As inflation impacts our daily lives, we often hear new terms that attempt to explain subtle shifts in the economy. Expressions like gridflation, shrinkflation, skimpflation, chipflation and excuseflation have emerged to describe the ways companies and markets respond to rising costs. Here’s what these terms mean:
Inflation is a key concern for everyone—individuals and the broader economy alike. According to the National Bank of Serbia (NBS), inflation reduces purchasing power and has sparked greater interest, especially after the COVID-19 pandemic. Alongside traditional inflation, new terms have popped up, often combining words in creative ways, and some have gained traction in Serbia.
Dragan Dživdžanović, from the NBS’s Economic Research and Statistics Sector, explains these terms.
Gridflation: The role of greed in inflation
Gridflation (or greedflation) suggests that post-pandemic inflation wasn’t solely caused by disruptions in supply chains, increased demand due to pandemic savings, or the rise in global energy and agricultural prices. It also points to companies using their power to increase profit margins, passing on inflationary pressures to consumers.
“Proponents of this idea argue that businesses used their bargaining power to maintain or even raise profit margins, thus transferring inflation directly to consumers,” says Dživdžanović.
Excuseflation: Raising prices under the pretext of inflation
Excuseflation refers to companies raising prices under the excuse of inflation, even when the rise in costs doesn’t fully justify it. The U.S. Federal Reserve, the European Central Bank, and the IMF have highlighted this phenomenon, especially in the U.S. and the Eurozone.
“Many companies have justified price hikes as necessary due to inflationary pressures, often exceeding the actual increase in their production costs,” Dživdžanović adds.
Shrinkflation: Smaller packages, same price
Shrinkflation is when companies reduce the quantity of a product while keeping the price the same. For instance, you might find a 90-gram chocolate bar instead of a 100-gram one, or a smaller bag of chips, while the price remains unchanged.
This practice is more palatable to consumers compared to direct price hikes and helps companies maintain profit margins. However, it increases the average cost per unit for consumers.
Skimpflation: Cutting quality, keeping the price
Skimpflation is a more subtle form of inflation. It involves reducing the quality of products or services without changing the price. For example, less cocoa may be used in chocolate products due to rising cocoa prices. This can also apply to services—like reduced coverage at theme parks after the pandemic.
“Unlike smaller quantities, lower product quality is harder to track with traditional inflation measures,” says Dživdžanović. While this helps companies in the short term, it can erode brand trust in the long run.
Cheapflation: Cheaper brands rising faster in price
Cheapflation refers to the phenomenon where the prices of cheaper product brands rise faster than more expensive ones during inflationary periods. For example, the price of budget cheese might rise more rapidly than premium cheese.
This trend has been observed in several developed countries, and the NBS confirmed it in Serbia between 2022 and 2024, showing that cheaper food brands increased in price by around 40%, while pricier ones rose by about 35%. The key drivers behind this are low price elasticity, consumers switching to cheaper alternatives, and market inefficiencies that lead to higher retail prices for lower-end products.
“The impact of cheapflation is particularly felt by low-income households, as they are more likely to purchase cheaper products,” explains Dživdžanović. This increase in food prices exacerbates the perception of inflation, further driving inflationary expectations.
Conclusion: The broader social impact
These new terms highlight the many ways inflation manifests in the market beyond just rising prices. They show how businesses adapt to inflationary pressures, sometimes in ways that are harder to detect. These phenomena have significant social consequences, especially for lower-income groups, as they face higher costs, even if those costs aren’t immediately obvious. Understanding these terms can help consumers better navigate the complex landscape of modern inflation.
