Price surveys in the area of Gross Fixed capital Formation, namely on: “Construction and civil engineering”, “Machinery and equipment” and “Other products” took place in order to produce Purchasing Power Parities (PPPs) for the 31 countries participating in the Eurostat coordinated group of the European Comparison Programme (ECP)³ Eurostat presents the price level indices for Gross Fixed Capital Formation derived from the PPP’s as part of a series of studies regularly released in the framework of the ECP in which Eurostat closely co-operates with the OECD. The data in this publication are preliminary for 2003 and final for 2001 and 2002. The PLIs are presented in relation to the EU 25 average.

The price level indices (PLIs) for Gross Fixed Capital Formation (Capital Goods) in 2003 highlight the following country groups:

As can be observed in table 1 these groups were the same for 2001 and 2002 with two exceptions: Cyprus and Estonia. Cyprus was in group IV in 2001/2002 and in group III in 2003 whereas Estonia was in group III in 2001/2002 and in group IV in 2003. Bulgaria presents the minimum PLI for the 3 years (49, 49 and 51) it is therefore the cheapest country in the 31 analysed. The maximum PLIs (133, 137, and 128) correspond to Switzerland in 2001 and 2003 and to Norway in 2002. This means that a comparable basket of capital goods costs 2.7 and 2.5 times more in Switzerland than in Bulgaria in 2001 and 2003 respectively. In 2002 the largest difference can be found between Norway and Bulgaria, the cost in Norway was 2.8 times the cost in Bulgaria. The Candidate Countries and the new Member States, with the exception of Cyprus in 2003 and and Estonia in 2001 and 2002, were below the 80% of the EU average for the three years.

The price level indices of Gross Fixed Capital Formation and of its two main components “Construction and civil engineering” and “Machinery and equipment and Other products”, which will simply be named “construction” and “Equipment Goods”, can also be seen in table 1. The table shows that, Bulgaria always had the minimum price level indices in both Construction and Equipment Goods with an only exception: Romania in 2001 presented the lowest level for Construction; conversely, Switzerland presented the maximum level for Construction and Norway for Equipment Goods for the three years. The ratio between the maximum and the minimum PLI gives an idea of the differences in prices between countries. It can be observed that the major variations occurred in Construction (5.3, 5.4 and 5.1) rather than in Equipment Goods (1.8, 1.9 and 1.6). This means that for Construction Switzerland was more than five times expensive as Bulgaria while for Equipment Goods Norway was less than twice expensive as the cheapest country, which was again Bulgaria. Chart 1 shows the price level indices for GFCF and its components for 2003, as can be seen the countries which present lowest PLI for GFCF have a level of prices in Construction lower than in Equipment Goods and vice versa, the same situation can be found with few exceptions in 2001 as well as in 2002.

Analysing the countries with a PLI less than 80 % of the EU average (group IV), it can be seen that for Construction prices, 16 countries came into this category and were the same in 2001 and in 2003, in 2002 it was another country into the group. In contrast, for Equipment Goods, only two countries were in group IV in 2001 and in 2002 and only Bulgaria in 2003. This provides another illustration of the major price differences between Construction and Equipment Goods. The following table demonstrates a stable situation with the countries with highest price levels. For Equipment Goods, only Norway recorded a PLI larger than 120, while for Construction there were 7 countries in this group in all three years.

From the above section it can be concluded that Construction is mainly responsible for the price dispersion of Gross Fixed Capital Formation (Capital Goods).

Table 2 overleaf for 2003 the PLIs for the main sub-groups of Construction and Equipment Goods, which permit a more detailed analysis.

The prices underlying table 2 are average annual national prices for the respective product groups. In the columns, the table provides a direct comparison of the price levels for the respective product groups across all 31 participating countries. For example, the PLI for Transport equipment is 5% above the EU average in France and 8% in Germany. Transport equipment is, therefore in Germany 3% more expensive than in France (108/105=1.03). By row, the table presents the PLIs of different product groups within one country and the interpretation is more complicated. All PLIs are expressed in relation to the EU average for the respective product group. For example, for Metal products and equipment, level in Finland is equal to EU average and for Electrical and optical equipment: 9% above the EU average. In relation to the respective EU average, therefore, Metal products and equipment are relatively cheaper in Finland than Electrical and optical equipment. However, intra-country analysis of PLIs is limited because of the use of different scaling factors per product group and the general non-additivity of the underlying aggregation method.

Table 3, which is based on table 2, provides a measure of price dispersion within the Euro zone, the EU 15, the EU 25 and the group of all countries participating in the comparison. The measure used is, for each product group, the difference between the maximum and the minimum price level indices expressed as percentage of the minimum price level index of the respective group of countries. The larger this number is the higher the price dispersion in the respective country and product group.

The Construction of residential buildings is the group which presents the widest PLI dispersion in all country groups. The major difference between the “EU 25” and “all 31” groups derives from the fact that the six additional countries include Bulgaria, Norway and Switzerland which show the minimum and the maximum PLIs respectively for nearly all product groups.

For all country groups the dispersion is wider in Construction than in the Equipment Goods.

¹ Excluding Liechtenstein

² Source: Eurostat, "Statistics in Focus" N 10/ 15.03.2005

³ The 25 EU Member States, the Candidate Countries, Iceland, Norway and Switzerland (EFTA-countries)