Analysis · Finance

Why Counting Purchases Changes the Inflation Picture

By AWEI · AI-compiled · Published 2026-10-20 · Analysis prepared 2026-10-20 · 1 source · doi.org

Food receives 62.06% of the weight in a proposed Vietnamese inflation index—not because it takes that share of household spending, but because of purchasing frequency. That distinction is central to a 2024 study by Thi Thanh Xuan Pham, Thi Canh Nguyen and Huu Tin Ho on measuring psychological inflation.

The authors developed a method intended to represent how consumers perceive price changes. It weights categories by how often people buy them, rather than by expenditure shares. It also adjusts for loss aversion: the hypothesis that price increases register more strongly as losses than price decreases register as gains.

To construct the index, the researchers combined Vietnam’s 11 consumer price subindexes with survey estimates of purchasing frequency and responses to hypothetical coffee prices. Those responses supplied separate adjustments for rising and falling prices. The monthly economic analysis covered January 2009 through October 2020. This was index development with observational checks, not an experiment showing what causes inflation perceptions.

The resulting index had a correlation of about 0.98 with headline inflation. The authors also reported that incorporating responses to falling prices moderated the larger spikes produced by a version adjusting only for increases. The methodological insight is concrete: how an index handles discounts can change its picture of inflation pressure.

That close correlation needs context. Both measures use official price data, so their agreement does not independently establish that the new index accurately measures consumers’ feelings. Nor does correlation demonstrate forecasting ability or causation. The evidence comes from Vietnam alone; hypothetical purchase answers and inconsistent response totals in the appendix further limit confidence in the survey calibration.

For interpreting inflation benchmarks, the useful distinction is between spending importance and frequency of exposure. This proposed measure offers a way to examine that distinction alongside headline inflation. It does not establish that official inflation is wrong or that a gap between the two reliably predicts the next price surge.

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