CNBC.com has an interesting article about consumer product inflation. CNBC remarks:
According to research from Consumer Reports, many companies have been shrinking the size of the products you buy, while charging the same amount for the product.
Check out the table below from the article. Shrinking the product while maintaining the price is just a hidden price increase—and those are not small price increases! It’s kind of hard to square with the official inflation reports, which indicate there is no inflation.
| Product | Old Size | New Size | Difference |
| PepsiCo’s Tropicana orange juice | 64 oz. | 59 oz | -7.8% |
| Procter & Gamble’s Ivory Dish Detergent | 30 oz. | 24 oz. | -20% |
| Kraft American cheese | 24 slices | 22 slices | -8.3% |
| Kirkland Signature (Costco) paper towels | 96.2 sq. ft. | 85 sq. ft. | -11.6% |
| General Mills’ Haagen Dazs ice cream | 16 oz. | 14 oz. | -12.5% |
| Kimberly-Clark’s Scott toilet tissue | 115.2 sq. ft. | 104.8 sq. ft. | -9% |
| Combe’s Lanacane | 113 grams | 99 grams | -12.4% |
| Chicken of the Sea Salmon | 3 oz. | 2.6 oz. | -13.3% |
| Heinz’s Classico Pesto | 10 oz. | 8.1 oz | -19% |
| ConAgra’s Hebrew National Franks | 12 oz. | 11 oz. | -8.3% |
Source: CNBC, Consumer Reports
The financial markets are rarely fooled as easily as government statisticians. Keep an eye on relative strength, which will likely be able to sort out the inflation winners and losers.
[...] fun parts. We already know that the reason the prices aren’t rising in the U.S. is because manufacturers are stealthily shrinking the size of the packages. The United Nations tracks food commodity prices directly and they are going through the roof. [...]
[...] In which camp, do you thing USA currently is. The guys from Systematic Relative Strength had a nice missive on the subject: “Shrinking the product while maintaining the price is just a hidden price [...]
Dear DWA Money Mgmt:
What is the most accurate published indicator of inflation at the consumer’s level?
If I understand correctly, the CPI does not include food and energy components, which can be highly volatile. Is the Producer Price Index a better measurement of real inflation?
Many thanks,
John Ross
DWA Subscriber
The published CPI does include food and energy; it’s the “core” CPI that excludes it. (I think the core CPI can safely be ignored!) That being said, there’s no general agreement on what the best published data series for consumer inflation is. The commonly reported Urban CPI is hobbled by hedonic adjustments and substitution. ShadowStats.com publishes a 1980-equivalent CPI that eliminates that problem-but it may be on the high side because there actually is some substitution and hedonic adjustment. The truth may be somewhere in between, but I would give preference to the ShadowStats data because it is transparent, with no fudging involved.
From a practical standpoint, I would say that price and relative strength capture whatever pass-through effect there is on individual stocks, sectors, or asset classes as well as any forecast or published data series. Everything is imperfect, but price may be the best available indicator.