Individual inflation rate: How high is my personal inflation?

For many years, a dramatic rise in inflation was just a nightmare. Now it is a reality. It’s good that the ECB exists. Because it is not only there to prevent the matter of inflation from getting out of hand, but also offers the possibility of calculating your own individual rate of inflation.

First of all, it should be noted that prices in a market economy keep changing. Some products are becoming more expensive, others cheaper. If the prices of goods and services increase in general and not just the prices of individual products, so one speaks of inflation.

And she currently knows how to be frightened. It rose to 3.4 percent in September 2021 in the euro zone – compared to the increase in consumer prices in September 2020. In Germany the value was even 4.1 percent. Which puts it at its highest level in almost 30 years.

The current strong price surge is due to numerous everyday products such as groceries, newspapers and gasoline, consumer goods such as clothing, computers and washing machines and services such as hairdressing, insurance and rental expenses. Energy prices rose particularly sharply again last month. Consumers were 17.4 percent more expensive than a year ago. The prices for food and luxury goods rose, just like those for industrial goods, by 2.1 percent. Services rose by 1.7 percent. If the costs for energy and food are factored out, the so-called core inflation rate also increases – compared to the previous month by 0.3 to a total of 1.9 percent. In this context, however, it should not be forgotten that so-called assets such as stocks and real estate have hardly been held for more than a decade.

Financial augurs expect normalization

Most economists, including those at the Bundesbank and the European Central Bank (ECB), had foreseen this, or something like that. Most economists are reassuringly anticipating significantly lower price increases in the medium term. And anyway, a large part of the currently high inflation is actually just a normalization after the unusual price drops in the Corona year 2020, including the reduced VAT rate.

Which should not comfort all those who already have the feeling that in their case the price increases are significantly higher. Which can be. Because the rate of price increases is only an average value and can vary significantly depending on the consumption behavior of the individual. Because, as always, when calculating, one hand on the stove, the other in the freezer – the average value is ready. So if you currently want to be cozy and warm at home and consequently heat a lot, you should be above average.

Unsurprisingly, every private household has different habits when it comes to selling its money. The combined average spending habits of all households determine how much weight each product and service receives in measuring inflation. When calculating the average price increase, greater weight is attached to the prices of products on which more money is spent, such as electricity, than the prices of products on which less is spent – such as sugar or postage stamps.

Turn on the ECB computer

The fact that people often have the feeling that inflation is higher than the actual measured values, however, also has psychological reasons. For example, price increases are more likely to be perceived than stable or falling prices, and frequent purchases are registered more strongly than infrequent purchases and direct debit payments.

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Whatever the case, the ECB not only strives for price stability, but also wants to shed light on individual monetary devaluation and offers on its website a personal inflation calculator at. Consumers can use this to enter how much they spend per year on rent, gasoline, haircuts or groceries, for example. In this way it can then be calculated to what extent the personal inflation rate differs from the official one. It is possible that the result may frighten one or the other. In this case, it is important to be strong or, if possible, reduce your expenses. With the energy costs already mentioned, for example, one could think about changing the expensive electricity provider or leaving the car at one point or another.

Otherwise, however, moderate inflation of 2.0 percent is to be welcomed. This is the value for the euro area that the ECB is aiming for. After all, prices that are permanently low or falling across the board mean that companies and consumers are tempted to postpone investments in anticipation of further falling prices. And this can then slow down the economy – which can put your own job at risk.