Quantitative Inflation Perceptions and Expectations of Italian Consumers

Abstract

Since February 2003 ISAE collects quantitative inflation opinions, within its monthly survey on Italian consumers. Data confirms the severe overestimation of inflation already emerged in previous studies. Quantitative replies are in line with more traditional qualitative evaluations, indicating that overestimation is not a sort of random outcome derived from casual answers. A first explanation calls for inadequate knowledge of inflation statistics: however, scarce information does not explain per se overestimation. Indeed, overestimation varies across personal characteristics and it is strongly correlated with assessments on economic conditions, with those being more optimistic generally showing lower inflation opinions. It is possible that given a scarce statistical knowledge consumers attribute to high inflation an “economic distress” mainly determined by slow growth of disposable income and psychological factors linked to socio-economic conditions.

Keywords: inflation expectations, survey data

JEL Classification: D12, D8, E31