What’s behind “inflation perceptions”? A survey-based analysis of Italian consumers

This study investigates inflation perceptions in both qualitative and quantitative terms and their relationship with factors likely to affect them. This has been done in a unified framework through a survey of a representative sample of Italian consumers carried out at the end of 2006. The results show that reported inflation is, on average, much higher than measured by official statistics. Inflation perceptions are higher for women, the unemployed and less educated individuals, as well as for consumers with some forms of financial distress. A very low knowledge of the inflation concept and related statistics and an inaccurate memory of past prices turn out to play a significant role in explaining the highest class of perceptions. In contrast, the characteristics of individual shopping activity do not result to be significant. All in all, these results suggest that when consumers express their opinions on what they report as “inflation”, they are incorporating a complex combination of forces that go well beyond the phenomena measured by official inflation statistics.inflation, consumers, perceptions, euro

LÂ’introduzione dellÂ’euro e la divergenza tra infl azione rilevata e percepita

Following the introduction of euro banknotes and coins many Italians perceived a much sharper increase in the price level than the moderate rise registered by the National Institute of Statistics. The paper shows that the apparent contradiction between the publicÂ’s perceptions and officially measured inflation stems mainly from the fact that the former often refer to phenomena not captured by the inflation rate calculated for the average basket of goods and services for the whole population. The rise in perceived inflation can be largely explained by the generally stronger influence that large, upward, and frequently observed price movements exert on consumersÂ’ perceptions, together with the actual behaviour of prices in the period following the currency changeover, which saw many price changes, with larger increases for the more frequently purchased products and exceptional rises for some items. The reciprocal influence between inflation perceptions and the mediaÂ’s unusually extensive coverage of price developments on the occasion of the changeover also appears to have been important. Lastly, the perception of a substantial loss of purchasing power, especially on the part of the least-well-off households, can be traced to economic phenomena that do not bear directly on official inflation but which it is hard for households to consider separately, such as the evolution of incomes and increases in the price of housing, not included in the official index.inflazione, euro, percezioni