Definition
In Korea, perceived inflation (chaegam mulga) is how high or low consumers subjectively feel prices are as they shop for groceries and eat out in daily life. Unlike the Consumer Price Index officially published by Korea's government statistics agency (the National Data Office, formerly Statistics Korea), it varies widely with the prices of the items a person buys often and with psychological factors.
Why Are the Official Numbers So Different from My Wallet?
Every time you check a receipt after grocery shopping, you may have wondered, "Prices feel like they've jumped at least 10%. Why does the news say only 2%?"
The biggest reason for this gap is how often you buy things. We're very sensitive to the prices of items we spend money on several times a week, like apples, eggs, lunch, and public transit fares. If one of these regulars goes up by even 1,000 won, money leaves your wallet every day, so it feels like prices have skyrocketed.
On the other hand, even if the price of a TV, a refrigerator, or a car that you buy once every few years falls or holds steady, you can't feel that benefit day to day. In the end, price rises on the things you buy often get burned into your mind and push perceived inflation way up.
To Be a Little More Precise: The Secret of the Statistical Shopping Basket
To be a little more precise, the official gauge, the Consumer Price Index, reflects the average spending of all households in Korea and combines the prices of about 458 representative items (based on 2020). It is due to be revised to a 2025 base year, and the mix of items will change with it.
This giant statistical basket holds not just vegetables and meat but also things you almost never pay for, like pianos, golf course fees, air conditioners, and car repairs. Government statistics assign weights to these hundreds of items and combine them into one overall score.
In real life, though, everyone's basket is different. The basket of a student living alone is nothing like that of a big family, and someone who rides public transit spends differently from someone who drives. The official price index is one giant average of the whole population, so a gap between it and the prices an individual consumer actually feels is unavoidable.
The Psychology of Remembering Only What Went Up
The odd way our brains work is also a main culprit in making perceived inflation much higher than the real thing. People tend to feel the regret and pain of a loss far more strongly than the joy of a gain.
If the lunch special you always eat goes up by 1,000 won, you quickly feel wronged and it sticks in your memory. But when fruit or vegetables at a big supermarket drop by 1,000 won, you shrug and think, "It should have been this price all along," and soon forget it.
On top of that comes a psychological illusion in which you wipe out the items that got cheaper and vividly remember only the ones that got pricier. As a result, the price level in people's minds tends to shoot well ahead of the official statistics.
Common misconceptions
The official inflation rate is announced as low because the government fudges the statistics.
It isn't statistical manipulation. It's a difference in what's included. The official price index is an average of more than 400 items, so even if the groceries you buy often rise sharply, the overall average rises only a little if the prices of appliances and manufactured goods stay steady.
Where you meet it
When the take-out coffee you drink often goes up by 500 won, you feel that price rise far more strongly than a drop in the price of furniture you don't usually buy.
When the price of napa cabbage and radishes soars, shoppers' perceived inflation shoots up even if the news reports that prices are stable.
In one sentence
Perceived inflation is a subjective sense of prices that reflects the items an individual buys often and the psychological shock of price increases.