How does 8% inflation correlate with the 30-50% increase in the price of products also accounting for shrinkflation?

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Edit: thanks to everyone especially those of you that have really detailed answers. I’ve learned a lot .

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Anonymous 0 Comments

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Anonymous 0 Comments

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Anonymous 0 Comments

The basket of goods looks at fixed quantities of product, ie. a gallon of milk year-over-year, not “medium size” peanut butter without accounting that jar is now 14.5oz. instead of 16oz.

Anonymous 0 Comments

8% is for basic items that there is plenty of price competition for. The 20-30 percent is going to be for nicer things that may not be a necessity.

Anonymous 0 Comments

Inflation is an average of a basket of goods. Take a look at the BLS website for more information on how they calculate it and why they do it the way they do. It does a lot to dispel the massive amounts of “common reddit knowledge” which is downright wrong. Like the CPS not factoring in housing or education costs (hint, it does). https://www.bls.gov/cpi/

Since the CPI is an average, it means that it will never fully take into account your specific situation. The inflation you experience in your town and for the goods and services you personally buy WILL differ from the CPI numbers. They try and apply a single set of weights to each of the categories and they will differ from your life. For example, some people don’t own a car. As a result, car prices would have little impact on their personal experience with inflation. Especially compared to someone looking to buy a car right now who are likely to feel the car inflation much more than others.

It also accounts for shrinkflation since it looks at what people buy on average across the country. Shrinkflation just means that people will buy more of a given item to get the same amount. Or they just consume less, which can impact the weighting given to each of the categories. Once again take a look at the BLS CPI website as they go into detail about how they calculate the weights. All of the information is published on the site. You REALLY should take a look at it as it is better than reading random redditor opinions, especially since more than a few of those on reddit literally have no idea what they’re talking about.

Something to also understand is that the CPI weights are constantly adjusted in order to reflect how people spend. For example, no one really buys whale oil anymore but that used to be part of the CPI calculation. The pandemic screwed that calculation up in the pandemic era because the weights were not adjusted (at the start) for the fact that nearly everyone stopped spending on things like travel and going out and instead switched to buying things on Amazon. As a result, CPI numbers in 2020 and part of 2021 were most likely horrendously underestimated. Which makes today’s CPI numbers look much worse than they were. Not to say that inflation isn’t a problem, there’s a lot going on in the world that’s screwing with it and short/medium term prospects are not great (thanks Putin and Xi!). But it’s a complex topic and no one has all the answers. Inflation is just one data point in the wider picture, and it makes no sense to focus on it without also trying to understand and fix the source of the inflation. FYI, US government spending doesn’t drive inflation that is being seen globally, of which the US isn’t even that bad compared to other countries including developed economies. Inflation is skyrocketing globally largely because of fuel prices (Thanks Putin!) particularly in Europe and supply chain issues exasperated by literally sealing the entire populations of megacities like Shanghai in their homes for weeks on end (Thanks Xi!). And then Putin’s war cutting off 2 of the largest food and fertilizer exporters globally (Ukraine and Russia are major food baskets in the world). All of these drastically cut supply in the global economy and market economics demand that prices rise as a result. And since it’s a global market… We all feel it.

Anonymous 0 Comments

Some of the inflation happened over a year ago. Early in the pandemic computer parts shot up in price. Toilet paper and other products also began to rise faster than normal. 2021 saw nearly 5% inflation, and housing prices and the stock market were soaring even before the pandemic.

Anonymous 0 Comments

As someone who does restaurant menu pricing. 8% is an average. Some products like our flour has seen an increase of about 42%. Clorinated Sanitizer up about 13%, about 28% for whipped cream, oatmilk up about 6% wild frozen blueberries up about 48%, so on so forth. Some stuff has been totally flat. Usually the less labor on their end like whole wheat berries are flat for us. Etc.

Some stuff demand and supply issues inflate. If you remember the glove-pocalypse. There simply weren’t any around and the places making them charged more as the material for them were more expensive.

Anonymous 0 Comments

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Anonymous 0 Comments

The trick is to redefine what products you base inflation off of. If you don’t like what the numbers are telling you, you re-create the base group of products.

Anonymous 0 Comments

Every one is talking about a basket of goods and averaging it, which is part of the answer.

But I think the more important part of this answer is that you are forgetting causation. Inflation is something we measure and imagine as an abstraction for the economy. Where as the price of goods are the actual real world values (that we measure from). Inflation is then defined (caused by) the movement in prices (buying power) against money. As the saying goes, “correlation is not causation” because many things are correlated that don’t actually effect each other; this compounds with the way verbs work in English. The point I am trying to make clear is that inflation *doesn’t correlate prices to it* (inflation doesn’t act on prices, prices act on it), price changes are the *cause of inflation* by definition.

As for shrinkflation, that’s more of a long term thing, often over years or decades. But that’s how inflation happens in other years, where a jar of peanut butter might stay 2.99 for 3 years, but because of inflation over those three years they remove an ounce of it at some point, which would be ~2% inflation relative to the value of peanut butter (if it was originally 16oz).