06 Oct 2014

If You Can’t Trust the BLS, Who *Can* You Trust? Grocery Store Edition

Inflation 56 Comments

I don’t often harp on this topic–though many of my correspondents get mad at me for “ignoring” it–because it looks like I’m moving the goalposts. Having said that, has anyone noticed how the amount of food is getting cut way back in the packaging at the grocery store?!

I get sushi a lot, in a package from the deli counter. They charge the same price as they did a year ago. Except, a year ago you got 10 pieces of sushi, now you only get 9. Same price. Someone do the algebra on that to check, but I’m pretty sure it’s more than a 2% increase.

Or how about the packets of pre-cooked and cut-up chicken that I buy, to sprinkle on my salad? (As lazy as you think I am when it comes to food preparation, double it.) I didn’t measure it, but I would not be surprised if they reduced the amount of actual chicken in the package at least 25% from a year ago, and I think they charge roughly the same price. Again, someone get out a calculator, but I think that’s above 2%.

Now yes there are more goods in the economy than the two things I often buy at the grocery store, and yes in theory the BLS takes unit prices based on weight into account and they are up at night worrying about how to correctly make hedonic adjustments to be as accurate as possible. I know all that, I just don’t trust them, sorry.

56 Responses to “If You Can’t Trust the BLS, Who *Can* You Trust? Grocery Store Edition”

  1. Jan Masek says:

    In the UK it is increasingly common practice to put 19 cigarettes in a box. The shape of the box cannot be easily changed so it’s the same, just one cigarette is missing. Sometimes even two or three. The pack does say there 19 in it. The manufacturers openly admit it’s to avoid price increases. I also doubt the gov’t adjusts for it.

    • Tel says:

      I was fascinated by that and searched a bit, some people are reporting it as a tax optimisation measure, only happening in the EU. Looks like some magical extra tax kicks in when you get a pack of 20, at the same time they are attempting to outlaw packs of 10 so gradually a very non-market equilibrium is established.

      • Jan Masek says:

        I don’t think it’s taxes. Excise duty (tax on booze and tobacco) is a % of retail price + certain £ amount per 1,000 cigarettes. The planned ban of 10 cigarette packs is supposed to protect kids – 10 packs are of course cheaper and thus more affordable for kids (who usually have little money).
        I think it’s the same case you guys see in the US with chicken, chocolate bar sizes etc. Btw same here with those.

  2. Darien says:

    The price of cheese has gone up enough in the past year that one place I work we now put less cheese on our pizzas than we used to.

    • skylien says:

      I am sure a BLS guy comes to you monthly eating one Pizza and checking for any qualitiy changes..


  3. skylien says:

    Since more and more countries also add ‘new’ businesses into the GDP calculations like illegal drugs and postitution, I guess they have to account for inflation in these businesses as well (else how would you calculate the correct GDP deflator..). At least I guess they won’t have any problems finding people to figure out the actual “hedonics” there.


  4. Scott H. says:

    But we can trust you because you don’t have a dog in this hunt.

  5. Innocent says:

    Yeah, I know that food prices have gone up by more than 2% over a year ago for the following categories. Lentils, Oranges, Milk, bananas, beef, pork, and Eggs. However prices came down a bit in chicken, black beans, and kale… The downs however were much smaller than the ups… Additionally CPI grabs such a wide range of goods and I do not know that it is weighted according to usage of said good. It would be really hard to actually create a ‘real’ CPI… Though I think it would be fairly easy to create an app that allowed people to track this stuff at what they purchase levels and start weighing it according to actual purchases.

    Bob ask for a grant to create a study on CPI at the consumer level that is tracked by an aggregate of participants who upload their grocery bill each month and is correlated regionally to achieve real CPI. Probably could create a more realistic CPI on food than what Government gives.

    Now I know asking for money from the government sounds bad, but supposedly that is what taxation is for currently, the creation of ‘science’ right? Take advantage of a system until a better one can be put into place.

