GDP per capita, consumption per capita and price level indices

From Statistics Explained

Data from June 2014. Most recent data: Further Eurostat information, Main tables and Database.

This article presents the most recent analysis of purchasing power parities and related economic indicators (gross domestic product (GDP) per capita, level of actual individual consumption (AIC) per capita, countries' price level indices) in the European Union (EU) and some other countries for 2010, 2011, 2012 and 2013, but focusing primarily on the latest reference year. The countries included in the comparison are the 28 EU Member States, three EFTA Member States (Iceland, Norway, and Switzerland), four EU candidate countries (the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey) and two potential candidates (Albania, Bosnia and Herzegovina).

In 2013, Austria recorded the second highest level of GDP per capita in the EU-28, at 29 % above the EU average, with only Luxembourg at a still higher level. Bulgaria was the Member State with the lowest per-capita GDP, at less than 50 % of the EU average. Levels of actual individual consumption were somewhat more homogeneous, but still showed significant differences across Europe. The highest price level among the EU Member States was observed in Denmark, at 44 % above EU-28 average.

Figure 1: Volume indices of GDP and AIC per capita, 2013 (EU-28=100) - Source: Eurostat (tec00114) - see country codes
Table 1: Volume indices per capita, 2010-2013(EU-28=100) - Source: Eurostat (tec00114) - see country codes
Table 2: Exchange rates and price level indices for AIC, 2010-2013 (EU-28=100) - Source: Eurostat (prc_ppp_ind) - see country codes

Main statistical findings

Relative volumes of GDP per capita

In international comparisons of national accounts data, like GDP per capita, it is desirable not only to express the figures in a common currency, but also to adjust for differences in price levels. Failing to do so would result in an overestimation of GDP levels for countries with high price levels, relative to countries with low price levels.

Countries’ volume indices of GDP per capita are shown in the left-hand part of Table 1. 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 comparison, being more than two and a half times above the EU-28 average. 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.

Having experienced a steady increase in GDP per capita, Austria comes out second among the EU Member States, at 29 % above the EU-28 average. The EFTA Member States Norway and Switzerland have a higher level of GDP per capita. Bulgaria records the lowest level of this indicator among the EU Member States.

Other EU Member States with a GDP per capita of more than 20 % above the EU-28 average are Sweden, Netherlands, Ireland, Denmark and Germany. Belgium is less than 20 % above the average, followed by EFTA Member State Iceland and Finland. France, the United Kingdom show a GDP per capita level of up to 10 % above the EU-28 average.

Italy, Spain and Malta are at GDP per capita of less than 10 % below the EU-28 average. Cyprus and Slovenia are around 15% below the EU-28 average, followed by the Czech Republic. Slovakia, Portugal and Greece are both around 25 % below that average, closely followed by Lithuania and Estonia. GDP per capita of Poland, Latvia and Hungary are clustered about 35% below the EU-28 average. These countries are followed by Croatia with GDP level of around 40 % below the EU-28 average. Candidate country Turkey has a higher level of GDP per capita than EU Member States Romania and Bulgaria, at around 45% below the EU-28 average. The other candidate countries – Montenegro, Serbia and the Former Yugoslav Republic of Macedonia - are about 60 % or more below the EU-28 average. Finally, two potential candidates - Albania and Bosnia and Herzegovina - both have GDP per capita of around 70 % below the EU-28 average.

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 of households.

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.

Luxembourg is the country with the highest level of AIC per capita in the EU, 38 % above the average of the EU-28. 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 25 % above the average, the same as its GDP per capita. Ireland's AIC per capita is marginally below the average EU-28 level, while GDP per capita is around 25  % higher than the average.

Price levels in Europe 

Table 2 shows countries' price levels to the right, with the EU-28 average at 100, for AIC only. It also shows the exchange rates applied in the calculation of the price level indices (see methodology described below in Data sources and availability). In the following, we will restrict our discussion to the price levels of AIC, 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 Member States, 44 % above the EU-28 average. However, EFTA Member States Switzerland and Norway have higher price levels which in 2013 exceeded the overall EU-28 level by more than 60 %. Other countries with price levels more than 20 % of the EU-28 average are Luxembourg, Sweden and Finland. Ireland, Belgium, the EFTA Member State Iceland, the Netherlands, the United Kingdom, and France Austria all have price levels between 10 and 20 % above the average. Italy and Germany have price levels of up to 10 % above the EU-28 average.

