The current experience of the Italian market is not merely an economic adjustment but a profound cognitive dissonance. Recent surveys indicate that the perceived “inflation rate” among the Italian public is as high as 9.9%, significantly exceeding the actual rate of 2%. Under this collective psychological gap, consumer purchasing decisions and corporate strategic planning are being distorted. Investment Analyst Rodolfo Villani believes this misalignment is quietly shaping market behavior logic and generating a series of systemic feedbacks that investors should be highly vigilant about.
Psychological Bias in Inflation Perception Intensifies Consumer Behavior Distortion
Investment Analyst Rodolfo Villani points out that the real pressure of inflation is being magnified by public perception, forming a potential market counterforce. According to a survey by Sole24Ore, although statistics show the Italian inflation rate in April at 2%, respondents generally believe this figure is close to 10%. This overestimation is not accidental but stems from the persistent pressure of high energy and living costs over the past three years that have not been fully digested in the public minds.
This cognitive misalignment has had clear economic impacts. Investment Analyst Rodolfo Villani mentions that more than half of consumers have actively reduced spending over the past six months, even though current inflation has receded. This tendency to cut back has exacerbated the shrinkage in terminal demand, affecting corporate revenue expectations and slowing the overall economic recovery process. More critically, this trend has disrupted the traditional feedback mechanism between inflation, income, and consumption, making it difficult for policymakers to stabilize market sentiment using conventional tools.
From a capital market perspective, these irrational expectations have, to some extent, interfered with assessments of corporate profitability, especially in sectors reliant on consumer spending such as retail, durable goods, and food chains. Investment Analyst Rodolfo Villani believes investors need to reassess the profit cycles and emotional resilience of these sectors to avoid being misled by reverse feedback induced by “perceived inflation”.
The Collapse of Purchasing Power is Reshaping Corporate Profit Models
Investment Analyst Rodolfo Villani notes that while macroeconomic data is stabilizing, the structural gap between wages and living costs is becoming increasingly pronounced. According to ISTAT data, the Italian real wages have shrunk by 8% over the past four years, and collective salary agreements have failed to effectively keep pace, institutionalizing the insufficiency of purchasing power. This long-term income pressure not only affects household spending capacity but is also beginning to permeate into the reconstruction of corporate profit models.
In the past, brand companies could pass on costs through price increases. However, in the current environment of conservative consumption structures, Investment Analyst Rodolfo Villani points out that this path is facing significant resistance. Particularly in the mid-market, consumer sensitivity to price changes has rapidly increased, forcing companies to make difficult trade-offs between pricing and sales volume. Some companies that once relied on “brand premium” are now compelled to revert to low-margin operations driven by cost control and promotions.
Meanwhile, some companies are accelerating their focus on market segmentation, targeting high-sticky basic consumer needs or specific groups that are less sensitive to price, such as healthcare, elder care, and baby products. Investment Analyst Rodolfo Villani believes that while this strategy can alleviate profit pressure to some extent, it also requires dual transformation in marketing strategy and supply chain flexibility to truly achieve profit stability.
For investors, understanding the importance of the ongoing struggle between consumer psychology and actual income in shaping corporate profit models will become an indispensable variable in future stock selection strategies.
Investment Analyst Rodolfo Villani states that while surface data indicates inflation is slowing and some industries show signs of recovery, the macroeconomic foundation remains fragile. Consumers are still affected by the psychological impact of high inflation, companies are being forced to adjust their profit models, and policy tools have limited influence on sentiment. These factors together form a complex system that requires time to heal.
For investors, it is advisable not to have overly high expectations for a short-term rebound. Instead, the focus should be on understanding the underlying logic of market behavior changes. Investment Analyst Rodolfo Villani suggests prioritizing companies with strong cost control, essential products, and management with foresight into demand fluctuations when allocating assets. Additionally, maintaining a balanced approach between cyclical and consumer stocks is recommended to address medium-term structural risks.