Shrinkflation occurs when firms reduce the size or quantity of a good and keep prices the same. Shrinkflation is as an alternative to inflation. Rather than increasing prices you get a smaller quantity. To buy the same quantity you have to spend more.
Recently, it has received a lot of press attention, and The OED is now considering adding the word to the OED. As the OED blog states:
“Shrinkflation is a portmanteau, made from combining shrink: ‘to become or make smaller in size’, with the economic sense of inflation:”
What is the opposite of Shrinkflation?
The opposite of shrinkflation would be:
Well, I don’t think that word will make the OED anytime soon. Perhaps I will invent my own: expandingstatic. The item is expanding in size, the price is static.
An appreciation in the exchange rate could reduce cost of imported raw materials. Firms could reduce price, though they may respond by giving consumers bigger size.
Variability of Shrinkflation
Shrinkflation is a word which will vary in usage. Shrinkflation is a potential response to ‘cost-push inflation’ a period of rising costs of production but with weak consumer demand.
The UK economy 2016/17 has ideal conditions for encouraging firms to pursue shrinkflation. The depreciation in the value of the Pound has put upward pressure on the price of imports, especially items like chocolate. At the same time, real wage growth is low and therefore consumers sensitive to any changes prices. In this case, shrinkflation is a way to maintain sales and absorb the cost increases.
Shrinkflation is much more common in times of cost-push inflation but less likely in a period of falling inflation rates.
Examples of shrinkflation make an excellent newspaper report. The outrage of the consumer being deceived by big multinationals. Furthermore, the fact shrinkflation is closely related to the impact of Brexit adds a potent political mix. When Toblerone shoot themselves in the foot and make gaps bigger, it’s a tabloid story already half-written.
But, Shrinkinflation can’t be a perpetual response to rising costs. Otherwise, we would end up with very small chocolate bars. In fact, if anything, chocolate bars and soft drinks have been increasing in size in the post-war period. Super sized bars are often considered to be a leading cause of obesity.
But, in a period of lower inflation rates, will firms respond by increasing size of chocolate bars by 10%?
If consumers rarely notice a 10% reduction in size, they probably won’t notice a 10% increase in size. Perhaps more likely is that firms will justify future price rises by increasing size of bars again.
Also, a 10% rise in the size of a chocolate bar without an increase in price hardly makes an exciting tabloid article. It is devoid of any sense of injustice or outrage, a word for the opposite of stagflation is unlikely to ever catch on.
Benefits of Shrinkflation
If obesity is caused by chocolate bars which are too big, then reducing the size of food items could help reduce the obesity epidemic. E.g. Article on obesity and super-sized portions?