Unnoticed Inflation: Maintaining Price Point

With all the conversations about inflation going around, there is one aspect that has been going unnoticed.  While the cost of items may even stay relatively the same, producers of products and services have been attempting to lower their expenses.  One way they can do this is by cutting quality and quantity in their product lines and services. 

In the food industry, it is not allowable to reduce quality; however quantity can certainly be changed.  Reduced quantity is becoming more and more evident in the grocery stores.  Shrinking the size of packaging without being noticeable is a key factor.  Ice cream cartons are no longer actual half gallon sizes and candy bars have become smaller.  Food items that come in boxes such as cereal can be closely the same size in height and width, but be slightly less in depth.  Water is a cheap additive to many products such as canned goods and juices.  Each of these methods will reduce the quantity of the final product.  

Regarding grocery products, this affects a couple of other factors.  First, this changes the quantity for recipe purposes.  If a recipe calls for a specific quantity that previously was available when purchasing one of something, then the consumer is not forced to purchase two items which will allow for waste or they need to be conscientious to modify their recipe.  A second aspect is portion control.  While dieters may benefit from the reduced portions, most Americans will find themselves desiring a second helping and thus the purchase for more goods is required.

Other commodities are hitting the economy very hard, the most obvious being gasoline prices.  To make matters worse, gasoline refineries are adding ethanol to their products.  This may decrease the cost for the refineries and increase their profit margins; however this reduces fuel economy for most all vehicles.  This is being done under the guise that ethanol can help keep the cost per gallon lower.  Unfortunately, the price has continued to rise while our fuel economy gets lower.  This is a compounded problem for consumers as they struggle to maintain their budgets.

All industries have been feeling the effect of a slower economy.  To increase the bottom line, there are two aspects business owners attempt to analyze: revenue and expenses.  Since an increase in price can lead to a reduction in sales volume reducing expenses is the best choice.  Manufacturers as well as service industries are learning how to reduce expenses very well.  Even though the price may remain fairly static or within the range of CPI, true inflation could be creeping in without being noticed.