You know all about price inflation and how it squeezes your wallet. But there are also ninja price increases out there that you might not notice. It's called "shrinkflation."
Inflation robs you of purchasing power by driving up the price of everything you buy. The government reports price inflation using the Consumer Price Index (CPI) but it's a lot worse than they're telling you.
In the first place, the CPI is rigged to understate the extent of price inflation. You probably realize this every time you go to the store.
But price inflation also manifests itself in ways a government formula could never capture, and you may not even notice. Not only do you pay more for everything you buy, you get less.
And that's called shrinkflation.
Consumers aren't the only ones struggling with rising prices. Producers have to deal with them as well. The cost of materials, labor, and equipment go up, putting the squeeze on companies' bottom lines. Eventually, they have to pass those costs on to their customers.
But raising prices isn't a popular move. Ideally, a company would love to hide the price increase from you.
Instead of raising the price, the company just gives you less for the same amount of money. It does this by shrinking packages or putting less stuff in the same size container.
Shrinkflation doesn’t show up in the CPI, and most of the time, you probably don’t even notice. But the effect is the same as rising prices. You ultimately end up with less stuff.
It is stealth inflation.
Here's a recent example courtesy of Campbell's Soup.
Notice you only get 16.3 ounces of soup in the "New Look" can. You used to get 18.8 ounces. That's a 13.3 percent decrease in the amount of soup.
Make no mistake; you'll pay the same amount for the "New Look," if not more.
A friend of mine had his own run-in with shrinkflation. Here’s how he described it in a Facebook post.
Today I picked up a new Kentucky license plate for the Jeep. The plate they handed me felt more like plastic than metal, was thinner than usual, and no longer had the raised letters and numbers of the past. This, in a vacuum, would be unconcerned.
But as my friend astutely pointed out, it is "part and parcel" of a bigger picture and it reveals exactly what the government is doing to your money as a matter of policy.
The devaluation of the dollar manifests itself everywhere in ways we don’t even expect or measure. The consumer price index measures inflation charitably by allowing, at their discretion, for the use of substitute goods and services to offset price increases. There are no aggregate metrics to account for the decrease in quality of goods, for shrinkflation, and the precipitous declines we’re experiencing in the quality and formerly personal nature of important services.
MousePrint.org chronicles shrinkflation. Here are some recent examples.
- A box of Huggies Simply Clean Wipes now has 64 fewer wipes per carton.
- Walmart brand liquid soap went from 56 ounces per bottle to 50 ounces per bottle.
- Folger’s Breakfast Blend coffee went from 25.4 ounces to 22.6 ounces.
- The large 30-ounce carton of Pepperidge Farm Gold Fish was reduced by almost 10 percent from 30 ounces to 27.3 ounces.
- The standard 92-ounce bottle of Gain detergent is now 88 ounces.
- A family-size bags of Double Stuf Oreos now have four fewer cookies in each bag. (Did the family shrink?)
Most of the time, consumers don't even notice shrinkflation. But when they do, they get mad. And their anger is usually directed at the “greedy” corporations that are charging them the same for less.
But there's another culprit.
The Federal Reserve.
Price inflation is a symptom of monetary inflation. As the central bank creates money out of thin air and injects it into the economy, prices generally rise. Economist Murray Rothbard noted that since governments have deemed “paper tickets” and "computer digits" money, “then the government, as dominant money-supplier, becomes free to create money costlessly and at will. As a result, this ‘inflation’ of the money supply destroys the value of the dollar or pound, drives up prices, cripples economic calculation, and hobbles and seriously damages the workings of the market economy.”
Companies can't just ignore their cost problems. They can either raise prices, which will make you mad, or shrink package sizes, which will still make you mad, but you might not notice.
But the end result is always the same. You end up paying more and getting less.
About the Author:
Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.