity comparisons
• Cost-of-living comparisons for individuals
• Assessing potential undervaluation or overvaluation of currencies or use as equilibrium exchange rates. 

What type of Products are priced?

As already outlined, Price Level Indices are derived from Purchasing Power Parities. Purchasing Power Parities, in their most elementary form, are price ratios for a comparable product (a good or a service) in different countries. Prices in the national currency serve as a starting point. Comparisons on the basis of PPPs are thus founded on ratios of purchaser prices in different currencies for identical or comparable products (e.g. 1 kg rice, 1 bottle of whiskey). These goods and services are carefully defined in detailed product descriptions, at a European level, prior to the price survey and are selected taking into account their representativity.

An overview of the product types for the Food, Beverages and Tobacco survey is given below:

• 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. Note: the Deposit Return Scheme fee was not included in prices collected for products where this fee applied;
• alcoholic beverages: spirits, wine, beer. Note: the Deposit Return Scheme fee was not included in prices collected for products where this fee applied;
• tobacco: tobacco.

Survey prices to National prices

After each survey all countries are required to provide Eurostat with spatial adjustment factors in order to adjust average prices obtained from one or more locations within the economic territory of a participating country to national average prices.  According to the PPP Regulation they are required to measure regional differences in price levels once every six years.

The spatial adjustment factors Ireland submitted were based on Consumer Prices data.

National prices to annual national prices

The prices collected, irrespective of whether they are adjusted capital city prices or national prices supplied directly by countries, refer to the point in time when the survey was conducted. For the Food, Beverages and Tobacco Survey this was Q2 2024. They are not annual prices and need to be adjusted accordingly. To this end, participating countries are required to provide Eurostat or the OECD with monthly temporal adjustment factors with which the national survey prices can be converted to national annual prices. Ireland supplies Eurostat with the required Harmonized Index of Consumer Prices (HICP) data for this purpose.

Type of prices collected

The aim of the survey is to collect the prices that purchasers would have to pay if they were to actually purchase the goods and services specified at the time of the survey. For the purpose of the Food, Beverages and Tobacco survey, VAT and other indirect taxes, e.g. excise duty, are included. For the 2024 survey, discounts were included.

Monitoring price trends over time

The Consumer Price Index (CPI) is the official measure of inflation for Ireland and should be used to monitor the development of prices for Ireland. The CPI is designed to measure the change in the average level of prices (inclusive of all indirect taxes) paid for consumer goods and services by all private and institutional households in the country and by foreign tourists holidaying in Ireland. The basket of items priced for the CPI is representative of consumer spending within Ireland. The weights used to construct the CPI represent the expenditure by Irish consumers. The weights for the items in the CPI basket are taken from the Household Budget Survey (HBS) and are updated annually using information on consumer expenditure from the National Accounts Household Final Monetary Consumption Expenditure (HFMCE).

The European Union-Harmonised Indices of Consumer Prices (EU-HICP) is calculated in each Member State of the EU. The purpose of the EU-HICP is to allow the comparison of consumer price trends in the different Member States. The methodology currently used for the construction of the national CPI for Ireland is identical to that recommended for the HICP and the two indices only differ in respect of the coverage of certain goods and services and the treatment of insurance. Thus, the EU-HICP can be used to compare the rate of price change for Ireland against other countries.