Isn’t it curious how, daily, we see and hear words, without really seeing and hearing the words, with the meaning and definition of the words, rightly or wrongly, set and formalised in our minds. We no longer even give the words a second thought or even a second glance.
In addition to not paying any real attention to the words, we give even less attention to variants of the words. Which brings me to ‘flation’.
In 1963, a faceless American senator was quoted in the now-defunct magazine, The Statist, as saying: “I am against inflation. I am against deflation. I am for ’flation.” This, of course, gives the impression he assumed there were only two ‘flations’. I know of a third, stagflation, and I used to assume there were no other ‘flations’. There are more, but two of them are relatively rarely used: these are reflation and disinflation. But, before mentioning the sixth ‘flation’, let me pause and focus on these five, which are legitimate economic terms.
Inflation, arguably the most famous, is a sustained increase in the general price level of goods and services in an economy over a period. You are no doubt familiar with the inflation rate, which, in South Africa, has become a measure and motivation for salary increases.
The opposite of inflation is deflation, which is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. Inflation reduces the value of money over time, but deflation increases it. Whatever you do, do not confuse deflation with disinflation.
Stagflation, a portmanteau of stagnation and inflation, is a situation where the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. You do not need to be an economist to know that this is the ‘flation’ within which the South African economy resides.
Reflation, one of the two ‘flations’ that, I must admit, I rarely use, is the opposite of disinflation, which is also seldom used. Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes, with a view to bringing the economy (specifically the price level) back up to the long-term trend, following a dip in the business cycle.
Disinflation is a decrease, a slowdown, in the rate of increase of the general price level of goods and services in a nation’s gross domestic product over time.
This leaves shrinkflation, which was coined by Brian Domitrovic in his 2009 book, Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity. Have you ever experienced, or suffered from shrinkflation, or rather the practice thereof?
You might quite possibly not even have been aware that you were experiencing it, since it is considered a ‘producer stealth tactic’ – if you were aware, you might not have known its name.
Shrinkflation is when goods are made smaller but still sold at the same price. To truly appreciate shrinkflation, you must have a sweet tooth like me. When I first became aware of shrinkflation, I rationalised it with the opening lyrics of the Bee Gees’ song, First of May: “When I was small, and Christmas trees were tall.” But as I grew bigger, there were quite a number of confectionary products that had grown smaller – suspiciously so. They had become smaller through either clever packaging, which manufacturers call ‘resizing’, or through clever presentation. In the instance of the latter, a favourite is to increase the space between the chocolate blocks in a bar, keeping the similar-sized packing, or by shrinking the packaging.
On the day of writing the column, January 21, the UK Office for National Statistics released its shrinkflation report, which found that bread and breakfast cereals are the most likely to be affected. Strangely, tobacco was the only product that increased in volume for the same price.
It would be interesting to see what Statistics South Africa would find should it undertake a similar study for South Africa.