Deflation on sale

[gavinfielder]

But aren't we seeing slight inflation now?

Shouldn't hoarding result in deflation by your model?

Had a quick thought. It's fairly obvious that people are more conscious about how and where they spend their money, and that this has increased the effectiveness of "on sale" marketing. As for me, nearly everything I buy now I only buy when it's on sale.

Normally, businesses wouldn't be so keen to cut their prices, but if it's a "sale", they actually get more sales, and functionally, it's the same thing as cutting their prices.

I can't imagine that CPI would cover this shift in pricing/shopping trends, and so could it be considered hidden deflation?

 

[What if...?]

Had a quick thought. It's fairly obvious that people are more conscious about how and where they spend their money, and that this has increased the effectiveness of "on sale" marketing. As for me, nearly everything I buy now I only buy when it's on sale.

I can't imagine that CPI would cover this shift in shopping trends, and so could it be considered hidden deflation?

Interesting.

Personally, I grocery shop by buying the things with club card discounts.

Pretty much everything we buy comes up regularly.

My savings per shopping trip are usually 25-30%.

On the flip side, food manufacturers have been putting less.product in the same packaging for the same price for some time, which is supposedly a factor in why we don't SEE inflation in food prices, even though its actually there.

 

[gavinfielder]

On the flip side, food manufacturers have been putting less.product in the same packaging for the same price for some time, which is supposedly a factor in why we don't SEE inflation in food prices, even though its actually there.

I hate it when they do that. They think I don't notice, but I do, and it's annoying.

That said, the price of ground beef has gone down, actually. I thought it was strange when I saw the 3-lb beef tubes go from 9.99 to 8.99. Of course, it could just be that it's less actual meat. Wouldn't surprise me.

The club card, costco, and farmers market when I remember it are the only ways I shop for food now. I hardly ever buy any food that isn't a good deal.

 

[pinqy]

Had a quick thought. It's fairly obvious that people are more conscious about how and where they spend their money, and that this has increased the effectiveness of "on sale" marketing. As for me, nearly everything I buy now I only buy when it's on sale.

Normally, businesses wouldn't be so keen to cut their prices, but if it's a "sale", they actually get more sales, and functionally, it's the same thing as cutting their prices.

I can't imagine that CPI would cover this shift in pricing/shopping trends, and so could it be considered hidden deflation?

But it does. When the economic assistants collect prices, they collect the price at the time, so a 50% off sale is recorded as a 50% drop in price. And when it comes off sale, that's recorded as a 100% increase.

 

[gavinfielder]

Ah. Ok then.

 

[Fisher]

But it does. When the economic assistants collect prices, they collect the price at the time, so a 50% off sale is recorded as a 50% drop in price. And when it comes off sale, that's recorded as a 100% increase.

But they do not sample the prices at just one location in a metropolitan area and they only sample in bigger urban areas and then the seasonal adjustment algorithms likely smooth out the effect of a sale price.

 

[pinqy]

But they do not sample the prices at just one location in a metropolitan area and they only sample in bigger urban areas

Right, so it won't be a huge effect...averages will mute the effect of individual sales.

and then the seasonal adjustment algorithms likely smooth out the effect of a sale price.

For regularly occurring sales, like memorial day sales, January sales, etc yep.

 

[gavinfielder]

Hm. So there could still be something to this.

 

[Lakryte]

Well so far it seems one can conclude that the CPI is not the best measure of inflation or deflation--or at the very least has some issues.

Interesting point about the sales. To add, one reason sales and price changes exist is because certain people out there are really eager to get something, and will pay a premium to get it right away. Other people would rather wait and pay a lower price. So it makes sense prices are initially high--some people will buy the products at the high price. And there will always be sales to entice everyone else.

Someone also brought up packaging and portions--that is a great point. Smaller portions in chip bags and the like are really just examples of inflation--yet that isn't measured. Prices per ounce have gone up much more than prices of individual products.

What is always important to remember is that there are a ton of factors going into prices. You have the supply and demand of the particular good in question, as well as the supply and demand of the money that it is exchanged with. The complexity of prices is one reason why free markets are so important--its not possible to just mathematically find out the ideal price (which could change in a second even if it were possible), people have to figure out the price that works through trial and error.

 

[pinqy]

Someone also brought up packaging and portions--that is a great point. Smaller portions in chip bags and the like are really just examples of inflation--yet that isn't measured.

Yes, it is. A $1 can of tuna going from 5 oz to 4.5 oz would be recorded as a 11% price increase. All quality adjust mementos, up or down, are taken into account.

 

[Canell]

Come on, it's the oldest retail trick in history! You buy it for $100, then balloon the price to $400, than scratch $400 with a big "50% OFF" label, then finally you sell for $200 with a 100% profit. After expenses and salaries, you still make %50 pure gain.

It's oversimplification but basically that's how things work. Think about it, what retailer would work for nothing?

 

[Lakryte]

Yes, it is. A $1 can of tuna going from 5 oz to 4.5 oz would be recorded as a 11% price increase. All quality adjust mementos, up or down, are taken into account.

I am not sure that is accurate. Do you have a source for that claim? I am aware of quality adjustments removing increases in quality. I have never seen the CPI adjust the price of chips based on the smaller portion sizes in the bag.

Here is the explanation I found:
"Quality adjustments remove from the CPI the cost of any improvements in quality, even if they become standard."
CPI Quality Adjustments [ClearOnMoney]

Doesn't mention the opposite at all.

 

[pinqy]

I am not sure that is accurate. Do you have a source for that claim? I am aware of quality adjustments removing increases in quality. I have never seen the CPI adjust the price of chips based on the smaller portion sizes in the bag.

Here is the explanation I found:
"Quality adjustments remove from the CPI the cost of any improvements in quality, even if they become standard."
CPI Quality Adjustments [ClearOnMoney]

Doesn't mention the opposite at all.

I'll look later for where it specifically mentions it in the bls website, but I used to be a commodities analyst on the CPI, so I personally made quantity changes like that while putting the index together.

 

[Lakryte]

I'll look later for where it specifically mentions it in the bls website, but I used to be a commodities analyst on the CPI, so I personally made quantity changes like that while putting the index together.

Regardless, the quality adjustments often come under criticism for under-stating the true level of inflation and how it impacts the cost of living.

 

[pinqy]

Regardless, the quality adjustments often come under criticism for under-stating the true level of inflation and how it impacts the cost of living.

True, but a lot of that is that for many individuals, a specific quality adjustment makes no difference to them...for example, whether or not a refrigerator has a child lock or not..or how many settings their washer or dryer has, etc. But those are still changes in quality that do affect the price and do make a difference to many.

The truth is that there is no "true level of inflation." Everything depends on what you're trying to measure and how you want to look at it.