The Big Mac Index: A Measure of PPP and Burger Inflation
The Big Mac was created in 1967 by Jim Delligati, a McDonald’s franchise owner in Pennsylvania. It was launched throughout the U.S. the following year, and today you can buy one in more than 70 countries. However, the price you pay will vary based on where you are, as evidenced by the Big Mac Index.
Spanning from 2004-2022, this animation from James Eagle shows the U.S. dollar price of a Big Mac in select countries around the world.
What Does the Big Mac Index Show?
The Big Mac Index was invented by The Economist in 1986. It is intended to be a lighthearted way to demonstrate the concept of purchasing power parity. In other words, it helps illustrate the idea that market exchange rates between countries may be “out of whack” when compared to the cost of buying the same basket of goods and services in those places.
Given that McDonald’s is one of the biggest companies in the world and the Big Mac is widely available globally, it means that the famous burger can be used as a basic goods comparison between most countries. It also has the advantage of having the same inputs and distribution system, with a few minor modifications (like chicken patties in India instead of beef).
Using the price of a Big Mac in two countries, the index can give an indication as to whether a currency may be over or undervalued. For example, a Big Mac costs ¥24.40 in China and $5.81 in the United States. By comparing the implied exchange rate to the actual exchange rate, we can see whether the Yuan is over or undervalued.
According to the Big Mac Index, the Yuan is undervalued by 34%.
Beyond currency misalignment, the index has other uses. For instance, it shows inflation in burger prices over time. If we compare the price of a Big Mac across countries in the same currency—such as the U.S. dollar—we are also able to see where burgers are cheaper or relatively more expensive.
Burger Costs Around the World
In the animation, all Big Mac prices have been converted from local currency to U.S. dollars based on the actual exchange rate in effect at the time. Below, we show the change in price of a Big Mac in select countries, ordered by January 2022 prices.
|Country||May 2004||January 2022||% change|
Switzerland takes the cake for the priciest Big Mac, followed closely behind by Norway. Both countries have relatively high price levels but also enjoy higher wages when compared to other OECD countries.
Venezuela has seen the largest jump in burger prices, with the cost of a Big Mac climbing nearly 250% since 2004. The country has been plagued by hyperinflation for years, so it’s no surprise to see large price swings in the country’s data.
While it appears that the price of a Big Mac has decreased in Turkey, this is because the prices are shown in U.S. dollars. The new Turkish lira has depreciated against the U.S. dollar more than 90% since it was introduced in 2005.
Finally, it’s worth noting that Russia has the cheapest Big Mac, reflecting the country’s lower price levels. Labor costs in Russia are roughly a third of those in Switzerland.
The Limitations of Burgernomics
The Big Mac Index is useful for a number of reasons. Investors can use it to measure inflation over time, and compare this to official records. This can help them value bonds and other securities that are sensitive to inflation. The Big Mac Index also indicates whether a currency may be over or undervalued, and investors can place foreign exchange trades accordingly.
Of course, the index does have shortcomings. Here are some that economists have noted.
- Non-traded services can have different prices across countries. The price of a Big Mac will be influenced by the costs of things like labor, but this is not a reflection of relative currency values. The Economist now releases a GDP-adjusted version of the Big Mac Index to help address this criticism.
- McDonald’s is not in every country in the world. This means the geographic reach of the Big Mac Index has some limitations, particularly in Africa.
- The index lacks diversity. The index is made up of one item: the Big Mac. Because of this, it lacks the diversity of other economic metrics such as the Consumer Price Index.
Despite all of these limitations, the Big Mac Index does act as a good starting place for understanding purchasing power parity. Through the simplicity of burgers, complex economic theory is easier to digest.
This article was published as a part of Visual Capitalist's Creator Program, which features data-driven visuals from some of our favorite Creators around the world.
Visualizing U.S. GDP by Industry in 2023
Services-producing industries account for the majority of U.S. GDP in 2023, followed by other private industries and the government.
Visualizing U.S. GDP by Industry
The U.S. economy is like a giant machine driven by many different industries, each one akin to an essential cog that moves the whole.
Understanding the breakdown of national gross domestic product (GDP) by industry shows where commercial activity is bustling and how diverse the economy truly is.
The above infographic uses data from the Bureau of Economic Analysis to visualize a breakdown of U.S. GDP by industry in 2023. To show this, we use value added by industry, which reflects the difference between gross output and the cost of intermediate inputs.
The Top 10 U.S. Industries by GDP
As of Q1 2023, the annualized GDP of the U.S. sits at $26.5 trillion.
Of this, 88% or $23.5 trillion comes from private industries. The remaining $3 trillion is government spending at the federal, state, and local levels.
Here’s a look at the largest private industries by economic contribution in the United States:
|Industry||Annualized Nominal GDP |
(as of Q1 2023)
|% of U.S. GDP|
|Professional and business services||$3.5T||13%|
|Real estate, rental, and leasing||$3.3T||12%|
|Educational services, health care, and social assistance||$2.3T||9%|
|Finance and insurance||$2.0T||8%|
|Arts, entertainment, recreation, accommodation, and food services||$1.2T||4%|
|Other private industries||$2.6T||10%|
Like most other developed nations, the U.S. economy is largely based on services.
Service-based industries, including professional and business services, real estate, finance, and health care, make up the bulk (70%) of U.S. GDP. In comparison, goods-producing industries like agriculture, manufacturing, mining, and construction play a smaller role.
Professional and business services is the largest industry with $3.5 trillion in value added. It comprises establishments providing legal, consulting, design, administration, and other services. This is followed by real estate at $3.3 trillion, which has consistently been an integral part of the economy.
Due to outsourcing and other factors, the manufacturing industry’s share of GDP has been declining for decades, but it still remains a significant part of the economy. Manufacturing of durable goods (metals, machines, computers) accounts for $1.6 trillion in value added, alongside nondurable goods (food, petroleum, chemicals) at $1.3 trillion.
The Government’s Contribution to GDP
Just like private industries, the government’s value added to GDP consists of compensation of employees, taxes collected (less subsidies), and gross operating surplus.
|Government||Annualized Nominal GDP |
(as of Q1 2023)
|% of U.S. GDP|
|State and Local||$2.1T||8%|
Figures may not add up to the total due to rounding.
State and local government spending, largely focused on the education and public welfare sectors, accounts for the bulk of value added. The Federal contribution to GDP amounts to roughly $948 billion, with 52% of it attributed to national defense.
The Fastest Growing Industries (2022–2032P)
In the next 10 years, services-producing industries are projected to see the fastest growth in output.
The table below shows the five fastest-growing industries in the U.S. from 2022–2032 in terms of total output, based on data from the Bureau of Labor Statistics:
|Industry||Sector||Compound Annual Rate of Output Growth (2022–2032P)|
|Computing infrastructure providers, data processing, and related services||Information||3.9%|
|Wireless telecommunications carriers (except satellite)||Information||3.6%|
|Home health care services||Health care and social assistance||3.6%|
|Oil and gas extraction||Mining||3.5%|
Three of the fastest-growing industries are in the information sector, underscoring the growing role of technology and digital infrastructure. Meanwhile, the projected growth of the oil and gas extraction industry highlights the enduring demand for traditional energy sources, despite the energy transition.
Overall, the development of these industries suggests that the U.S. will continue its shift toward a services-oriented economy. But today, it’s also worth noticing how services- and goods-producing industries are increasingly tied together. For example, it’s now common for tech companies to produce devices, and for manufacturers to use software in their operations.
Therefore, the oncoming tide of growth in service-based industries could potentially lift other interconnected sectors of the diverse U.S. economy.
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