Eurozone consumers’ perception of inflation much higher than reality: study

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Consumers' perception of inflation in the eurozone is almost three times higher than the official rate, according to a study published on Monday by the trade credit insurance company Allianz Trade, reported Xinhua.

This may lead the European Central Bank (ECB) to further hike rates until September, the study said.

The perceived inflation rate in the eurozone was recently close to 17 percent, whereas the actual rate in May was 6.1 percent, Allianz Trade said. The discrepancy between perceived and actual inflation has been worsened by current inflation dynamics in the eurozone, the company underlined.

"There is a wide gap between perceived and actual inflation, especially in Germany," said Jasmin Groeschl, senior economist at Allianz Trade.

This gap was about nine percentage points overall in the eurozone, the study showed, while in Germany the difference was about eleven percentage points.

The study said that the discrepancy has various reasons. For example, consumers pay more attention to price changes for common purchases such as groceries and beverages, fuel or other errands in the supermarket. When these prices rise above average there, people tend to feel that inflation is much higher. But psychological aspects, demographic and regional differences, and individual consumer behavior can also lead to consumers assessing price increases differently than the official inflation measurement. This creates a distorted picture and a strong discrepancy between perceived and actual inflation.

The gap between perceived and actual inflation has a considerable impact on how customers behave, especially in terms of their purchasing habits, said Groeschl.

"As a result, it is crucial for the business community, the economy, as well as interest rate policy," Groeschl added.

Allianz Trade expects that if the substantial gap persists until the end of next year, the ECB will introduce three more 25 bps rate hikes until September.


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