  6. Lee Waaks says:

    Haagen-Dazs ice cream used to be 16 oz pints; now it is 14 oz. “pints”. I’m not sure if the price went up. I also recall someone remarking about the changes in volume/size of food products within the last year or so on the Coordination Problem blog.

  7. Ag Economist says:

    There are plenty of supply factors pushing up food prices. I agree that price indices put out by the BLS are probably BS, but the cattle markets have seen the highest prices ever due in part to massive drought that thinned the herd dramatically in recent years. Demand for beef is also up (according to an index put out by Kansas State U) due in part to people realizing beef isn’t bad for you. Pork markets have had similar issues due to a horrible diarrhea that affects hogs. Since corn prices have crashed recently, the supply chain is adjusting and paying higher and higher prices for lower quality animals just to take advantage of cheap feed.

    So, I agree the CPI is crap, but price increases in some food products have as much to do with “real” changes as they do with dollar pumping.

  8. Mike M says:

    Between hedonics, substitution, and geometric weighting, the CPI, like every other government number is propaganda and not economic statistics.

    The CPI used to measure the cost to maintain a CONSTANT standard of living year over year. Now it measures “cost of living” which is a vague and evolving definition.

    • Harold says:

      What does a constant standard of living mean? It can’t mean the same stuff all the time, as new stuff keeps getting added and old stuff drops off. It would probably cost a fortune to keep us all in valve radios.

      • Grane Peer says:

        But the tubes sound so much warmer. Without the shrill tones coming from modern digital audio the world would be filled with rainbows and puppy dogs and think of how much more physically fit our children would be lugging around a walkman with a 50lbs transformer

  9. dt says:


    Looks like the general meat category was 8.8%, YoY for August. I’ve noticed the same thing about packaging. I think the YoY number for September will be over 10%.

    Looks like some of the beef categories are pushing 20% right now (19% for beef roast)

  10. Brian says:

    No, no, no. Using hedonics, the BLS has determined that the quality of sushi is actually far better than it used to be. It’s like iPhone 6 vs. iPhone 4. The price inflation of your sushi is actually NEGATIVE.

    • Raja says:

      You sound like Krugman.

    • Grane Peer says:

      The sushi is easier to bend?

      • Raja says:

        It think Bob Murphy has a sushi example related to inflation and business cycle. It might come in handy again.

  11. Enopoletus Harding says:

    I think the CPI both overstates and understates inflation. I don’t think anyone believes our standard of living is lower than at the 1970s business cycle peaks. I also don’t think health insurance shouldn’t be included in the CPI. Also, if food was really becoming expensive, people would be turning skinnier (like in Cuba in the 1990s). If you’re looking for the PPI for finished consumer foods, inflation in that department is about 5%.
    For some issues with the CPI, see here:
    Their CPI-U w/o lies clearly overstates inflation for the Year 2000, though. Does anyone disagree on this?
    Also, is a hypothetical someone living entirely on CPI-adjusted Social Security payments since 1973 getting absolutely richer or poorer? You decide.

    • Grane Peer says:

      Or fatter because the cheaper foods are less healthy. I don’t think the issue is an overall shortage.

  12. Enopoletus Harding says:

    Also, Scott Sumner pointed out that cars of equivalent quality and class are cheaper today than in the early 1980s. So inflation is not some simple phenomenon.

    • Andrew_FL says:

      It’s useful to remember that the natural result of economic progress, of increased productivity, is in fact lower prices. We can make more, with less input-whether that be human effort, or some other factor.

      Since the Austrian concern is over *monetary* inflation, not price inflation per se, one needs to recognize this price deflationary tendency will occur as an economy grows, if the quantity of money is fixed.

      It would thus be of concern for Austrians even if the rate of price deflation were 0% during a period of economic growth. Because it should be coming down.

      This was roughly the case in the 1920s, as a matter of fact.