Spain, Cyprus and Greece have price levels of around 10 % below the EU-28 average, followed by Portugal and Slovenia being at less than 20 % below the EU-28 average.

At the lower end of the table, we find several Member States with price levels clustered between 25 and 50 % below the EU average: Malta, Estonia, the Czech Republic, Latvia, Slovakia, Croatia, Lithuania, candidate country Turkey, Hungary, Poland, Romania.

The lowest price levels – half the EU average and below – are found in Montenegro, Bosnia Herzegovina, Serbia, Bulgaria and Albania and in the Former Yugoslav Republic of Macedonia.

Exchange rates are crucial in determining price levels, 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 2010 and 2013 can be at least partly explained by fluctuations of country's currencies against the euro. In 2013, the national currencies of Switzerland, Sweden, Norway continued to appreciate against the euro. The most significant depreciations were observed in Turkey, Serbia and Hungary.

The last three rows in Table 2 show the coefficients of variation of the price levels for three groups of countries: the euro area (EA18), the 28 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, price levels seem to diverge within all country groups.

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.

Purchasing power parities (PPPs) are currency conversion rates that are applied in order to convert economic indicators from national currency to an artificial common currency, called the Purchasing Power Standard (PPS), which equalizes the purchasing power of different national currencies and enables meaningful volume comparisons between countries. For example, if the GDP or AIC per capita expressed in the national currency of each country participating in the comparison is divided by its PPP, the resulting figures neutralise the effect of differences in price levels and thus indicate the real volume of GDP or AIC at a common price level. When divided by the nominal exchange rate of a given year, the PPP provides an estimate of the price level of a given country relative to, for instance, the EU-28 total.

PPPs are established on an annual basis. According to the regular publication calendar, PPPs are released as preliminary estimates 12 months after the end of the reference year and revised after 24 months, while the final results are released 36 months after the end of the reference year. In addition, an early estimate of PPPs, partly based on projections, is published 6 months after the end of the reference year. This regular PPP revision and release calendar is in line with the data delivery timetable for national accounts data as given in the ESA95 Regulation 2223/1996 of 25 June 1996. Thus, the 2010 results presented in this publication should be regarded as final, while the 2011, 2012 and 2013 results are still preliminary.

In their simplest form PPPs are nothing more than price relatives that show the ratio of the prices in national currencies for the same good or service in different countries. For example, if the price of a hamburger in France is 2.84 euro and in the United Kingdom it is 2.20 pound sterling, the PPP for hamburgers between France and the United Kingdom is 2.84 euro to 2.20 pounds or 1.29 euro to the pound. In other words, for every pound spent on hamburgers in the United Kingdom, 1.29 euro would have to be spent in France in order to obtain the same quantity and quality – or volume – of hamburgers.

The indices of relative volumes of GDP and AIC per capita published in this article have been adjusted for price level differences, and are expressed in relation to the European Union average (EU-28=100). Thus, for instance, if a country's volume index is below 100, that country's level of GDP (or AIC) per capita is lower than for the EU-28 as a whole. The price level adjustment factors, referred to as purchasing power parities (cf. box 1), can also be used in comparison of countries' price levels.

Price level indices (PLIs) as presented in this publication 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. They are presented relative 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. The EU average is calculated as the weighted average of the national PLIs, weighted by the expenditures corrected for price level differences.

Volume and price level indices are not intended to rank countries strictly. In fact, they only provide an indication of the order of magnitude of the volume or price level in one country in relation to others, particularly when countries are clustered around a very narrow range of outcomes. The level of uncertainty associated with the basic price and national accounts data, and the methods used for compiling PPPs imply that differences between countries that have indices within a close range should not be over-interpreted.

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 (AIC), 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 organisations. 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.

Context

GDP per capita volume indices (on a regional basis - see GDP 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.

See also

Further Eurostat information

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

Other information

  • Regulation 2223/1996 (ESA95 Regulation) of 25 June 1996 on the European system of national and regional accounts in the Community

External links

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