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Bright idea: stealth inflation

How are companies holding prices steady? By giving shoppers less for the same money


 

Rising prices sparked riots across Africa and the Middle East but, fortunately for North Americans, inflation has barely budged, right? Maybe not. The inflation rate in the U.S. in January was just 0.4 per cent, even though prices for raw materials—like cotton, wheat, metals, oil and wood—have soared worldwide. How are companies holding prices steady? By giving shoppers less for the same money.

An analysis of 10 products in the U.S. by Consumer Reports found packages are getting smaller: Ivory dish detergent shrank from 30 ounces to 24 ounces, Classico pesto sauce from 10 ounces to 8.1 ounces, Kraft American cheese from 24 slices to 22 slices, and Häagen-Dazs ice cream from 16 ounces to 14 ounces. According to Peter S. Cohan & Associates, a consulting firm, assuming prices stayed the same, the smaller packaging translates into an average price inflation of 12.2 per cent—far above the official rate. Call it inflation by stealth.


 

Bright idea: stealth inflation

  1. And Kleenex boxes (and competing products) used to have 200 or more per box. They keep approaching a cardboard-wrapped travel pouch of 15.

  2. Just made the same comment to my wife a couple nights ago over dinner. We had just picked up some take-out Japanese food from a chain fast food restaurant and I noticed they switched from the generic rectangular clam-shell take-out containers to new company-branded ones that seemed at least 10% smaller. Also noticed the reduction in chicken and beef in my teppanyaki dish. I think the prices have climbed slightly, to boot! Call it "stealth inflation", but all the minor changes made at the same time made it much less stealthy!

  3. The comment on shrinking sizes is valid. But official price indexes allow for this – they are based on standard sizes and would be adjusted. Comparing results for 10 products chosen for having shrunken sizes to the aggregate index for thousands of products is not meaningful. I also question whether the percentage changes quoted relate to comparable time periods but this is a bit too technical for discussion here.

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