Tag: CPIH inflation

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Shrinkflation, skimpflation and sneakflation: ways of hiding inflation

Have you noticed that many products in the supermarket seem to be getting smaller or are poorer quality, or that special offers are not as special as they used to be? When you ring customer services, does it seem that you have to wait longer than you used to? Do you now have to pay for extras that used to be free? These are all ways that producers try to pass on cost increases to consumers without rising prices. There are three broad ways in which producers try to hide inflation.

The first is called ‘shrinkflation’. It is defined as having less product in the same package or a smaller package for the same price. For example, reducing the number of chocolates in a tub, reducing the size of a can of beans, jar of coffee or block of butter, reducing the number of sheets in a toilet roll, or the length of a ride in a fairground or portion sizes in a restaurant or takeaway. A 2023 YouGov poll revealed that 75% of UK adults are either ‘very’ or ‘fairly’ concerned about shrinkflation. A similar poll in 2025 showed that this figure had increased to 80%. The product category with the greatest concerns was snack foods (e.g. crisps, confectionery items, nuts, etc.).1

The second form of hidden inflation is called ‘skimpflation’. This is defined as decreasing the quality of a product or service without lowering the price. Examples include cheaper ingredients in food or confectionery, such as using palm oil instead of butter, or reducing the cocoa content in chocolate or the meat content in sausages and pies, or package holidays reducing the quality of meals, or customer service centres or shops reducing the number of staff so that people have to wait longer on the phone or to be served.

The third is called ‘sneakflation’. This is similar to skimpflation but normally refers to reducing what you get when you pay for a service, such as a flight, by now charging for extras, such as luggage or food. Sometimes shrinkflation or skimpflation are seen as subsets of sneakflation.

These practices have had a lot of publicity in recent months, with consumers complaining that they are getting less for their money. Many people see them as a sneaky way of passing on cost increases without raising the price. But the changes are often subtle and difficult for shoppers to spot when they are buying an item. Skimpflation especially is difficult to observe at the time of purchase. It’s only when people consume the product that they think that it doesn’t seem as good as it used to be. Even shrinkflation can be hard to spot if the package size remains the same but there is less in it, such as fewer biscuits in a tin or fewer crisps in a packet. People would have to check the weight or volume, while also knowing what it used to be.

If firms are legitimately passing on costs and are up-front about what they are doing, then most consumers would probably understand it even if they did not like it. It’s when firms do it sneakily that many consumers get upset. Also, firms may do it to increase profit margins – in other words, by reducing the size or quality beyond what is necessary to cover the cost increase.

Does the official rate of inflation take such practices into account?

The answer is that some of the practices are taken into account – especially shrinkflation. The Office for National Statistics (ONS) accounts for shrinkflation by monitoring price changes per unit of weight or volume, rather than just the price. Data collectors track the weight, volume or count of item. When a product’s size is reduced, the ONS records this as a price increase in CPI or CPIH inflation statistics. This is known as a ‘quality adjustment’ process and allows the ONS to isolate price changes from product size changes. As CPI data from the ONS is used by the Bank of England in monitoring its 2% inflation target, it too is incorporating shrinkflation.

ONS quality adjustments are also applied to non-market public services, such as healthcare, education and policing to measure changes in service quality rather than just volume. This allows a more accurate measurement of productivity as it focuses on outcomes and user experience per pound spent rather than just focusing on costs.

Skimpflation is more difficult to monitor. The quality adjustment process may miss some quality changes and hence some skimpflation goes unrecorded. This means that the headline inflation rate might understate the true decline in purchasing power felt by consumers.

How extensive is hidden inflation?

