Shrinkflation

Abstract

This paper studies the macroeconomic relevance of product size adjustment, i.e., changes in the weight or volume of consumer goods. I establish several facts from U.K. CPI price microdata from 2012-2023: (i) Product size is relevant for around 35% of the consumption basket. (ii) Each month, up to 0.7% of goods in the CPI undergo size changes, with considerable variation across sectors and products (e.g. up to 3% in the Food sector or up to 60% for products like chocolate). (ii) Around 80% of all adjustments are reductions in product size, and 90% of these reductions are “downgrades”, i.e., raise the unit price. (iii) The frequencies of size reductions and downgrades are strongly procyclical, moving positively with CPI and PPI inflation and negatively with the unemployment rate. Conversely, size increases and upgrades are mostly acyclical. (iv) The frequencies of nominal price and product size adjustment are largely unrelated. These facts highlight the systematic use of “shrinkflation” – whereby unit prices are raised through product size reductions – as a margin of adjustment in response to aggregate fluctuations.