The Economic Perspective: “Grocery Prices and Inflation”

This is Mary Walden with economist MW welcoming you to the economic perspective.  Today’s program looks at grocery prices and inflation.  Mike, when you give economic talks to the public, you often observe a disconnect between official measures of inflation and the inflation rate people think is occurring.  What is this disconnect, and why does it occur?

Mike:  Summary Answer

  • Disconnect is that people usually think the inflation rate is higher than it is
  • Recent research sheds light on why
  • First, government numbers are based on following prices of products and services people purchase through the year
  • Yet not all products and services are bought with same frequency
  • A new survey shows people base their inflation estimates on price changes they see in grocery stores
  • Makes sense – most people buy groceries every week
  • Problem is: only 6% of consumer disposable income is spent in grocery stores
  • So perceptions are ignoring the other 94%
  • A good lesson in statistics and psychology
  • I’m MW

Mary:  And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics.