With open inflation, every market participant can see the rise in the general price level. This term is mainly used in connection with or to differentiate it from hidden inflation. Open inflation is the rule of inflation, at least in Germany, as the inflation rate is measured permanently.
In this lesson we explain the concept of open inflation, differentiate it from hidden inflation and explain the measures that are taken in Germany to collect relevant market data. At the end of the lesson, we will give you a few practice questions with which you can consolidate your newly acquired knowledge.
Why should you know open inflation?
Recognizing inflation as such enables you to react to it yourself and to better assess the reactions of other market participants. In the case of open inflation, certain reactions on the part of households and companies are easy to predict.
Open and hidden inflation
Open inflation: types of inflation
In contrast to open inflation, hidden inflation actually shows a price increase, but this is not or not yet perceived as such. In this context, there is also talk of a monetary illusion. Consumers assume that the value of money will stagnate, i.e. that it will remain at a constant level.
The more frequently measurements are made and the results are published, the shorter the duration of this effect. In Germany, hidden inflation is almost impossible, as the state statistical offices determine thousands of prices for the consumer price index every month.
Consumer price index and shopping cart
As already mentioned above, hidden inflation is almost impossible in Germany and open inflation, on the other hand, is the rule. To compile the consumer price index, around 650 goods and services are currently recorded in monthly surveys.
On behalf of the regional statistical offices alone, around 600 employees carry out monthly price surveys for the products in the shopping cart. Around 300,000 individual prices are manually collected in trading and service companies. Due to the increased use of digital data sources, the number of monthly price observations could even be increased.
According to photionary, the shopping cart currently consists of goods and services in the following categories:
- Food and non-alcoholic beverages
- Tobacco products and alcoholic beverages
- Clothing and shoes
- Housing, gas, water and fuel
- Furniture and furnishings
- Health and care
- Leisure, culture and entertainment
- Hotels and restaurants
- Other goods and services