Saturday Snippet: Notes on Inflation


We’ve heard from investment guru John Mauldin in these pages on several previous occasions.  He’s one of the few economic commentators whom I read regularly.  He’s able to summarize critical issues into a few paragraphs, and make sense of interlocking factors affecting the economic world we live in.

In his latest weekly newsletter, titled “Notes on Inflation“, he makes several very important observations about events and circumstances that may change our economic outlook for a very long time.  I won’t steal his thunder by mentioning all of them:  instead, I urge you to click over to his place and read them for yourself.  I’ll simply excerpt his notes on current consumer prices and “shrinkflation”.

Price inflation is an individualized experience based on your spending patterns. It is increasingly difficult to escape completely, though. Almost every category of living costs is rising to some degree. You can see it in these charts from my friend Liz Ann Sonders of Charles Schwab. (Click the image for a larger view.)

The food component of CPI just posted its biggest annual jump since 1979.

Last week I talked about rent increases driving service prices higher. That’s not the only problem. Services ex-rent are growing even faster.

These other services carry less weight in the CPI formula, so their impact is smaller. As we’ll see, though, they add up, particularly for those with chronic health conditions. Treatment services are expensive and getting more so.


Most businesses hate raising prices. At some point they have no other choice, but it’s nerve-wracking because they don’t know how customers will respond. So, they find all manner of ways to camouflage what they’re doing, hoping no one will notice they are paying more.

Anas Alhajji recently posted some examples of “shrinkflation,” when companies keep prices the same but reduce the quantity sold.

  • Folgers container: 51 ounces to 43.5
  • Nescafe Azera Americano coffee: 100 grams to 90
  • Kleenex: 65 tissues to 60
  • Walmart Paper Towels: 168 sheets per roll to 120
  • Crest 3D White Radiant Mint toothpaste: 4.1 to 3.8 ounces
  • Dorito’s: 9.75 ounces to 9.25
  • Most “Party Size” Chips: 18 to 15.5 ounces
  • Chobani Flips yogurts: 5.3 ounces to 4.5
  • Burger King chicken nuggets: 10 to 8
  • Bounty Triples: 165 sheets to 147
  • Tillamook ice cream: 56 ounces to 48
  • Hefty’s mega pack: 90 bags to 80
  • Earth’s Best Organic Sunny Day: 8 bars per box to 7
  • Vim dish soap (India): 155 grams to 135
  • Cottonelle Ultra Clean Care toilet paper: 340 sheets per roll to 312
  • Pantene Pro-V Curl Perfection conditioner: 12 ounces to 10.4
  • Royal Canin’s cans of cat food: 5.9 ounces to 5.1
  • Angel Soft: 425 sheets per roll to 320

I can’t verify all those but I’ve seen similar examples. Caffeine Free Diet Coke is now in 10-ounce cans instead of 12-ounce. Some of this shrinkflation amounts to 20%‒25% price increases in terms of the amount you get for your money.

These changes don’t fool CPI, which adjusts for quantities. They fool many customers, though, which could have a long-term cost when people see what happened and lose trust in the brand.

There’s much more at the link, including natural gas shortages in New England and the Northeast, European manufacturing moving here to the USA because of energy shortages there, and other important factors.  Highly recommended reading.  For ongoing, interesting perspectives on economics, finance and investing, you might want to consider subscribing to Mr. Mauldin’s free weekly “Thoughts from the Frontline” newsletter, from which this morning’s snippet has been drawn.  I find it very useful.

I’d like to make two observations on the excerpt above.

  1. Note the embedded graphic.  The price of fuel affects literally every other category in the CPI, because everything has to be manufactured and/or moved, and that takes energy.  This affects many consumer choices, and not just short-term, either.  For example, one may decide to buy a house closer to work to reduce commuting expenses and/or use public transport, which in turn affects property prices in many areas.  Many elements of the CPI have not yet fully factored in a much higher fuel price, so their current rate of increase may move higher (perhaps much higher) over time as that filters through to the rest of the economy.  We saw that in Germany just this week, remember?  There’s nothing to stop it happening here too.
  2. Note the effect of “shrinkflation” on product prices.  As Mr. Mauldin points out, “Some of this shrinkflation amounts to 20%‒25% price increases in terms of the amount you get for your money”.  I’ve had several people complain that my rule of thumb to measure inflation (namely, to multiply the official CPI figure by 3.5 to get the true rate of inflation) is grossly exaggerated.  Unfortunately, it’s not.  CPI measurements are supposed to take shrinkflation into account when calculating their numbers, but in many cases that has not filtered through to the analysts doing the figuring.  However, when you add the effect of shrinkflation to the increase in a product’s price per quantity (ounces, pounds, gallons, liters, whatever), that 3.5 multiplier suddenly looks far more reasonable, doesn’t it?  It’s as much a contributor to the effects of inflation on our personal pocket-books and wallets as anything else, yet most people simply ignore it.  That’s a dangerous error.
My wife and I continue to experience at least a 30% annualized overall rate of inflation in the things we buy for our household.  Everyone’s personal rate of inflation will differ to some extent, because we all buy things that we want and will use, and don’t buy those we won’t.  Nevertheless, I’ll be very surprised if most people aren’t currently experiencing a 25%-35% personal rate of inflation.  Go add up your shopping bills, compare them to those of a year ago, and decide for yourselves.

Finally, if you think the current drought is making US agricultural products more expensive and in shorter supply, spare a thought for the folks in China, who look to be having it even worse than we are.  There are two video clips at the link that are pretty eye-opening.  Think of what shortages on that scale, in the two largest economies in the world, are likely to do to international inflation.  It’s scary.



  1. And yet our "Leadership" in CONgress (spelling intentional) sees fit to ship overseas to that Grift Mill, err Freedom for Ukraine distraction war OUR Money, Liquified Natural Gas, Oil and food.