Despite public perception, shrinkflation has a relatively small impact on the headline CPI and CPIH inflation rate in the UK because it is largely confined to certain sectors, such as bread and cereals, personal care products, meat products, and sugar, jams, syrups, chocolate & confectionery. Nevertheless, in these sectors it is particularly prevalent, especially in the packaged foodstuffs and confectionery sector. The latest research by the ONS in 2019 covered the period June 2015 to June 2017 and is shown in the following figure.2

According to research in the USA by Capital One Shopping, some major brands reduced product sizes by over 30% in 2025 without reducing prices, with shrinkflation averaging 14.8% among selected national grocery brands.3 Shrinkflation had been observed by 74% of Americans at their grocery store. Of these, 81% took some kind of action as a result, with 48% abandoning a brand. Nevertheless, across all products, shrinkflation accounts for quite a small percentage of any overall price rises.

A US Government Accountability Office (GAO) report found that shrinkflation accounted for less than 1/10 of a percentage point of the 34.5% increase in overall consumer prices from 2019 to 2024.4 The reason is that the items that were downsized comprised a small percentage of goods and services. Indeed, many goods and services, such as housing, cannot be downsized in the same way that household products can.

Nevertheless, with consumer budgets being squeezed by the inflation that followed the pandemic and the Russian invasion of Ukraine, hidden inflation has become more prevalent in many countries and an increasing concern of consumers.

References

  1. Shrinkflation concern rises in 2025, but fewer Britons are changing shopping habits

    2. YouGov (15/8/25)

  2. Shrinkflation: How many of our products are getting smaller?

    3. Office for National Statistics (21/1/19)

  3. Shrinkflation Statistics

    4. Capital One Shopping (30/12/25)

  4. What is “Shrinkflation,” And How Has It Affected Grocery Store Items Recently?

    5. U.S. Government Accountability Office (12/8/25)

Videos

Articles

Journal Article

Questions

  1. If shrinkflation, when included in CPI statistics, accounts for such a small percentage of inflation, why are people so concerned about it?
  2. From a company’s perspective, is it a good idea to engage in (a) shrinkflation; (b) skimpflation?
  3. Go round you local supermarket and identify examples of shrinkflation and skimpflation.
  4. How are various EU countries attempting to inform consumers of shrinkflation?
  5. Why is skimpflation often harder to detect than shrinkflation?
  6. Give some other examples of sneakflation in the provision of services.
  7. How could behavioural economists help firms decide whether or how to engage in shrinkflation or skimpflation?
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Rising inflation

The latest figures from the ONS show that UK inflation rose to 2.3% for the 12 months to February 2017 – up from 1.9% for the 12 months to January. The rate is the highest since September 2013 and has steadily increased since late 2015.

The main price index used to measure inflation is now CPIH, as opposed to CPI. CPIH is the consumer prices index (CPI) adjusted for housing costs and is thus a more realsitic measure of the cost pressures facing households. As the ONS states:

CPIH extends the consumer prices index (CPI) to include a measure of the costs associated with owning, maintaining and living in one’s own home, known as owner occupiers’ housing costs (OOH), along with Council Tax. Both of these are significant expenses for many households and are not included in the CPI.

But why has inflation risen so significantly? There are a number of reasons.

The first is a rise in transport costs (contributing 0.15 percentage points to the overall inflation rate increase of 0.4 percentage points). Fuel prices rose especially rapidly, reflecting both the rise in the dollar price of oil and the depreciation of the pound. In February 2016 the oil price was $32.18; in February 2017 it was $54.87 – a rise of 70.5%. In February 2016 the exchange rate was £1 = $1.43; in February 2017 it was £1 = $1.25 – a depreciation of 12.6%.

The second biggest contributor to the rise in inflation was recreation and culture (contributing 0.08 percentage points). A wide range of items in this sector, including both goods and services, rose in price. ‘Notably, the price of personal computers (including laptops and tablets) increased by 2.3% between January 2017 and February 2017.’ Again, a large contributing factor has been the fall in the value of the pound. Apple, for example, raised its UK app store prices by a quarter in January, having raised prices for iPhones, iPads and Mac computers significantly last autumn. Microsoft has raised its prices by more than 20% this year for software services such as Office and Azure. Dell, HP and Tesla have also significantly raised their prices.

