In the US, key cities have seen their cost of living surge despite the falling cost of oil and a strong US dollar pushing down prices and keeping local inflation relatively low. New York moved up to seventh place, its highest global position since 2002, while Los Angeles rose to eighth place. 

Interestingly, a total of 106 cities have seen a decline in the relative cost of living when compared with New York in the last year, in contrast with just 16 that have seen a rise. In Western Europe, all 28 cities surveyed have enjoyed a fall in the cost of living compared with their US counterparts, highlighting the difference in recovery between the two regions.

The stronger US dollar and weaker euro has pushed eurozone cities down the ranking and Paris was the only one to make an appearance in the top ten, albeit slipping three spots to fifth place. Meanwhile, Swiss cities are among Europe’s most expensive. Following last January’s de-pegging of the Swiss franc from the euro, coupled with structurally high income and price levels, Zurich and Geneva ranked second and fourth respectively.

“The US Federal Reserve Bank raised interest rates in December 2015, which is expected to have a global impact, given the prominent role of US fiscal and monetary policy on an international stage,” the EIU said in its report.

“The US dollar is on its fastest rise in 40 years. Meanwhile geopolitical issues, ranging from uncertainty over a 'Brexit' referendum to sanctions over Ukraine, are compounding currency weakness in Europe and the former Soviet Union, which will also have an impact beyond the countries most affected. The rise of online competition and discount retail channels is also undermining prices in many more mature markets, but as economies recover, expectations of higher spending could see prices moving back up.”