Big Mac world economics — not a bad way to see where currency rates are out of whack

by Charlie Leocha on July 30, 2011


For years, I have used the price of a Big Mac at McDonald’s as my benchmark for well-adjusted currency rates. I have always thought that if the price of a Big Mac was the same in the U.S. and in a foreign country that the exchange rates were more or less OK. If It cost more, there was probably a bad exchange and if it cost less, I’d be planning another trip.

Finally, The Economist has come up with a real Big Mac study that shows the relative cost of this McDonald’s mainstay across the world. There were some surprises to me, like the 19 percent premium for a Big Mac in Argentina. Who would of thought that a country rich with beef and with a 4-to-1 $ to Peso exchange would register such an expensive sandwich. Chile on the other hand, that is more expensive overall, registers with a bargain Big Mac costing a bit less than in the USA.

The UK where I find everything overpriced, Big Macs actually cost less than in the USA. And the biggest bargain burger comes from Hong Kong, China and Egypt. At least the analysis is something that everyone can identify with and it is fun.

Illustrations: Courtesy www.creditsesame.com/

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  • Manisfeld

    Charlie: This is not a “new” statistic. The Economist has been publishing the McDonalds comarative prices of hamburgers worldwide as an annual feature for at least 10 years – under the term PPP (Purchasing Power Parity) index. But I did like your illustrations which I have never seen in the Economist.

  • http://profiles.google.com/saucywench S E Tammela

    Unfortunately, this comparison pays no attention to things like minimum wages. Most countries are (relatively) far more generous with their McDonald’s pay rates than the USA. Australia’s, for a start. Adult minimum wage (full time) is $12.64 per hour. This pushes up the price of your burger without real relation to the value of the dollar (currently more valuable than the USA’s). Nice and valid a comparison if you plan to travel and then just eat American food… but most people travel for the experience of new foods, sights and cultures. Try a roo burger from a real restaurant, instead ;)

  • Graham

    When the Economist publishes this index it does so with more than the intention of simply trying to compare the price of a food item.   They claim that it has a wider economic meaning.

    http://www.economist.com/blogs/dailychart/2011/07/big-mac-index

  • SoBeSparky

    The whole point of this exercise is to take into consideration many costs of doing business in a foreign country, not just the ingredients.  Thus, if the minimum wage is much higher, it will be that way for hotel maids, front desk clerks and others.  If transportation costs are higher, ditto for you. 

    If nothing else, this is a fair barometer of common food prices, not those of “tourist trap” places.  Of course Peking Duck in a famous Beijing restaurant catering mostly to tourists will cost an arm and a leg.  But overall, the costs of eating good nutritious food in China’s middle-class white-linen restaurants is far less than in the USA, I would guess around 44% lower with urban area compared against urban area.

  • AidaMorer

    I have tasted the food being serving by the Big Mac; no
    doubt that I like the taste as well as the quantity of it. I am well satisfied
    of how was it served to the customers. Big Mac is also one of those companies
    which had a success on their business when it comes to food industry. I hope
    that Big Mac will satisfy the taste of their customer for the customers to be
    satisfied on the food they will eat.
     

    restaurant catering

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