The third biggest was food and non-alcoholic beverages (contributing 0.06 percentage points). ‘Food prices, overall, rose by 0.8% between January 2017 and February 2017, compared with a smaller rise of 0.1% a year earlier.’ Part of the reason has been the fall in the pound, but part has been poor harvests in southern Europe putting up euro prices. This is the first time that overall food prices have risen for more than two-and-a-half years.

It is expected that inflation will continue to rise over the coming months as the effect of the weaker pound and higher raw material and food prices filter though. The current set of pressures could see inflation peaking at around 3%. If there is a futher fall in the pound or further international price increases, inflation could be pushed higher still – well above the Bank of England’s 2% target. (Click here for a PowerPoint of the chart.)

The higher inflation means that firms are facing a squeeze on their profits from two directions.

First, wage rises have been slowing and are now on a level with consumer price rises. It is likely that wage rises will soon drop below price rises, meaning that real wages will fall, putting downward pressure on spending and squeezing firms’ revenue.

Second, input prices are rising faster than consumer prices. In the 12 months to February 2017, input prices (materials and fuels) rose by 19.1%, putting a squeeze on producers. Producer prices (‘factory gate prices’), by contrast, rose by 3.7%. Even though input prices are only part of the costs of production, the much smaller rise of 3.7% reflects the fact that producer’s margins have been squeezed. Retailers too are facing upward pressure on costs from this 3.7% rise in the prices of products they buy from producers.

One of the worries about the squeeze on real wages and the squeeze on profits is that this could dampen investment and slow both actual and potential growth.

So will the Bank of England respond by raising interest rates? The answer is probably no – at least not for a few months. The reason is that the higher inflation is not the result of excess demand and the economy ‘overheating’. In other words, the higher inflation is not from demand-pull pressures. Instead, it is from higher costs, which are in themselves likely to dampen demand and contribute to a slowdown. Raising interest rates would cause the economy to slow further.

Videos

UK inflation shoots above two percent, adding to Bank of England conundrum Reuters, William Schomberg, David Milliken and Richard Hunter (21/3/17)
Bank target exceeded as inflation rate rises to 2.3% ITV News, Chris Choi (21/3/17)
Steep rise in inflation Channel 4 News, Siobhan Kennedy (21/3/17)
U.K. Inflation Gains More Than Forecast, Breaching BOE Goal Bloomberg, Dan Hanson and Fergal O’Brien (21/3/17)

Articles

Inflation leaps in February raising prospect of interest rate rise The Telegraph, Julia Bradshaw (21/3/17)
Brexit latest: Inflation jumps to 2.3 per cent in February Independent, Ben Chu (21/3/17)
UK inflation rate leaps to 2.3% BBC News (21/3/17)
UK inflation: does it matter for your income, debts and savings? Financial Times, Chris Giles (21/3/17)
Rising food and fuel prices hoist UK inflation rate to 2.3% The Guardian, Katie Allen (21/3/17)
Reality Check: What’s this new measure of inflation? BBC News (21/3/17)

Data

UK consumer price inflation: Feb 2017 ONS Statistical Bulletin (21/3/17)
UK producer price inflation: Feb 2017 ONS Statistical Bulletin (21/3/17)
Inflation and price indices ONS datasets
Consumer Price Inflation time series dataset ONS datasets
Producer Price Index time series dataset ONS datasets
European Brent Spot Price US Energy Information Administration
Statistical Interactive Database – interest & exchange rates data Bank of England

Questions

  1. If pries rise by 10% and then stay at the higher level, what will happen to inflation (a) over the next 12 months; (b) in 13 months’ time?
  2. Distinguish between demand-pull and cost-push inflation. Why are they associated with different effects on output?
  3. If producers face rising costs, what determines their ability to pass them on to retailers?
  4. Why is the rate of real-wage increase falling, and why may it beome negative over the coming months?
  5. What categories of people are likely to lose the most from inflation?
  6. What is the Bank of England’s remit in terms of setting interest rates?
  7. What is likely to affect the sterling exchange rate over the coming months?