Cavallo also looked into how Covid-19 purchasing habits are affecting inflation in 16 other countries. Since Cavallo did not have credit card data for these other countries, he assumed that consumption patterns changed at the same relative magnitude as they did in the US. His adjusted inflation figures were higher than official ones in 10 out of these 16 countries. The UK is one of the six countries that had lower inflation, in large part because food bought at grocery stores has been getting cheaper during the pandemic.

Cavallo thinks that his adjusted inflation numbers may actually be underestimates of true inflation. For example, in the US, the Bureau of Labor Statistics, the organization which measures inflation, has been unable to obtain prices for some goods because many stores have run out and are no longer selling them. As a result, prices for these products remain static in the inflation calculation. Yet it is these high demand products that are likely getting more expensive.

Accurately measuring inflation is key for public policy, says Cavallo. “The two most important economic indicators are employment and inflation,” Cavallo tells Quartz. “Unemployment numbers are showing that people are losing their incomes. Inflation numbers show that, in some cases, the prices of the goods they spend on the most are rising faster than what they aren’t spending on at the moment.” Central banks and governments responding to Covid-19 must recognize that if the cost of living is higher than official numbers suggest, aid packages might not go as far as they think.

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