by Michael Maharrey, Schiff Gold:
Inflation robs you of purchasing power by driving up the price of everything you buy. You see the impacts of inflation every time you go to the store. But sometimes inflation hits you in a more subtle way that’s difficult to see – through “shrinkflation.”
I experienced shrinkflation first-hand last weekend.
Inflation-driven rising prices don’t just hit consumers. In fact, they typically impact producers first. As the cost of materials, labor and equipment goes up, companies feel the pinch. Eventually, they pass those costs on to their customers.
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But raising prices is bad for business, so sometimes, companies find other ways to cut costs. They shrink packages or simply put less stuff in the same size box. While the price stays the same, you get less product.
Shrinkflation doesn’t show up in the CPI and consumers often don’t even notice, but the effect is the same as rising prices. You ultimately end up with less stuff.
It is stealth inflation, robbing you of purchasing power in a back alley.
MY BRUSH WITH SHRINKFLATION
Last weekend, my wife and I took an overnight trip and stayed in the same hotel as we did on a trip to the same place almost exactly one year ago. Surprisingly, the room rate was within $10 of last year’s price. But the hotel is clearly trying to find ways to cut costs.
Check out the soap.
The package on the left was the soap on the bathroom counter a year ago. My wife brought the soap on the right home from this year’s trip.
That’s shrinkflation.
You’ll notice that last year’s soap is called a “Body Bar.” This time we got a “Cleansing Bar.” The hotel now opts for a smaller, and presumably less expensive, soap version.
The bottom line is we paid the same for our room and got less for our money.
That’s shrinkflation.
Sure, it’s not really that big of a deal when we’re talking about soap, but shrinkflation is rampant out there.
MY FRIEND’S SHRINKFLATION EXPERIENCE
Just today, 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.
It’s part and parcel of a larger picture though.
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.
MORE EXAMPLES OF SHRINKFLATION
MousePrint.org chronicles shrinkflation. Here are some recent examples.
- Betty Crocker Cake mixes were downsized to 15.25/oz some time back and recently shrunk again to just 13.25/oz — a full five ounces less than the original. The boxes are identical in size.
- A package of Farm Rich Mozzarella Bites went from 20 ounces to just 15. But the bites are now bigger — but with fewer calories per serving. What’s going on here? A closer look at the front panel reveals they changed the serving size from four bites to just two now.
- The Quilted Northern Ultra Plush variety has gone from 284 sheets down to 255.
- Hill’s Science Diet “Perfect Weight” dog food decreased their package weight by 2.5 pounds.
We also see shrinkflation in services. Remember full-service gas stations? Now, we pump our own gas, bag our own groceries and manage our own investment portfolios.
The inflation tax is insidious and relentless. My friend in Kentucky summed it up nicely.
