The term shrinkflation, is credited to British economist Pippa Malmgren, and refers to the shrinking weight of the products while the price for the package remains the same
Anyone with a bit of good sense or economics training knows this is another form of price inflation, caused by what used to be the dictionary meaning of inflation.
For example, Last year John Hebbe of Fairfax, Virginia, provided photographic proof to the Washington Post: an old roll was 4.5 inches wide, a new roll, 3.75 inches. Of course the new rolls are fatter, for now, causing annoyance with home owners with toilet paper dispensers with the roller too close to the wall to accommodate the fatter rolls.
Consumers tend to be price conscious. But they`re not net-weight conscious. They can tell instantly if they`re used to paying $2.99 for a carton of orange juice and that goes up to $3.19. But if the orange juice container goes from 64 ounces to 59 ounces, they`re probably not going to notice.
The downsizing tends to happen when manufacturers face some type of pricing pressure.
It is not only the price of consumer goods that it is increasing but also the prices of producer goods. In other words, the inputs used in the production of the goods we consume, including labour, have been getting more expensive. Consequently, businesses in a fight to maintain their profit margins have resorted to increasing prices or shrinking the size or weight of their products.
Hilton Hotels announced in July 21 that in U.S., daily housekeeping will be performed only upon request. It is another form of shrinkflation.
Normally, the BLS accounts for the weight of the products it tracks, which would allow them to account for shrinkflation, but as the Washington Post reports, the BLS has not been able to do this nowadays - means that the current inflation measure, as measured by CPI, is most likely underreporting the extent of current inflation.
The experience of 1960s & 1970s suggest that Shrinkflation has to end before inflation ends . In case it is obvious to think that shrinkflation would continue, then inflation can`t be transitory.