The establishment of common rules for the provision of basic information on purchasing power parities and for their calculation and dissemination is governed by Regulation (EC) No 1445/2007 of the European Parliament and the Council. The purchasing power parities published here by the Federal Statistical Office in tables, press releases etc. are co-financed by the European Union.
Purchasing power parities (PPP) indicate how many units of a currency have to be paid for a specific volume of goods and services in different countries.
Purchasing power parities are calculated to convert macroeconomic aggregates such as the gross domestic product (GDP) into a uniform currency and thus make them comparable internationally.
The statistical population of price surveys for place-to-place price comparisons in the European Union (EU) is the uses side of the gross domestic product. Included are, among others, household final consumption expenditure, government final consumption expenditure and gross fixed capital formation (mainly construction and machinery).
Purchasing power parities are available also for household final consumption expenditure. It comprises the expenditure of all domestic households on goods and services that are used to directly satisfy individual needs.
Purchasing power parities are published in the same dimension as exchange rates, with the basic currency depending on the respective comparison programme. In Eurostat’s European Comparison Programme (ECP) with 36 participating countries, purchasing power parities are quoted as [unit of domestic currency per unit of purchasing power standard (PPS)]. The purchasing power standard is an artificial currency determined on the basis of the weighted average of the purchasing power of the European Union Member States' individual national currencies. The relation between the purchasing power parity and the respective exchange rate is reflected by the price levels and in contrast to the purchasing power parity is standardised not to 1 but to 100. The exchange rates of the countries’ currencies to the euro are used to calculate price levels.
The final consumer prices of several thousand goods and services (products) are included in the purchasing power parities of the European Comparison Programme (ECP). The products selected should be available in as many countries participating in the Comparison Programme as possible and be important for the market (representative products). These products are used to calculate price ratios which indicate how many units of foreign currency are needed to purchase the same volume of a good or service or of a number of goods and services available in the domestic territory for one unit of the domestic currency.
Prices for household final consumption expenditure are collected from a representative selection of retail shops, online dealers and service providers offering goods and services for private consumption. The prices monitored are those of products or product offers specified by the Statistical Office of the European Union (Eurostat). The goods and services constituting the basket of products are selected in a Europe-wide pre-survey with regard to their international comparability and representativeness. As a consequence, prices of products have to be collected that are representative of the domestic market but also prices of products that are representative in the other countries included in the comparison but not representative in the domestic territory.
All Member States of the European Union (EU) and some other European countries participate in the European Comparison Programme (ECP) coordinated by the Statistical Office of the European Union (Eurostat). Purchasing power parities are calculated for each individual state. In addition, they are determined for the EU and for the Euro area.
Data and detailed information on Eurostat’s European Comparison Programme are available at:
Eurostat - Purchasing Power Parties
The Organisation for Economic Co-operation and Development (OECD) is also involved in the work under the European Comparison Programme (ECP). The OECD additionally coordinates the price collection and calculation for its non-European member states, for example Australia, Chile, Mexico.
For more information please refer to:
OECD Purchasing Power Parities
Currently more than 170 states participate in the International Comparison Programme (ICP) of the World Bank.
Worldbank Purchasing Power Parities
The price surveys for place-to-place price comparisons in the European Union (EU) comply with the extensive provisions of the underlying legislation and the Methodological Manual issued by Eurostat and the OECD, which documents the methodological guidelines and requirements.
Eurostat - OECD Methodological manual on purchasing power parities (2012 edition)
Determining purchasing power parities is a joint effort of all countries participating in the comparison programme, with the quality depending on a country’s own data and the data of all participating countries. Nevertheless, there is no validation of individual data but only of national average prices of individual items. At the finest level of detail, too, only highly aggregated results are published.
The purchasing power parities published monthly by the Federal Statistical Office for household consumption purposes are updated by means of inflation rates (Harmonised Index of Consumer Prices) and exchange rates (EU-27). The categories (such as fish) are processed using the respective subindices according to individual consumption by purpose. The purchasing power parity is divided by the nominal exchange rate to calculate the price level. All price levels published on the ‘International comparison of prices’ page are updated results that are well suited for planning stays in foreign countries.
Calculation examples:
1.
€ 1000 are to be converted into Swiss francs to obtain an amount of money with the same purchasing power, to be able to buy the same volume of goods and services in Switzerland (CH) and Germany (DE).
June 2022
PPP CH=1.6998 PPP DE=1.0676
Formula:
Amount of Swiss francs with the same purchasing power = PPP CH / PPP DE * amount in EUR
Calculation:
Amount of Swiss francs with the same purchasing power = 1.6998 / 1.0676 * 1000 = 1592.17
This means that 1592.17 Swiss francs have the same purchasing power in Switzerland as €1000 in Germany.
2.
A salary of 4000 Swiss francs is to be converted into an amount in Euros, which has the same purchasing power (June 2022).
Formula:
Amount of euros with the same purchasing power = PPP DE / PPP CH * amount of foreign currency
Calculation:
Amount of euros with the same purchasing power = 1.0676 / 1.6998 * 4000 = 2512.30
A Swiss person who earns 4000 Swiss francs has to negotiate a salary of €2512.30 to be able to buy the same volume of goods and services as in Switzerland.
