Alan Greenspan isn’t the only one worried about inflation. As the chart below indicates, Gallup polling finds a sharp upswing in the number of Americans who fear that inflation is coming back from the near-dead. And well they might, given data like last week’s Labor Department report of an 0.7 percent jump in wholesale prices. The curious thing about the chart, though, is that it shows about half of Americans were spooked by inflation throughout the period in which it was negligible. Similarly, a Harris Poll conducted in late 2002 found people putting “rising prices” atop their list of life’s daily hassles, even as economists were fretting about the prospect of disinflation. If consumers were worked up about nonexistent inflation, how will they react to the real thing? The answer is tricky to predict. After all, it’s been so long since inflation was a big deal (apart from the occasional gas-price increase) that a significant number of consumers have never dealt with it in their adult lives. Will it shock them into reining in their spending? In the short run, marketers will hope the fear of inflation instead drives people to rush out and buy things now, before prices rise. As for the longer run, media coverage of inflation’s apparent comeback has noted that it could restore some of the “pricing power” companies forfeited during the long period of consumer-price stability.
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