      I actually think it’s an argumentative mistake of many Austrians to focus so much on price inflation and it’s effects on living expenses. It might resonate with people, but it sends entirely the wrong message to their opponents. Namely that all they need to show is that the rate of price inflation is low and therefore everything is hunky-doory.

      • Major.Freedom says:

        Good post.

      • Brian says:

        Silly Austrians. They think you don’t need to print more money when stuff gets cheaper because of technology and economic growth. They don’t even fear the invisible DEFLATION vigilantes!

  13. Yancey Ward says:

    You are overlooking something, Bob. By reducing the number of pieces of sushi, you consume less mercury and other heavy metals. This improves your health and increases the stock of fish in the oceans- all big positives that greatly outweigh your increase in price/piece.

    The same applies to Lee Waak’s point about Hagen-Daas. Less ice cream is better for you, thus it more than accounts for the increase in the price/ounce.

    You inflationistas just can’t see the big picture. Eventually, we will realized the ultimate benefit when your sushi packages and ice cream containers are completely empty of sushi and ice cream. The health benefits are so great, you should be happy paying for the containers.

    • Major.Freedom says:

      “Eat what? There’s nothing here. Ghandi ate more than this.”

    • gienon says:

      Good work,sir. You had me wondering until the last paragraph whether or not you were being fecetious.

    • Lee Waaks says:

      Yancey, I think you are on to something here. Didn’t life expectancy go up during the Great Depression due to less food consumption?

  14. Major.Freedom says:

    Sushi is typically low profit margin with high price elasticity. These are some of the main reasons why size shrinkage is the most popular way retailers handle rising costs.

    The billion price index has been calculating consumer price inflation as higher than the BLS’ CPI since early 2013.

    At the end of the day:

    “The notions of inflation and deflation are not praxeological concepts. They were not created by economists, but by the mundane speech of the public and of politicians.” – Mises


  15. Jesse J. says:

    Peter Schiff has talked about this at length, both before and after he went to podcasting.

    “Shrink-flation” is the cheesy term they’re using. Regardless, it’s price inflation.

  16. DesolationJones says:

    I’m curious. What are the prices of these things now?


  17. Tel says:

    By the way, if you do some research about price control during World War II, what happened is that with no ability to negotiate price, the suppliers negotiated quality instead. Thus, current situation has a similar appearance as price controls, not sure what causes this.

    • Andrew_FL says:

      Ah, a good observation, actually, because if you look at the CPI during the war-in fact if you specifically look at when price controls started and ended-you can see clear discontinuities in the rate of price inflation. Price controls start, the CPI stagnates, price controls are lifted and it jumps up. I’m not sure but I’d guess various measures of the money supply would indicate a smooth increase during this period, meaning the inflation was almost certainly already going on, just hidden-or forced to take the form of decreased ouput instead-by the price controls. Friedman actually had a good metaphor for this in the seventies: fighting inflation by controlling prices is like fighting a fever by breaking the thermometer.

      I’m not sure if a similar measurement problem could be at play right now because as you say it’s not clear why the current situation would look like price controls were in place.

      • Harold says:

        Maybe the price control is in people’s heads.

        • skylien says:

          With one exception. The overnight interest rate for reserves is price controlled. A (or some) bureaucrat thinks up an arbitrary number at which he thinks a certain service/good has to be exchanged and then this price is enforced with government power. Admittedly it is done much more subtle today and not as crude as old style price controls were done, however essentially it is not different.

        • skylien says:

          And minimum wages of course… How could I forget..

        • skylien says:

          But I realize I should apologize for this comment since obviously your comment was not referring to interest rates or wages, but to those prices Tel and Andrew were talking about where clearly no price controls are in place… I strawmaned you. Sorry.

          • Andrew_FL says:

            Well, I should have said these problems arise with price ceilings in the case of inflation.

