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The mid-2009 Big Mac Index
Tuesday, July 21, 2009
No, it's not scientific, but it sure is fun to look at. The latest Big Mac Index from The Economist has a few surprises as shown below, any valuation of +/- 40 percent or more is circled.
Naturally, the Purchasing Power Parity variable is key but, just the idea that you can buy a Big Mac in Asia for under $2 when it would cost almost twice that much in the U.S. should be a big tip-off that something is amiss.
A Big Mac only cost 2.29 pounds in the U.K.? Really? It was much higher the last time that we were there and the official exchange rates were not much different than today.
5 comments:
As the article notes, countries with substantially cheaper costs (rent, wages, benefits, etc.) will have lower PP values, which explains several of the low numbers.
What's more interesting to me is the higher numbers; this would imply either higher systemic business costs than the US (which is already high to begin with), or an unstable currency, or something else (or combination of the above). That list is primarily Europe area countries (as you would expect with their massive entitlement programs and high tax rates), but Brazil is also nosing in there.
Very interesting.
I can't believe a Big Mac is $3.57 USD. Wow - what a rip off. I obviously haven't eaten there in a very long time.
There is great variation in Big Mac prices within the US. See http://www.dallasfed.org/research/eclett/2008/el0809.html
They found it ranged from $2.24 in
rural Georgia to $3.60 in Auburn Washington
I went on a rugby tour of the UK when I was in high school and I was baffled by the guys that travelled 3600 miles and wanted to eat at McDonalds.
Because they were only there to play rugby?
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