John Kay on perceptions of inflation

Trust John Kay to make plenty of sense of the furore over whether the official inflation numbers are accurate in telling us what is happening to consumer prices

Despite the rather amateurish attempts of journalists at various tabloid newspapers to contruct their own crude indicator of consumer price inflation, the truth is that the ONS does more or less the same as the hacks, but in a much more systematic, rigorous and careful manner. The key to understanding our perceptions of inflation is to be aware of the issue of salience. We often give too much weight to the information that is most salient in our minds.

John writes

“Perceptions of inflation are formed, not by the Office of National Statistics, but by the most salient prices. The price of petrol is highly salient: not only do people buy petrol regularly, but even when they are not buying it, they routinely pass signs that display the price. We are most observant of the prices of goods we buy regularly and often and of the cost of undifferentiated products, such as petrol or milk, for which price comparisons are easier and likely to stick in our minds. Utility prices are salient – with the exception of telecoms whose price structure is bewilderingly complex.”

The rest of the article is here

Seeing is believing when it comes to inflation

Unit 2 Macro: Evaluation on Supply-Side Policies [21 May 2012]
Unit 2 Macro: Migration and the UK Economy [20 May 2012]
Unit 2 Macro: Measuring Inflation in the UK [20 May 2012]
Unit 2 Macro: Real Interest Rates [20 May 2012]
Q&A: What do we need to know about output gaps? [20 May 2012]
Unit 2 Macro: The Output Gap [20 May 2012]
Revision notes on unemployment [20 May 2012]
Unit 2 Macro: Bank Cuts UK growth Forecast for 2012 [16 May 2012]
Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
Unit 2 Macro: Model answer for revision data question [9 May 2012]
Unit 3 Micro: The Dawn of a Shareholder Spring? [8 May 2012]
Unit 2 Macro: Monetary Policy and Inflation Glossary [5 May 2012]
Unit 2 Macro: Economic Cycle Glossary [5 May 2012]
Unit 2 Macro: Aggregate Demand Glossary [5 May 2012]
Macro Revision - Key Statistics on the UK Economy [4 May 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
Unit 2 Macro: Inflation and the Business Environment [6 Apr 2012]
Unit 2 Macro: Revision on Real Economic Data [2 Apr 2012]
Unit 2 Macro: Revision on Real Disposable Income [2 Apr 2012]
Posen on slower growth in the UK compared to the USA [30 Mar 2012]
Life in the Slow Lane - UK Growth in 2011 Lags the Euro Area [28 Mar 2012]
George Buckley at the Millfield Economics Society [28 Mar 2012]
Beyond the Bike - Monetary Policy in Africa [28 Mar 2012]
Unit 4 Macro: Evaluating 3 Years of Quantitative Easing [27 Mar 2012]
Unit 4 Macro: Video Resources on the Euro Crisis [10 Mar 2012]
Unit 2 Macro: Policies to Drive Economic Recovery [9 Mar 2012]
Unit 2 Macro: Might Oil Prices Bring another Recession? [4 Mar 2012]
Economies hooked on central bank stimulants? [4 Mar 2012]
Unit 4 Macro: King on the UK Economy [15 Feb 2012]
Unit 2 Macro: Signs of Progress for Zimbabwe [29 Jan 2012]
Unit 2 Macro: Focus on China - Inflation [26 Jan 2012]
Inflation - what’s up, what’s down and what’s going to happen next [17 Jan 2012]
Unit 4 Macro: UK Bond Yields Reach Record Lows [11 Jan 2012]
Unit 2 Macro: Factors Driving Business Investment [10 Jan 2012]
Hopes and Fears 2012 [10 Jan 2012]
Unit 2 Macro: Quantitative Easing in the UK [8 Jan 2012]
Rising prices and falling real incomes [13 Dec 2011]
Beyond the Bike - The Value of Money [19 Nov 2011]
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Can the “invisible hand” solve Africa’s poverty? [13 Oct 2011]
Unit 4 Macro: Unit Labour Costs and Inflation [12 Oct 2011]
Unit 4 Macro: UK Inflation Charts [12 Oct 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
University Challenged [11 Oct 2011]
Unit 2 Macro: Homework Assignment on Consumer Spending [3 Oct 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
Inflation in India [18 Sep 2011]
Unit 2 Macro: Interest Rates and Income Inequality [16 Sep 2011]
Study Note - Macroeconomic policy objectives [16 Sep 2011]
John Kay on the future of Economics [26 Aug 2011]
Monetary Policy Roundtable [25 Jul 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
A2 Macro: Consumer Spending [30 May 2011]
AS Macro Key Term: Supply-Side Policies [25 May 2011]
AQA Macro: Remember to revise inflation [25 May 2011]
AS Macro Key Term: Demand Pull Inflation [24 May 2011]
AS Macro Key Term: Deflation [24 May 2011]
AS Macro Key Term: Cost Push Inflation [24 May 2011]
AS Macro Key Term: Inflation [24 May 2011]
A2 Micro: The Importance of Profit [19 May 2011]
UK Economy Update: What Mervyn Said [11 May 2011]
Interest Rates Held at 0.5% once again [5 May 2011]
Macroeconomics revision - measuring Consumer Confidence [4 May 2011]
AS Micro: Rising Global Food Prices [2 May 2011]
Video Clips on the Chinese Economy [1 May 2011]
AS and A2 Macro Revision: Keynesian Economics [28 Apr 2011]
UK Economy at a Glance April 2011 [17 Apr 2011]
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A2 Macro: Back to Roubini - a Year On! [11 Apr 2011]
AS Macro Key Term: Real Disposable Income [11 Apr 2011]
AS Macro Key Term: Monetary Policy Tightening [11 Apr 2011]
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ECB breaks rank and raises interest rates [7 Apr 2011]
AS Macro Key Term: Fiscal Austerity [6 Apr 2011]
AS Macro Key Term: Aggregate Supply Shock [6 Apr 2011]
AS Macro Key Term: Inflationary Pressure [5 Apr 2011]
AS Macro Key Term: Relative deflation [2 Apr 2011]
OCR F585 June 2011: Data Charts [30 Mar 2011]
Keeping Track of UK Macro Objectives [18 Mar 2011]
Focus on Spain [16 Mar 2011]
AS Macro Revision: Investment Spending [12 Mar 2011]
the latest data from the MPC [8 Mar 2011]
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Economics Q&A: Will the rise in VAT harm the UK’s economic performance? [17 Jan 2011]
Economics Q&A: How might rising food prices affect food retailers and manufacturers in the UK? [16 Jan 2011]
Analysis and evaluation practice of the monetary policy decision [13 Jan 2011]
Economics Q&A: What economic factors affect the demand for new cars? [9 Jan 2011]
Economics Q&A: What are some of the benefits and drawbacks of a period of rising world food prices [4 Jan 2011]
Economics Q&A: Will the Government spending cuts affect inflation? [3 Jan 2011]
EU Economics: EU Economy in Charts Jan 2011 [29 Dec 2010]
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