Why in news? Economists and market analysts have coined the term “fomoflation” to describe episodes when prices rise not because of shortages or production costs but due to consumers rushing to buy out of fear of missing out (FOMO). The phenomenon has been observed in property markets, travel bookings and even essential commodities.
Background
FOMO is a psychological response characterised by anxiety that others are getting better deals or opportunities. In markets, this behaviour can trigger panic buying or speculative investment, driving demand far above normal levels. The resulting surge causes prices to spike temporarily until supply catches up or buyers’ enthusiasm wanes.
How fomoflation works
- Panic buying: Rumours of upcoming price hikes or shortages lead consumers to hoard goods or book services en masse. Retailers and service providers raise prices in response to the sudden demand.
- Social amplification: News reports, social media posts and group chats amplify the sense of urgency. Seeing peers purchase property or plane tickets can provoke others to follow suit, even if they cannot afford the purchase or do not need it immediately.
- Self‑fulfilling cycle: As prices climb, more buyers fear they will be priced out later, which perpetuates the cycle. Eventually, demand slows, inventories replenish and prices stabilise, sometimes leaving latecomers with overvalued assets.
Examples
In Australia, a combination of interest rate cuts and government subsidies for first‑time homebuyers in 2025 triggered a rush to purchase property. Real estate agents reported buyers signing contracts out of FOMO, driving up median home prices and sparking debates about housing affordability. Similarly, global news about visa fee increases prompted applicants to book travel and appointments en masse, leading to temporary spikes in airfare and hotel prices.
Why it matters
Recognising fomoflation can help policymakers and consumers respond appropriately. Officials can mitigate panic by communicating clearly about supplies and avoiding abrupt policy announcements. Consumers can avoid overpaying by researching purchases and resisting herd behaviour. For investors, understanding FOMO‑driven bubbles in stocks, cryptocurrencies or commodities can prevent rash decisions.
Sources: MacroBusiness and ABC News.