GDP per capita, consumption per capita and price level indices
From Statistics Explained
- Data from December 2012, most recent data: Further Eurostat information, Main tables and Database.
This article focuses primarily on gross domestic product (GDP) per capita in the European Union (EU) but also looks at the level of actual individual consumption (AIC) per capita and at countries' price level indices. The analysis covers the 27 EU Member States, three EFTA Member States (Iceland, Norway and Switzerland), acceding state Croatia, as well as four EU candidate countries (the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey), and two potential candidate countries (Albania, Bosnia and Herzegovina).
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Main statistical findings
In 2011, Bulgaria was the country with the lowest level of GDP per capita among all EU Member States, at less than 50 per cent of the EU average. The Netherlands was 31 per cent above that average; only Luxembourg recorded a higher level of GDP per capita. Levels of AIC were somewhat more homogeneous, but still showed substantial differences across EU. The highest price level among the EU Member States was observed in Denmark at 47 per cent above the EU-27 average.
Relative volumes of GDP per capita
Countries’ volume indices of GDP per capita are shown in the left-hand part of Table 1 (per-capita volume indices are explained in Data sources and availability).
The dispersion in GDP per capita across the EU Member States is quite remarkable. Luxembourg has by far the highest GDP per capita among all the 37 countries included in this analysis, being more than two and a half times above the EU-27 average, and 6 times higher than Bulgaria, which is the poorest EU Member State as measured by this indicator. One particular feature of Luxembourg's economy which to some extent explains the country's very high GDP per capita is the fact that a large number of foreign residents are employed in the country and thus contribute to its GDP, while at the same time they are not included in the resident population.
The Netherlands comes out second among the EU Member States, at 31 per cent above the EU-27 average. However, the EFTA Member States Norway and Switzerland have a higher level of GDP per capita. Ireland shows a stable volume index among the top EU Member States. In 2011, Austria has the same position as Ireland, experiencing a continuous increase in its GDP per capita.
Other EU Member States with a GDP per capita of more than 20 per cent above the EU-27 average are Sweden and Denmark. Germany and Belgium are at the same level of about 20 per cent above the average, followed by Finland and EFTA Member State Iceland. The United Kingdom and France show a GDP per capita level of nearly 10 per cent above the EU-27 average.
Italy and Spain are at a GDP per capita level around the EU-27 average, being about 5% higher than Cyprus. Malta, Slovenia and the Czech Republic are all clustered between 15 and 20 per cent below the EU-27 average, followed by Greece, whose GDP per capita has decreased significantly due to the economic crisis.
Portugal and Slovakia have GDP per capita levels around 25 per cent of the EU-27 average. Estonia, Lithuania, Hungary and Poland are all very close to around 35 per cent below the EU-27 average. Croatia – the acceding state - has a slightly higher volume index than Latvia, both around 40 per cent below the EU-27 average.
Candidate country Turkey has a higher level of GDP per capita than EU Member States Romania and Bulgaria, at around half the EU-27 average. The other candidate countries – Montenegro, Serbia and the former Yugoslav Republic of Macedonia - are about 60 per cent or more below the EU-27 average. Finally, two potential candidate countries - Albania and Bosnia and Herzegovina - both have GDP per capita of 70 per cent below the EU-27 average.
The changes in GDP per capita can be partially explained by adjustments in population figures resulting from the Census carried out in most of the countries in 2011.
Relative volumes of consumption per capita
While GDP per capita is mainly an indicator of the level of economic activity, Actual Individual Consumption (AIC) per capita is an alternative indicator better adapted to describe the material welfare situation of households.
In national accounts, household final consumption expenditure (HFCE) denotes expenditure on goods and services that are purchased and paid for by households. Actual individual consumption, on the other hand, consists of goods and services actually consumed by individuals, irrespective of whether these goods and services are purchased and paid for by households, by government,or by non-profit institutions. In international volume comparisons, AIC is often seen as the preferable measure, since it is not influenced by the fact that the organisation of certain important services consumed by households, like health and education services, differs a lot across countries. For example if dental services are paid for by the government in one country, and by households in another, an international comparison based on HFCE would not compare like with like, whereas one based on AIC would.
Countries’ volume indices of AIC per capita can be found in the right-hand part of Table 1.
Generally, levels of AIC per capita are more homogeneous than GDP but still there are substantial differences across the EU Member States. To illustrate this, in 2011, eight countries are clustered in the range between 98 and 113 per cent of the EU-27 average, while the levels of GDP per capita for those countries vary between 94 and 131 per cent.
Luxembourg is the country with the highest level of AIC per capita in the EU, 40 per cent above the average of the EU-27. However, while Luxembourg can be said to belong to "a division of its own" in terms of GDP, this is less so for AIC. One reason for this is that cross-border workers contribute to GDP in Luxembourg while their consumption expenditure is recorded in the national accounts of the country of their residence.
The EU Member State with the second highest AIC per capita is Germany at 20 per cent above the average, around the same as its GDP per capita. Ireland's AIC per capita is only marginally above the average EU-27 level, while GDP per capita is 29 per cent higher than the average.
