Ikea Keeps Lid on Billy Prices in Europe as Inflation Weakens; The Billy index calculates the cost across 43 countries of Ikea’s white bookcase

Ikea Keeps Lid on Billy Prices in Europe as Inflation Weakens

Ikea will keep a lid on prices of its Billy bookshelves in most euro-area countries next year, underscoring a lack of inflation in the 17-member currency bloc. The signature bookcase remains cheapest in Europe, according to the 2014 catalog on the website of the world’s biggest home-furnishings retailer, compiled in Bloomberg’s annual global index. The shelves are least expensive in Slovakia and the Netherlands, with a price of 34.95 euros ($46.48).While the euro area emerged from a record-long recession in the second quarter, inflation in the region has weakened to the slowest since February 2010 and is almost a percentage point below the European Central Bank’s 2 percent ceiling. President Mario Draghi has pledged to keep key interest rates low on the grounds of “broad-based weakness” in the economy.

“The outlook for domestic demand in the debt crisis countries is hardly euphoric,” said Alexander Koch, an economist at Raiffeisen Schweiz in Zurich. “But less of a fiscal burden, lower inflation and a deceleration of the negative labor-market dynamics should enable at least a stabilization in the coming quarters.”

Inflation was at 1.1 percent in September and the ECB forecasts it will average 1.5 percent this year and 1.3 percent in 2014. Draghi predicted on Oct. 2 that it will stay “subdued on the very low side of 2 percent” in the medium term.

Due to weak consumer spending in Europe, Nestle SA, the world’s biggest food company, this year suffered the lowest pricing growth for the first nine months of any year since 2003.

Billy’s Dimensions

The Billy index calculates the cost across 43 countries of Ikea’s white bookcase that is 202 centimeters (79.5 inches) high, 80 centimeters wide and 28 centimeters deep. Prices were collected Oct. 15 and converted to dollars at the average exchange rate over the past 30 days.

For next year, the average cost globally is $58.93, little changed from $59.35 in the 2013 catalogue. The shelves remain priciest in the Dominican Republic at 3,995 pesos ($94.72), though the index shows they are $16 cheaper there than a year earlier. In local currency terms, prices remain unchanged throughout the Group of Seven countries.

The index, which compares each country’s Billy dollar price against the average, increased throughout the euro region, reflecting a strengthening of 4 percent against the dollar in the past year.

Jobless Scourge

Greece and Cyprus have the most expensive Billy shelves in the euro region, and were also the only countries in the zone where the price rose in euros, aside from the Netherlands.

Stubbornly high joblessness is limiting the euro area’s recovery, thereby hampering consumer spending growth. In August the euro area jobless rate held just short of a record 12.1 percent, with unemployment among young people at 23.7 percent.

“Once unemployment rates come down, that should be the moment consumer demand picks up,” said Carsten Brzeski, chief economist at ING Groep NV in Brussels. “We’re still in this period of deleveraging in many countries, especially those hit by real-estate bubbles, and consumers will have to pay off their debts.”

To contact the reporters on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net; Kristian Siedenburg in Vienna at ksiedenburg@bloomberg.net