In the UK, consumer borrowing is falling sharply, the housing market is following its US counterpart into deflation, and consumers are retrenching. Here too, underlying inflation pressures ought to moderate.
In the eurozone, the picture is less clear. Money and credit growth have remained in double-digit territory and economic activity has been robust in recent years. Some signs of higher wage settlements are evident. But the most recent data also point to a sharp slowdown in the eurozone economy.
So, what are we to make of higher inflation expectations in the US and western Europe? Investors and households seem to believe energy and food prices will continue to rise. But will other prices and wages automatically follow suit? Stagnating growth and tighter credit conditions suggest the opposite.
Perhaps that is why consumer confidence has plummeted on both sides of the Atlantic. Eating and driving are more expensive, but weak growth, rising unemployment, and fear of outsourcing are keeping most wages in check.
In short, households may say they expect higher inflation, but there is little they can do about it. The reality is they are experiencing falling real incomes and pinched balance sheets. That is hardly the stuff of overheating.