Shrinkflation Gets ONS Attention - What Is It?

Shrinkflation is a term used to describe the business practice of changing the physical weight of a product, while keeping its price constant. The “shrink” part of the term refers to the change in package size, typically a reduction, whereas the latter part of the word refers to inflation – the rise in the general price level. If products “shrink” in size, inflation rises even if prices stay constant, as consumers pay the same amount of money for less of the good. In order to more accurately measure inflation, the ONS use quality adjustment processes to isolate price movements from the changes in product’s weight or quality.

We have been banging on about this issue for some while to Essex Universities, EUROMOD project. 

EUROMOD is a unique tax-benefit microsimulation model for the European Union. The ABC want to show the effects of inflation in the real world, as opposed to the theoretic models from the world of academia.

The need to understand the real effect on UK welfare benefits that have been frozen, by a problem food manufactures have created, companies that are shrinking products in size and weight. This is in addition to monetary inflation, which is eroding the purchasing power of money itself. 

If the Council stops emptying the bins once a week and reduces the service to every two weeks…that is a form of inflation, as your money is buying less and less service, for the same amount spent. Some Shrinkflation does little harm, but some does hurt people a great deal.

Shrinkflation is something we will be hearing more about. The government cutting welfare and services yet expecting the public to carry on paying the same amount of tax, except of course for companies that are having Corporation Tax cut still further. The actual effective rate of Corporation Tax, as one Scottish economist pointed out is just 2%. 

It is good that the Office of National Statistics is tackling this issue, which we brought up with EUROMOD sometime ago.