Economists say consumers overestimate inflation. This scenario is not only common in the US but worldwide. Why? Oftentimes, consumers relate inflation with the things they regularly buy such as gas and groceries and not with the large items that eat up a bigger portion of their monthly budgets.
The media also has contributed to the overestimation of inflation. Media outfits tend to cover more of price hikes compared with declines in prices. These information make consumers dwell on the negative rather than the positive.
For instance, last spring, it was predicted that gas would sell at $5 per gallon before summer ends. That did not happen. And people, particularly the media, stopped talking about it. When the prices started to rise up recently, the news contained the price hike again.
Sometimes, inflation isn’t really as bad as people think it is. Maybe, it is time to start making the right inflation estimate.