New York and Singapore topped the list of cities with the highest cost of living this year, dethroning Tel Aviv, according to an annual report from the Economist Intelligence Unit.
War in Ukraine, Covid restrictions in China and surging energy prices drove costs up by the fastest pace in at least 20 years, rising by an average of 8.1% in cities across the globe. The EIU survey, conducted earlier this year, tracked the price of more than 200 goods and services in 172 cities worldwide and said supply-chain woes contributed to the acceleration.
Inflation hit multi-decade highs in many countries and caused a global economic slowdown that is expected to continue. A study done by Geopoll earlier this year found that 75% of the thousands surveyed globally said that the rising cost of living has led them to have to reduce their standard of living significantly.
The war explains why Moscow and St. Petersburg had the largest cost increases and also brought higher global oil prices that pushed up gas prices 22% on average from a year earlier in the local currency.
Gas and electricity prices also rose on average by 29% in Western European cities as the region tried to wean itself off of Russian energy, compared with the 11% global increase.
The strength of the American dollar made U.S. cities more expensive, explaining how New York topped the list for the first time. A brief lull in New York rent growth during the pandemic has now reversed and they're now hitting new highs. San Francisco and Los Angeles also made it into the top 10 with the highest costs of living, and six of the 10 cities with the biggest price increases were in the U.S.
The cheapest cities were Damascus, Tripoli and Tehran, reflecting struggling economies and currencies. The most significant drop in the rankings from 2021 was in Stockholm and Luxembourg, partly due to the war in Ukraine and the energy crisis in Europe.
Inflation rates remain worryingly high. A study earlier this month showed that 70% of people say prices will keep rising globally and 61% say jobless rates will also increase. The EIU said that global consumer price growth will fall to 6.5% in 2023, still higher than usual but much lower than in 2022.
As the global economy begins to slow, interest rates will fall as well. Unless the war in Ukraine escalates, the prices for energy, food and supplies will probably decline in 2023.