Friday, February 23, 2007

Big Macs and iPods

We're all familiar with the use of the Big Mac as a method of measuring purchasing power parity so now someone's started one based on iPods.


Having already stormed world fashion, Apple's hip iPod music player is finally making its presence felt in global currency markets.

One of Australia's biggest banks, the Commonwealth Bank (CBA.AX: QuoteProfile , Research), has used the latest version of Apple's (APPL.O: QuoteProfile , Research) music player -- the slimline Nano -- to compare global currencies and purchasing power in 26 countries.

Along the lines of the Big Mac index launched 20 years ago by The Economist magazine, the survey prices the 2GB Nano in U.S. dollars and found Brazilians pay the most for an iPod, shelling out $327.71, well above second-placed India at $222.27.

Canada was the cheapest place to buy a Nano at $144.20, while Australia ranked 19th at $172.36, cheaper than Germany ($192.46), France ($205.80), South Korea ($176.17) and China where the machine is manufactured. The U.S. was fourth cheapest at $149.

"Interestingly, especially with freight costs close to zero, China is middle ranked in terms of global prices at US$179.84," Craig James, the Chief Equities Economist at Commonwealth Bank, told Reuters.

Purchasing power parity surveys compare the prices of goods in different countries and at their simplest level can help show whether one currency is undervalued against another.

Unfortunately, all this one tells us is the PPP of the retail sectors in each country, much less useful.

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