• World Price Index reveals price disparities within Europe
  
• The French Euro is significantly overvalued in relation to the dollar
  
• The German Euro is scarcely overvalued by the same yardstick
  
  

The World Price Index (WPI) measures the value of an urban selection of goods and services at purchasing power parity, reflecting the real purchasing power of different nations. With same-month prices, monthly and rolling annual averages can be created, allowing for rapid and accurate international price comparisons.


Currency Under/Overvaluation
The Eurozone has large internal inconsistencies due to the wide variation in the purchasing power of the currency within the Eurozone. For example, the Euro in France is overvalued by almost 30% in relation to the US Dollar. The Euro in Italy is likewise overvalued by almost 15%.

In contrast, the Euro in Germany is only marginally overvalued on the same measure. This internal disparity in what is notionally a single European market inevitably imposes great strains on some members of the currency union.

The Under/Over valuation data illustrated above is based on the difference between the exchange rate value of a currency and that of the US Dollar in relation to the World Price Index calculated exchange rate. The chart illustrated underneath shows that the Japanese Yen and Brazilian Real continue to be is highly overvalued compared to the Dollar, whereas the Indian Rupee and Chinese Renminbi are significantly undervalued.

An example: At official exchange rates, 66p was needed in the UK to buy a $1 basket of items in May 2013; however, the WPI shows that 75p was actually needed. Hence, we can draw the conclusion that the Pound is overvalued by 13.60% in comparison to the Dollar.




The following charts show GDP at 2012 market exchange rates, the International Comparison Program (ICP) 2011 exchange rates and the World Price Index (WPI) 2012 exchange rates at PPP values. Full tables are available in the report which can be downloaded from our website. The charts are ranked by WPI values.

The World Economics World Price Index is designed to provide a timely and practical solution to the problems posed by international comparisons. It is intended for companies that transact across countries and currencies, for governments and for international non-governmental institutions. 

The key difference between the World Price Index and other international PPP comparisons is the timeliness of the data. WPI figures are released the same month they are collected. This means WPI data is the most up-to-date exchange rate adjustment mechanism available. 

World Economics is an organisation dedicated to producing analysis, insight and data relating to questions of importance in understanding the world economy. 

Currently our primary research objective is to encourage and assist the development of better and faster measures of economic activity. In cases where we believe we can contribute directly, as opposed to through highlighting the work of others, we are producing our own measures of economic activity. 

Our work is mainly of interest to investors, organisations and individuals in the financial sector and to significant corporations with global operations, as well as governments and academic economists. 

The World Price Index has been developed by World Economics, a leading provider of original economic data and comment. Sister products include the World Economics Journal, the Sales Managers’ Indexes, the Global Marketing Index, and the Country Growth Monitors.

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