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What Is Shrinkflation?

Have you noticed you’re paying more at the grocery store but getting less? Canada’s inflation is causing prices for almost everything to increase. In addition to higher prices, you may have noticed that the consumables you’ve bought don’t seem to last as long. You are paying the same or even more for many of those products but you are getting less. 

This is known as shrinkflation. It’s easy to miss if you don’t check the weight or volume of the products you buy. It’s more noticeable when your purchases run out sooner than they did before.

So, what causes shrinkflation, and how does it affect Canada’s grocery prices? Let’s take a look at the effect of rising interest rates on inflation and how you can reduce the impact of shrinkflation on your wallet.

Interest Rates in Canada

Inflation became noticeable in Canada in 2021. By mid-2022, it had reached a rate not seen in more than 30 years. Rapid price increases may mean a reduction in your standard of living, struggling to cover expenses. Trying to fight inflation, the Bank of Canada has stepped in and raised interest rates.

Canada’s interest rate hikes

The Bank of Canada aims to curb inflation by increasing interest rates. Interest rates in Canada have increased ten times since March 2022. The purpose of interest rate hikes is to bring inflation under control by reducing spending and cooling the economy. 

Interest rate hikes increase mortgage interest rates, loan rates, interest rates on lines of credit, and credit card interest rates can rise too. You’ll pay more to borrow money, or you may see rates on your debts increase. Life gets more expensive, and you’ll have less money to spend. The idea behind interest rate increases is that prices and inflation will decrease when people spend less.

In the short term, you may have to cope with higher interest rates on your debt and higher prices when you shop. It can take time before interest rate hikes achieve their goal of reducing inflation. 

Canada’s inflation rate

So, how bad was Canada’s inflation rate, and have the interest rate increases made a difference? In March of 2022, the inflation rate was 6.7%-the highest it has been in more than 30 years. In June of 2023, the inflation rate was 2.80%.

It’s possible that interest rate increases are reducing inflation. Inflation is still running high in some areas of the economy, such as food and housing measuring Canada’s inflation rate.

Inflation is currently a hot topic. You hear about it daily on the news, the radio and social media, so you might be curious about how the government calculates Canada’s inflation rate.

The government measures inflation by tracking and calculating price changes in a basket of goods called the Consumer Price Index (CPI). The general categories for the CPI are shelter, transportation, food, clothing, furniture and recreation. Price increases in these categories are used to calculate the inflation rate.

You can use the inflation calculator to find out how much $100 of goods in 2020 will cost today. The inflation calculator will show you how inflation has affected your purchasing power.

Shrinkflation disguises inflation

When retailers increase their prices dramatically, some will accuse them of price gouging or using inflation to increase prices when it isn’t necessary. Shrinkflation allows retailers to raise prices by charging the same or a similar price for less product. So, your bag of potato chips that may have cost $3.99 for 300 grams might be the same price, but now you’re only getting 235 grams.

Retailers do this quietly, and consumers sometimes don’t notice the change for a while. Companies justify shrinkflation by stating that their costs have gone up, so this is one way to pass them on to the consumer.

Shrinkflation is inflation that you’re not supposed to see. This podcast shares a few ideas of how to spot it and what you can do about it.

How to protect yourself from shrinkflation

Rising interest rates can increase your borrowing costs significantly, making it harder to afford necessities like groceries. But your grocery budget can be flexible since it isn’t a fixed cost like rent. When shopping, you protect your wallet from shrinkflation by paying attention to packaging, comparing unit prices, substituting brands, and finding alternatives.

Packaging

Companies will often change their packaging when reducing the product amount. They may change the shape of a bottle or jar or the package of dry goods. Generally, the idea is to make the box or container look like you’re getting the same amount, although you’re not. If you notice a change in the packaging of your favourite brands, check the weight or volume to see if you’re getting less. 

Comparing unit prices

Conventional wisdom is that buying in bulk is better than buying smaller quantities. That can still be true, but sometimes it isn’t. Check the unit price per gram or milliliters before buying. Sometimes, smaller packages are on sale or simply cheaper than a large quantity.

Substituting brands

If your usual brand now offers less for the same price, compare it with its competitors. Competing brands may offer more for the same price or charge less for the same amount.

Finding alternatives

Your favourite products may have increased in price, reduced the amount in the package, or both. If the price is more than you want to pay, you can see if a substitute would work or skip buying the item for a while. If neither of these options works, you can wait for a sale and stock up or look at scaling back on other purchases.

Finding Help to Deal With Inflation

If carefully watching prices and cutting back hasn’t helped you manage your finances, getting help with your debt could be the next step. When your debt load is increasing and you are relying on credit to help make ends meet, seeking help sooner rather than later will give you more debt relief options to choose from. 

At Allan Marshall and Associates, we understand your financial pressures. Our team of Licensed Insolvency Trustees can help you manage your debt. We will work with you to find the best option to eliminate your debt. Please call us today at 1-888-371-8900 for a free consultation so you can be free from the stress of debt.

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Francyne Myers, JD, CIRP, LIT

Francyne spent many years in senior positions with the Office of the Superintendent of Bankruptcy. During the course of those years, she also found time to study Accounting at Saint Mary's University and attend the Schulich School of Law (formerly Dalhousie Law School) to earn her degree in law (J.D). In 2012, Francyne left public service life and joined Allan Marshall & Associates Inc. where she completed her education becoming a Licensed Insolvency Trustee in 2013. She is actively involved in her local Trustee Association and enjoys helping others find solutions to their financial problems.