I was wondering if reflation should be included in the inflation calculation. If the quantity in my box of cereal drops by 20% and stays at the same price, that is after all a price increase.
— Michel Brault
The episode of galloping inflation that we have experienced and which is hopefully coming to an end has enabled us to enrich our vocabulary. Reduflation is a now commonly used word that describes a manufacturer’s business strategy of reducing the quantity of their product without reducing the selling price, thereby allowing them to maintain their profit margin.
We should not count on manufacturers to display “New format, smaller for the same price!” » on their packaging, hence the very legitimate question from our reader.
The short answer to this question is that reflation is taken into account in the consumer price index published each month by Statistics Canada.
The federal agency’s price surveys take into account the formats of the CPI components. These components may change over time to adapt to consumer habits, and product sizes may also be altered.
Statistics Canada ensures that products whose price is monitored offer consistent quality and gives an example: “If the coffee from your favorite restaurant is now served in a smaller cup, but you pay the same amount, the price has increase. »
Likewise, the price of our reader’s box of cereal which remained the same even though the quantity decreased is a price increase that the CPI takes into account.
In Quebec, retailers are required to indicate the price per 100 grams or 100 milliliters, which makes it possible to compare the prices of similar products and sometimes to spot discounting.
Measuring inflation accurately remains complicated. Statistics Canada does it well, according to Stephen Gordon, economist and professor at Laval University, but “it is especially the measurement of quality that is difficult,” he says.
It is easy to see that the quality of an internet package, for example, has increased if the provider offers more data for the same price. The price of this package is considered to have decreased by Statistics Canada.
In food, it is often less obvious. If a cookie manufacturer replaces butter with a cheaper substitute and the quantity and price remain the same, chances are it will go unnoticed.