(CNN) – It’s been a tough year for portfolios around the world.
Supply chain bottlenecks and changing consumer demand have driven up the cost of living in many of our largest cities, according to a new study released Wednesday, and inflation is the fastest on record over the past five years.
One city has seen changes faster than most, dropping from fifth to first place in this year’s Global Cost of Living Index released by the Economist Intelligence Unit (EIU).
The Israeli city of Tel Aviv topped the rankings for the first time, overtaking last year’s leader Paris, which is now tied for second with Singapore.
The EIU attributes the sharp rise in the Tel Aviv index to rising food and transportation prices and the strength of the Israeli shekel against the US dollar.
Everyday goods and services
The 2021 Global Cost of Living Index tracks the cost of living in 173 cities around the world – 40 more than last year – and compares the price of more than 200 everyday products and services.
Data from the survey, which has been running for more than three decades, is collected by EIU’s global team of researchers in March and September.
The index is compared to New York City prices, therefore cities with stronger currencies against the US dollar are likely to appear higher in the rankings.
Zurich and Hong Kong are in fourth and fifth place respectively, after taking first place last year alongside Paris. New York, Geneva, Copenhagen, Los Angeles and Osaka round out the rest of the top 10.
The top rankings continue to be dominated by developed European and Asian cities. The lowest-ranked cities are found mainly in the Middle East, Africa and the less affluent regions of Asia.
Pandemic issues
The EIU reports that, on average, the prices of goods and services covered by the index increased by 3.5% year-on-year in local currency, compared to an increase of just 1.9% at the same time in the year last.
These highly reported global supply chain issues have contributed to the rise in prices and the Covid-19 pandemic and social restrictions still affect production and trade around the world. With a new variant of the coronavirus currently causing widespread alarm, these problems will not go away quickly.
Rising oil prices led to a 21% increase in the price of unleaded gasoline, reports the EIU, but there have also been sharp price increases in leisure, tobacco and personal care categories.
The highest city in 2021 was the Iranian city of Tehran, which jumped 50 places from 79th to 29th as US sanctions resulted in shortages and higher prices.
The Syrian city of Damascus ranks again as the cheapest city in the world, as its war-torn economy continues to struggle. Damascus and Tehran suffered from very high inflation in 2021, as did Caracas in Venezuela and Buenos Aires in Argentina.
More soon
Upasana Dutt, head of global cost of living at EIU, said in a statement: “Although most of the world’s economies are now recovering as Covid-19 vaccines are rolled out, many major cities are still experiencing spikes in cases, leading to social restrictions. These have disrupted the supply of goods, leading to shortages and higher prices.
We can clearly see the impact in this year’s index, with the rise in oil prices particularly strong. But not all cities have seen their prices increase. Many cities at the bottom of our rankings have seen their prices stagnate or even drop, in part because their currencies have weakened against the US dollar.
Over the coming year, we expect the cost of living to rise further in many cities as wages rise in many industries. However, we also expect central banks to cautiously raise interest rates to contain inflation. Price increases should therefore start to moderate from this year’s level.
The most expensive cities in the world to live in 2021
1. Tel Aviv, Israel
2. (tie) Paris, France
2. (tie) Singapore
4. Zurich, Switzerland
5. Hong Kong
6. New York, New York
7. Geneva, Switzerland
8. Copenhagen, Denmark
9. Los Angeles, California
10. Osaka, Japan
11. Oslo, Norway
12. Seoul, South Korea
13. Tokyo, Japan
14. (tie) Vienna, Austria
14. (tie) Sydney, Australia
16. Melbourne, Australia
17. (tie) Helsinki, Finland
17. (tie) London, United Kingdom
19. (tie) Dublin, Ireland
19. (tie) Frankfurt, Germany
19. (tie) Shanghai, China
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