19 Derek Streidl – The Coffee Index: Using Everyday Consumer Goods to Dispel Perceived Inflation
Derek Streidl is a Senior from Cincinnati, OH and he is a pure mathematics major who has graduate school aspirations following graduation from IUE in Fall 2025. Derek would like to attend a PhD program in either Mathematics or Economics, with a goal of working for the Federal Government one day as a Quantitative researcher and/or research economist helping to shape future US financial policies and save it from autocratic presidential administrations. This work was prepared for Robert F. Mulligan’s ECON-E 430 International Economics, who states, “Derek’s study on price inflation is original, innovative, and demonstrates his intellectual curiosity.”
The Coffee Index: Using Everyday Consumer Goods to Dispel Perceived Inflation
Introduction
Inflation perception often diverges from actual inflation rates, a6ecting consumer confidence, spending habits, and economic policymaking. In my paper “The Coffee Index: Using Everyday Consumer Goods to Dispel Perceived Inflation,” we explore the extent to which commonly consumed products—specifically coffee—reflect true inflationary trends, challenging misconceptions held by the general public. The study uses real-world pricing data from independently owned coffee establishments in Cincinnati, Ohio, to analyze how consumer goods can serve as reliable indicators of actual inflation.
Objective of the Study
The primary goal of the research is to determine whether the pricing trends of house coffee and cappuccino can accurately reflect inflation rates in a local market. The study posits that if everyday goods closely follow actual inflation, they can serve as tangible tools for economic literacy, helping to mitigate exaggerated public concerns about rising prices. This research is particularly relevant in the wake of economic disruptions caused by the COVID- 19 pandemic and subsequent fluctuations in consumer pricing expectations.
Methodology
The study utilizes a robust dataset collected from 50 independently owned coffee shops in Cincinnati, Ohio. Prices for two specific products—house coffee and cappuccino—were gathered from the years 2020 and 2024. Regression analysis was then applied to assess the relationship between past and current prices.
The methodology consists of the following steps:
1. Data Collection: Coffee prices from 50 local establishments were recorded for two timeframes (2020 and 2024).
2. Product Selection: The study focused on house coffee and cappuccino, as these are standardized items available at most coffee shops.
3. Statistical Analysis: Regression analysis was conducted to determine the correlation between past prices (2020) and present prices (2024), and to establish the annualized rate of inflation for these products.
Findings
The research revealed a strong correlation between past and present prices for both house coffee and cappuccino. The key findings include:
- The annualized rate of inflation for house coffee was approximately 3.36%.
- The annualized rate of inflation for cappuccino was approximately 3.17%.
- These rates closely align with the actual local inflation rate of 3% as reported by the Consumer Price Index (CPI) during the same period.
- The pricing behavior of coffee establishments suggests that local businesses adjust prices in response to real economic conditions rather than consumer perceptions.
These results support the hypothesis that coffee prices serve as reliable indicators of actual inflation, countering the common misconception that inflation is significantly higher than reported.
Impact of the Study
Implications for Consumer Behavior
One of the most significant contributions of this research is its potential to improve public understanding of inflation. Many consumers base their perceptions of inflation on anecdotal evidence rather than data-driven analysis. By demonstrating that coffee prices track real inflation rates, the study o6ers a practical reference point that consumers can use to better gauge economic trends.
Applications in Economic Education
The study suggests that financial literacy programs could incorporate simple, relatable examples such as coffee pricing trends to educate the public about inflation. Rather than relying on abstract CPI figures, which everyday people may find easier to understand inflation, by observing the price of commonly purchased items they are exposed to everyday.
Policymaking and Market Stability
Consumer sentiment plays a critical role in economic stability. When inflation is perceived to be higher than it actually is, individuals may alter their spending patterns, leading to unnecessary market disruptions. By promoting accurate inflation perception through everyday consumer goods, policymakers and economists can help stabilize economic expectations and prevent overreactions in the market.
Conclusion
“The Coffee Index” provides a compelling case for using everyday products as tangible measures of real inflation. Through rigorous statistical analysis, our study confirms that coffee prices in Cincinnati closely track actual inflation trends, reinforcing the idea that public misconceptions about inflation can be corrected using data-driven insights. The study has broad implications for consumer education, economic policy, and behavioral economics, making it a valuable contribution to ongoing discussions about inflation perception and market behavior.
By offering an accessible way to understand economic trends, the research bridges the gap between economic theory and everyday consumer experience. Moving forward, further studies could expand this approach to other consumer goods or di6erent geographic regions, solidifying the utility of everyday price tracking as a tool for economic literacy.