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Is Inflation Really as High as You Think? One Economist Says It’s Not

If you’ve been paying attention lately, you know inflation feels like it’s everywhere—in your groceries, rent, even that daily coffee habit that suddenly costs more than before. It’s easy to feel stuck wondering: Should I tighten my belt? Change how I invest? Or just hope things settle down?

Here’s a twist: some economists argue that the inflation numbers we see in the news might actually be overstated. Yep, that’s right—your real cost of living might not be rising as fast as those scary headlines suggest. This idea is gaining traction in financial circles, so let’s break down why it’s worth thinking about.

Why Traditional Inflation Numbers Might Be Missing the Mark

The go-to measure for inflation is the Consumer Price Index (CPI). It tracks the price of a fixed “basket” of goods and services over time. Simple enough, but here’s the catch—it assumes we keep buying the exact same things, in the same amounts.

In reality, when beef prices spike, most of us switch to chicken or tofu. But the CPI isn’t great at capturing those quick changes. This can make it seem like prices are rising faster than they really are for most people.

Plus, the CPI is slow to adjust for new trends. Remember when we all dumped cable for Netflix and Spotify? It took years before those savings showed up in official inflation stats.

So when economists like Mark Zandi from Moody’s Analytics say inflation is “overstated,” they’re highlighting real gaps in how inflation is measured—not just trying to be contrarian.

Tech Is Quietly Helping Keep Prices Down

One big factor that often flies under the radar is technology making things cheaper. Think about it: cloud computing, automation, and even AI have helped businesses cut costs, which often means cheaper services for us.

Take ride-sharing apps like Uber and Lyft. They disrupted the old taxi monopolies, driving prices down. And booking travel online? It’s never been easier to compare and find deals.

But here’s the tricky part—these tech-driven savings don’t always show up clearly in inflation stats. A better, cheaper service is a “quality improvement,” and the CPI can lag in reflecting that. So, official inflation numbers might look stickier than what you actually feel in your wallet.

Housing: The Complicated Piece of the Puzzle

Housing takes up a huge chunk of most people’s expenses, but measuring it isn’t straightforward. The CPI uses something called “owners’ equivalent rent”—basically guessing what homeowners would pay if they rented their own place. That estimate often lags behind real market swings.

During COVID, rents in big cities dropped but surged in the suburbs. The CPI took months to catch up, meaning inflation was probably lower than what those numbers suggested for a while.

On the flip side, in hot housing markets, prices can rise faster than the CPI tracks, sometimes understating how tough things really are. So housing makes the “inflation is overstated” idea a bit messy.

Shrinkflation and Subscriptions: What You’re Really Buying

Ever noticed your favorite cereal box or candy bar getting smaller but staying the same price? That’s shrinkflation, and it’s everywhere. Official inflation numbers try to adjust for this, but not always quickly or accurately.

Then there are subscription services—streaming, meal kits, etc.—which often give more value for less money compared to what we used to pay. Those savings don’t always show up right away in inflation data either.

It’s tough for economists to keep up with these fast-changing spending habits. The CPI is designed to move slowly so it doesn’t get caught up in short-term noise, but that means real savings or costs can be missed in the meantime.

How Global Supply Chains Play Into This

A lot of the recent inflation buzz comes from supply chain headaches—think chip shortages, car parts, and even eggs. These disruptions pushed prices up suddenly, but they’re usually temporary.

If you believe these supply hiccups will smooth out soon, then inflation might already be cooling in real terms. But if supply chains stay rattled for good, the CPI could actually be underestimating inflation going forward.

Most experts lean toward hoping these bumps fade, but nothing’s set in stone.

Two Important Things to Keep in Mind

First, if your spending is very different from the average—maybe your rent jumped 20%, or you’re dealing with expensive medical bills—the CPI won’t comfort you much. Many families feel inflation way more than the headline numbers show.

Second, when energy prices spike—like oil or electricity—the impact is real and immediate. You can’t substitute driving your car with something else, so those costs hit hard and the CPI often underestimates how painful it feels.

What Should You Do?

Don’t ignore inflation, but don’t freak out either. Start by looking at your own spending. Are there ways to lean into tech-driven savings or make smarter choices on what you buy? Those tweaks can add up.

For investors, this debate matters a lot. If inflation is actually lower than reported, interest rates might drop sooner, which could be good news for stocks and bonds. But if you’re tied to housing or energy sectors, tread carefully—those costs are very real.

Wrapping It Up

Inflation isn’t just a number—it’s personal and always changing. Official stats are useful, but they often lag behind what most of us experience day-to-day.

The best approach? Keep an eye on both the big numbers and the trends behind them. Don’t let one headline freak you out, and remember—sometimes the reality isn’t as dramatic as the news makes it seem.

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