Business

Bright idea: stealth inflation

How are companies holding prices steady? By giving shoppers less for the same money

Rising prices sparked riots across Africa and the Middle East but, fortunately for North Americans, inflation has barely budged, right? Maybe not. The inflation rate in the U.S. in January was just 0.4 per cent, even though prices for raw materials—like cotton, wheat, metals, oil and wood—have soared worldwide. How are companies holding prices steady? By giving shoppers less for the same money.

An analysis of 10 products in the U.S. by Consumer Reports found packages are getting smaller: Ivory dish detergent shrank from 30 ounces to 24 ounces, Classico pesto sauce from 10 ounces to 8.1 ounces, Kraft American cheese from 24 slices to 22 slices, and Häagen-Dazs ice cream from 16 ounces to 14 ounces. According to Peter S. Cohan & Associates, a consulting firm, assuming prices stayed the same, the smaller packaging translates into an average price inflation of 12.2 per cent—far above the official rate. Call it inflation by stealth.

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