            One cause for concern with otherwise healthy price deflation caused by increased productivity and a fixed money stock or nominal income, is that the presence of a minimum wage rate may force increasingly large quantity adjustments in the labor force.

            Of course, the problem is with the price floor, not the deflation itself. I would couple monetary reform with complete freedom of the price system, which naturally requires the abolishment of the minimum wage.

            • skylien says:

              I can only second that.

    • Tel says:

      Just throwing this out there… see what people think.


  18. DesolationJones says:

    CPI measures the average inflation of a wide ranging basket of goods. Why are you using 2% number and calling shenanigans? The BLS does not claim meat prices has grown 2%. It in fact claims it has grown 8.82% percent in the past year.

    • Gamble says:

      Because CPI claims the overall cost of living only increases 2-3% per year.
      You are correct about meat, it is kinda hard to lie about something so obvious. Although I wonder when pink slime replaced real beef?

      BTW inflation is the expansion of money supply, not price trends. I know the definition is a moving target but economics and monetary theory makes more sense when you think of inflation as money expansion and price increases and price increases.

  19. Chris says:

    Basic question here, but one I’ve long wondered the answer to. Let’s say through increased production efficiency, the price drops on a laptop, by 2%. No features of the laptop change, just the price. Actual inflation is 2%, though, so the price of the laptop stays the same. How does the BLS account for (or even know about) the efficiency gains, which seem to mask inflation?

    • Andrew_FL says:

      It’s a good theoretical question (although you’re unlikely to find a new laptop of the same quality as an older one except at a *much* reduced price, not just because it’s easier to produce now but also because it’s very inferior in quality to a more state of the art model)

      The short answer I think is that is not what they are interested in measuring. You can (and I would) quibble with whether that is what they *should* be interested in measuring, but that’s a different matter.

      The consumer price stabilization view implicit in focusing on reducing CPI growth to zero, is equivalent to the view that productivity gains should pass on to consumers in the form of rising nominal wages. Or more accurately (although still inaccurately, because not everyone’s hours are worth the same), rising total compensation per hour worked. I think that’s the inflation rate you have in mind when you say there is inflation the CPI does not measure.

    • Tel says:

      I bought my most recent laptop (a netbook) for $250 and the one before that for $400 and the one before that was about $1000, and those are all nominal prices.

      The most recent laptop has the fastest CPU out of the three, the middle one had more RAM. Screen and graphics roughly the same for all of them. Newest one seems to have the best WiFi (first one needed a plug-in WiFi card which cost extra). The progression has been toward physically smaller devices which I happen to prefer (don’t care about weight, just size).

  20. Sean says:

    I recently came to wonder if inflation may show up in the ingredients used to create foods, ingredients which would be less preferred by consumers for the final product at the same price. I don’t think this would account for all such substitution, and it might happen somewhat indirectly by, say, favoring larger food producers who use substitution and additives to enable food to be preserved longer, vs. local food producers who use no such ingredients. (I have no particular preference for “organic” foods, but the question seems legitimate to me at first glance.).

    • Grane Peer says:


      • Harold says:

        It happens indirectly through fraud – see European horsemeat scandal where horse was substituted fro beef on a grand scale.

        • skylien says:

          It is no excuse for it but of course it is only logical to see more of this kind of fraud due to inflationary pressure than without it.

          Ultimately though it is hard to find out in the individual case if they wouldn’t have done it anyway.

          • Harold says:

            Is it inflation per se that causes this type of fraud? Surely it is only the price differential between beef and horse?

  21. Gamble says:

    Personal budgets are more complicated than CPlie.

    Alls it takes is 1 major expense such as health insurance to increase by 10% to completely throw your budget out of whack.

    If inflation increase is 2% and you get a 2% raise at work, you get nothing, hopefully you didn’t give more or now you get paid less.

    Unfunded liability’s are not just relegated to S.S. and medicare. Does your personal budget include a new roof, deductibles, retirement?

    Ob boy I am cranky, I had better go vote some more, so they say.

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