Q&A: Is price inflation hiding behind shrinking packaging?

By Jeff BlyskalConsumer Reports

Q: When the federal government calculates inflation in the cost-of living adjustment for various programs, such as Social Security and the consumer price index, do the number crunchers adjust for product “downsizing” without a price increase? Prices have not decreased correspondingly. In my book, that’s inflation by any other name. —Susan Rosenthal, Oakland Park, FL

A: That’s inflation in our book, too, and we’ve warned consumers about the incredible shrinking package and measured how manufacturers have sneakily reduced the size of everything from orange juice to dishwashing liquid by 8 to 20 percent, while keeping the price the same.

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Packaging pros play shortchange by sleight-of-hand because consumers are more attuned to changes in price but not so much to changes in package weight or volume.

Manufacturing chicanery can involve optical illusions that maintain the same visible outer dimensions of the package but rob from the unseen interior space by indenting the bottom of the package, for example.

The good news is that, as clever as packaging pickpockets are, they can’t fool the U.S. Bureau of Labor Statistics, which is the federal agency that calculates and keeps track of the Consumer Price Index and the CPI-W for wage earners and clerical workers (a subset index used for Social Security cost of living adjustments).

BLS pricing experts are aware of and adjust for shrinkage.

So yesterday’s 99-cent two-ounce candy bar that’s still 99 cents today but has been downsized to 1.8 ounces doesn’t get away with not having raised its price in the eyes of the Feds. Economists at the BLS count that as a 10 percent price increase.

BLS, which collects about 80,000 prices per month from all over the U.S., also factors in meaningful changes in product quality (for example, a faster personal computer) and gives more weight to the price of products that more people are buying.

It’s tough to get even subtle chiseling past BLS. When airlines started charging separately for baggage in recent years, the Bureau made an upward adjustment to account for the fact that airline ticket prices used to include transportation of at least a couple of pieces of checked luggage.

“We always try to capture what comes out of the consumer’s pocket,” Steve Reed, an economist in the Information Analysis Branch of the CPI Program, said.

How to protect yourself? Compare seemingly equal-size packages of competing brands, because not all manufacturers downsize, and check the unit prices, which express the cost per ounce, pound, or whatever other unit of measure, so you can make true apples-to-apples comparisons.

–Jeff Blyskal

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