Sydney sneaks into Top 10 as rising energy prices send inflation soaring globally, Economist Intelligence Unit survey finds
New York was the world’s most expensive metropolis in 2022, sharing the unwanted title with Singapore, as soaring energy prices doubled the inflation rate across the major global cities, according to the Economist Intelligence Unit’s annual survey.
Last year’s leader Tel Aviv dropped to third, while Sydney snuck into the Top 10 and Moscow and St Petersberg in Russia scaled the rankings by as much as 88 places as sanctions and buoyant oil prices propelled prices higher, the EIU’s Worldwide Cost of Living report found.
Venezuela’s capital, Caracas, with its 132% price increase in 2022, was well down on the 2019 hyperinflation rate of more 25,000%, but remained too high to be included in the survey. The average inflation of 8.1% in local currency terms was still the highest in more than two decades of surveys, and up from 3.5% last year and 1.9% in 2020.
A stronger currency was also one factor driving cities up the rankings. Six of the eight highest climbers (after the two Russian cities) were US cities, led by Atlanta going from 42nd to 46th in the rankings of the 172 cities surveyed. The US currency has strengthened sharply against almost all currencies as the US Federal Reserve hiked interest rates and signalled more rises to come.
Cities in countries where their currency slumped featured among those dropping down the listing of most costly cities. Japan’s Tokyo and Osaka were among the 10 biggest drops, ending at 37th and 43rd respectively, down from 13th and 10th in 2021.
Stockholm and Luxembourg dropped the most, both losing 38 places to 99th and 104th. Damascus in Syria and Tripoli in Libya retained their slots as the cheapest cities surveyed.
Singapore’s placing at the top of the index was little surprise. The city-state was the equal-second most expensive city in 2021 and has been No 1 in eight of the past 10 years. This year was the first time the Big Apple has been ranked as No 1.
The three UK cities surveyed all dropped down the rankings, with London now 28th from 17th in 2021. Edinburgh came in at 46th, down from 27th, while Manchester was 73rd most expensive compared with 41st last year.
Australian cities generally edged up the rankings, with the harbour city rising from 14th last year to 10th spot in 2022. Melbourne moved up to 15th from 16th last year, while Brisbane was 32nd up from 36th. Perth bucked the trend, dropping two spots to 73rd.
The global surge in inflation had been gathering steam before Russia’s invasion of Ukraine in February caused disruptions to supplies of key commodities, particularly food. Subsequent sanctions on Russia prompted further surges in oil, gas and other energy prices.
The biggest single factor that contributed to higher inflation was rising gasoline prices. A litre of the fuel cost 22% more on average in local currency than it did a year prior.
Western European cities saw a 29% increase in gas and electricity prices, nearly tripling the global average increase of 11% as the area scurried to find alternatives to Russian energy.
The price of recreational goods and services increased “subduedly,” which provided consolation for some of those increases. The EIU stated that “[T]his may reflect softer demand as consumers focus spending on essentials.”
The EIU predicts that, barring some unforeseen catastrophe, cost increases will start to slow down in 2023 as higher interest rates relieve some of the pressure on demand and supply-chain bottlenecks start to loosen up. Given the fraying of its zero-Covid policy, China might continue to be a wildcard.
The good news is that rising interest rates may be causing prices to start to decline in some nations.
Unless the conflict in Ukraine intensifies, the report stated, “we predict that commodity prices for energy, food, and supplies like metals are likely to fall sharply in 2023 compared with 2022 levels, although they are likely to stay higher than previous levels.” The expected increase in global commodity prices in 2023 is 6.5%, a slower rate than the 9.4% seen in 2022.