Price levels in Europe
The price level adjustment factors used to derive the volume indices in Table 1 can also be applied in an analysis of countries' price levels. Table 2 shows countries' price level indices to the right, with the EU-27 average at 100, for AIC only. It also shows the exchange rates applied in the calculation of the price level indices. In the following, only the price level indices of AIC will be discussed, since this is closer to the concept of price levels that most people are familiar with than a price level indicator based on GDP.
Denmark has the highest price level among the EU Member States, 47 per cent above the EU-27 average. However, EFTA Member States Switzerland and Norway have higher price levels which in 2011 exceeded the overall EU-27 level by more than 60 per cent. Other countries with price levels more than 20 per cent higher than the EU-27 average are Luxembourg, Sweden and Finland. Ireland, Belgium, the EFTA Member State Iceland, France, the Netherlands and Austria all have price levels between 10 and 20 per cent above the average. Italy, the United Kingdom and Germany have price levels of up to 5 per cent above the EU-27 average.
Spain, Greece and Cyprus have price levels of less than 10 per cent below the EU-27 average, followed by Portugal and Slovenia being at the same level of 15 per cent below the EU-27 average.
At the lower end of the table, we find several countries with price levels clustered between 25 and 50 per cent below the EU average: Malta, the Czech Republic, Estonia and the acceding state Croatia. Latvia, Slovakia, Lithuania, Hungary, the candidate country Turkey, Poland and Romania also fall within this range.
The lowest price levels – half the EU average and below – are found in Montenegro, Bosnia and Herzegovina, Serbia, Bulgaria, Albania and in the Former Yugoslav Republic of Macedonia.
Exchange rates are crucial in determining price level indices, and exchange rate movements consequently often have a big impact on the development of price levels over time. In fact, several of the major price level changes observed between 2009 and 2011 can be at least partly explained by fluctuations of country's currencies against the euro.
In 2011, the national currencies of Switzerland, Sweden, the Czech Republic and Norway continued to appreciate against the euro. The most significant depreciations were observed in Turkey and Poland. However, these movements have been less substantial between 2010 and 2011 than between 2009 and 2010.
The Icelandic króna, for which significant depreciation was reported in recent years, shows currently a relatively stable development.
The last three rows in Table 2 show the coefficients of variation of the price levels for three groups of countries: the euro area (EA-17), the 27 EU Member States, and the entire group of 37 countries. A time series of these coefficients can be interpreted as a rudimentary price convergence indicator.
These figures tell us that first, and unsurprisingly, the price dispersion is much less pronounced in the euro area than in the EU as a whole and in the 37-country group, which can be partially impacted by the volatility of exchange rates. Second, while price levels are marginally converging within the euro area, this seems not to be the case in the EU as a whole, or in the complete group of countries.
Data sources and availability
The data in this article are produced by the Eurostat-OECD Purchasing power parities programme. The full methodology used in the programme is described in the Eurostat-OECD Methodological manual on purchasing power parities which is available free of charge from the Eurostat website (see under "Further Eurostat information").
The volume indices of GDP and AIC, shown in Table 1 and in Figure 1, represent the real volume of GDP and AIC per capita. "Real volumes" means that the figures have been adjusted for price level differences across countries, using PPPs, and are expressed in relation to the European Union average (EU-27=100). If the GDP (or AIC) volume index per capita is higher than 100, that country’s level of GDP (or AIC) in per-capita terms is higher than the corresponding level for the EU as a whole. The indices should be interpreted with some caution, allowing for error margins. For example, in 2011, the GDP volume index per capita for Malta was 85, while that of Slovenia was 84. In reality, these figures show that the GDP per capita is of similar magnitude in the two countries.
Price level indices as presented in this article 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 with respect to the European Union average; if the PLI is higher than 100, the country concerned is relatively expensive compared to the EU average and vice versa. The EU average is calculated as the weighted average of the national PLIs, weighted with the expenditures 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.
Context
GDP per capita volume indices (on a regional basis - see GDP and household accounts at regional level) are used in the allocation of Structural Funds within the EU. Regions where real GDP per capita is less than 75 % of the EU average (taken over a period of three years) are eligible for support from the Structural Funds.
Eurostat is co-operating closely with other international institutions in the production and dissemination of PPPs. It co-operates with the OECD to produce PPP statistics for the OECD countries and with the World Bank and the International Monetary Fund (IMF) to produce global PPP data. See external links below.
Further Eurostat information
Publications
- Substantial cross-European differences in GDP per capita - Statistics in Focus 47/2012
Main tables
- GDP per capita in Purchasing Power Standards (PPS)
- Comparative price levels
- Price convergence between EU Member States
Database
- Purchasing power parities (PPPs), price level indices and real expenditures for ESA95 aggregates (prc_ppp_ind)
- Price convergence indicator (coefficient of variation of comparative price level index for final household consumption in %) (prc_ppp_conv)
Dedicated section
Methodology / Metadata
- Eurostat-OECD Methodological manual on purchasing power parities
- GDP per capita in PPS (ESMS metadata file - tsieb010_esms)
- Purchasing power parities (ESMS metadata file - prc_ppp_esms)
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