    (While they strip mine America of its assets for their nests), See Ms. Pelosi's outstanding successes in the Stock Market and the loudest mouths in CONgress family members getting big money for being the bag men in Ukraine.

    "Leadership" right out of Isiaha chapter 3 God's Judgment against Judah.

    Read the whole thing, God makes provisions for His faithful BUT Remember God allowed the Babylonians to sack His chosen people and ship them off to be slaves. Nations are not His concern, souls are.

    Pray for wisdom and act on it.

  2. Michae…

    I suggest thatyou are fallingfor their shell-game if you focus on relatively minor expenditure of that nature, and ignore what has been done to destroy the fundamentals of our respective economies.

    Politicians will ALWAYS blame external factors, while their own policies – such as printing extra money and borrowing without restraint – are primarily respinsible. Biden and Co. have wedged conservatives beautifully when they persuade so many of us to reject a morally appropriate action instead of the morally inappropriate policies of their own devisining.

    Remember always that when they do something that takes money or value away from you and lets them spend it on what they want, it is a tax. Printing money drives up inflation. It puts that money in their budgets (and buys votes) while destroying your savings. – It’s a tax.
    Increasing interest rates to “fight inflation” costs you more on your mortgage and reduces the investment that drives employment. – It’s a tax on jobs.
    Never-ending borrowing – it’s a tax on your grandchildren.
    Subsidies for their cronies and to buy votes – it’s a tax.

  3. Peter..

    My grain-growing expenses have doubled in two years. As I think we have discussed before, the actual price of grain is not a big component in the cost of grain-based foods, but the likely result is that farmers will reduce their risk by changing their enterprise mix. Livestock finished on grass is one option, but supply may be reduced.

    Best of luck…

  4. PeterW tax or theft it's a matter of terms.

    Stealing our freedoms by controlling food and energy is as old a political control trick as can be found in the Old Testament when Pharoh controlled his Hebrew slave's food and Joeseph was there to sell grain to his brothers that sold him into slavery.

    Communists love control that way.

    We live in an age of corruption and lies. Need I list the children being groomed and such as evidence? Shrinkflation is a polite way of stealing (or responding to price increases apology).

    "Subsidies for their cronies and to buy votes – it’s a tax."

    NO, it's simple graft and corruption by folks with no morals.

    I notice California is scheduling their 250.00 per victim "Inflation Assistance" for October, NOT an obvious vote buying exercise it is?

    Ephesians 6:12
    New International Version
    12 For our struggle is not against flesh and blood, but against the rulers, against the authorities, against the powers of this dark world and against the spiritual forces of evil in the heavenly realms.

    Or to put it in more worldly manner as Michael Yon said it so well (Sorry Peter for crude quote) "Biden and the Democrats are not shit on the shoe of the real powers that Be".

    It may not be the end of the world but I'm sure the Hebrews being sacked and sent into slavery *might* have thought that but America in its current "Leadership" is not under God's grace.

    Best to be on good terms with your creator as you never know the moment you will face Him on the Throne. Nations come and go in a blink of God's eyes but He values souls.

    Pray for wisdom and act on it.

  5. Not philosphy or religion, but consider that China is a net importer of food, while the US has been a net exporter of food.
    Even though they have contracted for much (most?) of this years US crops, their people will starve. Totalitarians don't care about dead people, whether their own or others. It is a cost of doing business.
    I think that we will find the same attitudes and actions from our own totalitarians.
    I only hope that they may come to their senses before they find out just how different Americans are from the Kulaks they expect to starve into submission.
    The totalitarians necessarily believe that political forces are top down, and can not concieve of an individual and organic opposing force, selecting opportunities to frustrate their efforts at points of power or inflection.
    They seek to destroy much of what makes America what it is, and expext to rule in the ashes.
    If America descends into political violence, the world starves, and most world governments will lose control of their societies. What comes after that has too many variables to predict, but I think that it will be a horrible mess for a generation or two. :- 《
    John in Indy

  6. Peter, a comment on the changes to your blog. When reading on my phone, the highlighted portions are a very light colored font on top of a very light colored background which makes it very difficult for these old eyes to read. Is it possible to somehow just underline or italicize the portions you wish to emphasize? Otherwise, your posts are spot on. I am seeing better than 20% inflation down here in South Central texas.

  7. What I'm seeing in regard to inflation is about what happened back around '08/'10?. What was most obvious back then was the huge drop in quality of the product, and the drop in quantity inside the original packaging. For instance, cereal went from ~16 oz to ~12 oz per box. Now it's down to ~10oz. Name brand cereal became the same as house brands in quality.

    Socks from all makers became trash, and pants material got much thinner or of looser weave. This sort of business response really pisses me off. I'd much rather get the original quality and pay more for that, as the long term cost per item gets much more expensive due to the shorter life expectancy. When possible, I will change brands, instead of continuing to support idiocy.

    The biggest quality change I saw was Duracell batteries, as they took the #1 brand and absolutely killed their product. Unfortunately, most all their competitors jumped on the same wagon of bad chemicals and trashed their own products. I'm unsure of what is driving that sort of group idiocy. Collusion or MBA "thinking"? Anyway, I have no intention of ever buying a product from Duracell again. Lots of damaged items before I realized they had turned to trash.

  8. I think the Caffeine Free Diet Coke sizing has to do with the local bottler, as the cans are still 12oz around here. Not too long ago they were not even available.

    I've gotten some sticker shock as my kids moved out of their dorms and so needed to get set up. Ouch.

    On the bright side, I saw one product (Costco 1lb pre-cooked bacon) do the right thing, and raised both their price and the quality. It no longer is dry jerky, and will leave a little grease in the pan.

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