Description Purchasing power parities (PPPs) are indicators of price level differences across countries. The PPP Surveys are conducted under the European Statistics Programme and are funded by the European Union. Data are available for 37 countries: the 27 EU Member States, the United Kingdom, three member states of the European Free Trade Association (EFTA), five candidate countries and one potential candidate country.
PPPs can be used as currency conversion rates to convert expenditures expressed in national currencies into an artificial common currency (the Purchasing Power Standard, PPS), thus eliminating the effect of price level differences across countries. Therefore, PPP's can be used to convert national accounts aggregates into comparable volume aggregates. In particular, PPPs can be used to compare the Gross Domestic Product (GDP) as well as the GDP per capita of different countries without the figures being distorted by differing price levels in those countries.
Method Sample survey is used for the data collection of prices of consumer goods and services. The most common way of obtaining data is by visiting sales outlets and service providers. However, phone calls and internet websites can also be used. The sample of goods and services is defined by Eurostat.
Prices for equipment goods are obtained from producers, importers and distributors of specific brands and products. The price survey on construction projects is conducted using the assistance of construction experts.
Administrative data sources are used for the calculation of the average compensation of government employees as well as for the calculation of the average cost of a sample of medical and surgical cases in hospitals. For the calculation of average rental prices of flats and houses, existing data sources from CYSTAT are utilized.
Data Coverage Purchasing Power Parities (PPPs) are calculated for the Gross Domestic Product (GDP) and its various sub-aggregates on the expenditure side of national accounts.
Data Availability PPP data are available on Eurostat's website from 1995 and onwards. PPPs are compiled on an annual basis. Twice a year, in June and December, the most recent price survey results and national accounts data are incorporated into the calculation.
PPPs for a given year (t) are published in four steps:
After t+6 months: First preliminary results, based on extrapolations from year t-1 and on the new data for year t that are available at that time;
After t+12 months: Preliminary results, incorporating all new price and expenditure data of year t;
After t+24 months: Revised, preliminary results, incorporating the most recent expenditure estimates;
After t+36 months: Final results for year t.
Comparability Over Time PPPs are spatial price level indicators, and thus primarily suitable in comparisons referring to several geographical locations at a given point in time. Unlike the item sampling and price collection that underlie consumer price indices, the sampling of items and the price collection for PPPs are not designed to capture price changes over time, but rather price differences across countries or other geographical units.
Principal Variables The Purchasing Power Parities (PPPs), Price Level Indices (PLIs), Volume Indices and per capita Volume Indices are published in Eurostat's dissemination database. The above indices are published for the level of GDP, its main sub-aggregates and a selected number of categories.
The PPP of one particular country indicates how many units of national currency one would need in that country in order to maintain the purchasing power of one euro in the EU. The price level indices (PLIs) are the ratios of PPPs to exchange rates multiplied with 100. PLIs provide a measure of the relative price levels of each country.
The Volume Indices and per capita Volume Indices are comparative indices based on real expenditures that is, expenditures that have been converted to a common currency and valued at a uniform price level with PPPs. At the level of GDP, the volume indices are used to compare the economic size of countries and the per capita Volume Indices to compare the material well-being of their residents.
Classification Systems PPPs are produced in accordance with the final expenditure classification of the European Standard of Accounts (ESA 2010).
Legal Framework Regulation (EC) No 1445/2007 of the European Parliament and of the Council of 11 December 2007 establishing common rules for the provision of basic information on Purchasing Power Parities and for their calculation and dissemination.