Corks must be popping in Cincinnati—albeit from bottles of Bonnaire—now that the Queen City has finished first in the U.S. in a recent ranking of the costs of doing business. That’s first as in cheapest: Thanks in part to especially low property taxes, transportation costs and leasing rates, Cincinnati was rated the least-costly city in which to do business out of 27 major metropolitan areas (populations of 2 million+). The ranking, by the accounting/consulting firm KPMG, ranked each city against a national baseline cost index of 100. Cincinnati’s cost index of 95.9 means it was 4.1 percentage points lower than the baseline. Atlanta (96.2), Orlando (96.3), Tampa (96.4) and Dallas-Fort Worth (96.5) round out the top 5, with San Francisco (104.5) clocking in as most expensive, followed by New York City (103.4), Seattle (101.5), Boston (101.2) and Los Angeles (100.9).
Interesting as such domestic rankings are, the real candy in KPMG’s 2012 Competitive Alternatives report— broad in ambition and thorough in execution—is its international perspective. Measuring the overall impact of 26 different business cost components, the study examines 19 industry operations in 14 countries: Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, the Netherlands, Russia, the United Kingdom and the U.S. Reading through the document, it’s not difficult to understand one-reason why high-growth countries can grow so fast: the costs of doing business are so much lower. Consider the cost indexes for the two cheapest-to-do-business-in cities in each of the so-called BRIC countries:
Brazil: Belo Horizonte (91.4), Sao Paulo (94.6)
Russia: St. Petersburg (77.6), Moscow (83.0)
India: Chennai (72.9), Mumbai (76.4)
China: Chengdu (72.0), Shanghai (76.3)
Obviously, as economies grow and countries become wealthier, labor and other costs rise in near lockstep. But for many of America’s biggest economic rivals over the coming decades—most notably China and India—the costs-of-doing-business gap will take a while to close.