Dear Bureau of Labor Statistics: please pay careful attention to this case study of how your CPI "inflation" gauge, hedonically, seasonally-adjusted or otherwise, is completely inaccurate, and how what you record as 0% inflation is really 72%.
As Consumerist points out, for the latest example of "stealth inflation" we go to Sodastream, where as part of a redesign of its proprietary line of flavoring syrups which "cost the same" the actual bottle contents are now not only smaller but also diluted.
"How much smaller? The old version made 50 servings of flavored drink, and the new versions make only 29. Why 29? Why not 30? Such are the mysteries of the Grocery Shrink Ray."
Consumerist shows that "the new bottles are somehow taller even though they’re smaller. On the positive side, they no longer look like petite laundry detergent bottles."
Furthermore, while the number of servings is down to 2/3 of the original amount, the bottle size isn’t that much smaller. That’s because the measuring cap is now bigger, and each serving uses more syrup. "The worst part is that they just diluted it with more water so the ‘new improved’ ones LOOK like they are the same size," reader Erik complained to us. “They are 440ml instead of the old 500. EVIL! Free the bubbles! Stop this shrink ray occupation of my favorite soda!”
The old versions are still available on SodaStream’s site for now, as "Classics," but readers report that they only find the shrunken version in brick-and-mortar store.
Consumerist' conclusion: "maybe SodaStream made this change because they know that the product still looks reasonably priced next to its new competitor, the Keurig Kold. Maybe."
Actually, why SodeStream did this is irrelevant: we are confident the decision to shrink and dilute the product was the result of simple concerns about maximizing profit margins.
What is far more troubling is that for the Bureau of Labor Statistics, both the "old" and the "new" product costs the same, or $5.99, hence there is no inflation... until one does the actual math.
Presenting the "old", Dr. Pete soda mix, the one which is no longer available in bricks-and-mortar outlets, which costs $5.99 and which makes 50 servings per bottle.
And here is the new one: available everywhere for "the same price as the old one" but with one small difference - it makes only 29 servings per bottle.
- Cost per serving "old" style: $0.1198
- Cost per serving "new" style: $0.2066
Nominal inflation: 72.4%
Worse, there is not even an attempt to make the "new" product "hedonically" better, or for that matter different in any way - it is just smaller, and massively diluted.
And it just so happens that nobody in the Bureau of Labor Statistics noticed this oldest trick in the book, and why month after month the BLS reports core CPI that is negligible, and why said "lack of inflation" allows the Fed to continue its zero-interest rate policy for 7 consecutive years in a row.