3.2 Inflation perceptions are normally higher than measured inflation

Especially in times of major changes there can be great differences between perceived and measured inflation. These differences may even undermine people’s trust in official statistics.

Such a situation may occur for instance because of a currency changeover, like the adoption of the euro. In many euro area countries, the changeover from the national currency to the euro was associated with extremely high perceived inflation.

The chart entitled “Inflation perceptions versus measured inflation” shows survey data on inflation perceptions from 2004 – two years after the euro replaced the national currencies of the first countries to join the euro area. We can see that there is a large gap between perceived inflation – shown here by the “median”, which is the middle of all the inflation perceptions reported by the people surveyed – and measured inflation. The gap seems to have diminished over time, but it still exists. This means that perceived inflation is still higher than measured inflation in the euro area.

The interactive visual also shows how much inflation perceptions vary – look at the size of the “corridor” around the median. Our individual perceptions of inflation are all different because we all have different shopping patterns. To discover yours, try out the personal inflation calculator in the next chapter.

Click to enlarge and interact

Click to enlarge and view