Peter Lewis acknowledges that eggs are not the biggest expense in the world. But amid the current levels of inflation, the rise in consumer goods prices is really gripping him. “I tend to buy the same things every week, and for some reason I just eat a lot of them with eggs, and I notice the prices on them,” he says. The 18 extra-large eggs he buys were $3.18 in early 2021; now they are $5.12. Over the weekend, Lewis spent nearly $100 at his local Walmart on food for him and his wife, an amount he doesn’t believe he’s ever minted before. “It’s not like we’re buying an entire shopping cart.”
Inflation is ugly. For consumers it is painful, big and small. People’s wages can’t keep up with rising prices, which means some have to make significant cuts to survive. In addition to the economic hardship that inflation brings, there is also a real psychological toll. People pay more attention to prices than in the past, and they notice increases in the items that are most familiar to them – increases that may not be the biggest, but that are a nuisance nonetheless.
“Price increases hurt because we don’t evaluate the price of eggs in absolute terms, we evaluate it in relation to what we paid for it,” said Deborah Small, a professor of behavioral marketing at the Yale School of Management. “A price increase is like a loss, and we feel pain when we experience that loss.”
With the way inflation has been going lately, that sense of loss is pervasive.
At current levels of inflation, pretty much everyone has looked at the price of something and thought, “Wait a minute, what?” For some people, it’s about big-ticket items, like houses and cars. For others, it’s the little tagged stuff that still leaves them baffled, wondering how in the world a pack of paper towels is $5 more than it was a few months ago, or that bag of potato chips. used to be slightly bigger for the same price. We often notice changes more when they are things we usually buy. And of course, all those small price increases add up.
Lewis, 71, and his wife are doing well – they are now retired, have had good corporate jobs all their lives, have saved a lot and have ridden a few bull markets. But he can’t help but worry about others. “I look at Walmart, I see families shopping there, and I know that an extra $50 a week is a killer for those people,” he says.
Inflation is a common topic these days, in fact all the time and everywhere. In early August, my cafemadrid colleagues and I talked about where inflation had occurred in people’s lives and what had broken them a little bit. Since this is the year 2022 and I work in online media, I asked that question on Twitter. There was a variety of reactions, but the most common place people hit a breaking point on inflation was at the grocery store.
Hila Paldi, who owns a Pilates studio in New York, told me she’d bumped into her wall with bacon, a key ingredient in her son’s beloved homemade bacon, egg, and cheese sandwiches. The package she was used to was $8.99 at her local grocery store, and when she went to buy it recently, it was $12.99. “I went to the manager and I said, ‘Is this right, or is this a mistake?’ And they say, ‘Yeah, that’s the price now,” she says. So she didn’t buy it. “Honestly, this is something we can totally live without.”
Drew Ober, an engineer in Indianapolis, told me he was most concerned with frozen chicken tenders. He likes to have them handy at home because it’s an easy work-from-home lunch or a lazy dinner. “I hesitate almost every time now,” he says. He pulled out some old cash register receipts to make sure he was right and told me he bought a 48 ounce bag of chicken tenders for $8.79 in April 2021. Now it is listed as $11.99. He usually still gets them, although he also feels less guilty about going to restaurants to get them instead. “It doesn’t feel like I’m saving more by grocery shopping.”
It’s not just rising in-store prices that are troubling consumers, it’s declining sizes, which happened to Tony Sarthou, a father of two hungry teenagers in New Jersey. “Doritos and Oreos, for better or for worse, are very important staples in our kitchen,” he says. But lately, he’s noticed packaging shrinking — a phenomenon referred to as shrinkage inflation, where companies simply give you less for the same money. On multiple occasions, Sarthou says he and his wife walked down the grocery aisle, looked at the prices and sizes of the packages, and just walked away. “The sizes are getting smaller, the price is the same or more often than not higher.” They are starting to trade for generic or private label brands.
Many people wonder whether the price hikes — or the package shrinkage — were really necessary. Wasn’t there some sort of reward for loyalty to a local supermarket? Of course there have been delivery problems with chicken tenders due to staff shortages and the bird flu, but was that really it? How much did the makers of Oreos — owned by American food conglomerate Mondelez — really save by giving you a little less cookies?
“I really don’t understand how this is getting through to us, I don’t see the point,” said Dorothy, a New York City teacher and mother of two, who asked to remember her last name to protect her. her privacy. Her family has special dietary needs – she has severe food allergies, her husband is a vegetarian – which force them to make “difficult decisions”. On organic strawberries for $7.99, the answer is “Are you kidding?” A pint of ice cream for $4.79 is a “Hell no,” and pasta for $2.49 a box “just isn’t going to happen.” She writes a list before going to the store, and if the item isn’t on the list, it won’t be bought. “We’re not going on vacation, home improvements have been discontinued,” she says of how her family is adjusting. “It seems outrageous.”
As Julia Carpenter noted in the Wall Street Journal, people understand price tags by the items that are part of their daily budget. They use a handful of mental benchmarks to measure their inflation expectations. David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, told the WSJ folks that they take these benchmarks and then completely extrapolate that to the economy at large.
Aside from mundane things, inflation in the brain probably makes people think about prices more than they normally would, explains Utpal Dholakia, a professor of marketing at Rice University’s business school. “Consumers’ price knowledge is generally very poor. In general, under normal circumstances, most of us don’t know the prices of most common things we buy,” he says. “What inflation has done is people generally pay more attention to it.”
And in turn, people feel more irritated. Especially when the total amount of everything goes up.
Dholakia advises companies on pricing strategy and notes that the fact that consumers express their anger at prices does not mean that they always change their behavior. There is a “huge gap” between what people say and what they do. “They will complain,” he says, “but they will still pay the higher price.”
Such was the case for Andrea from Missouri, who also requested anonymity. Earlier this year, she paid nearly $25 for a single box of ob tampons on Amazon (they generally cost less than $10). in the middle of the tampon shortage, she couldn’t find them at Target or Walmart, and she didn’t want to change brands. She says she thought, “Well, Amazon is technically a black market, maybe you can find them there.” Andrea recognized that she was being abused by the seller and that the price was “ridiculous”, but she clicked to buy anyway. “I know people have to do what they have to do to survive, and I’m not super mad at that person,” she says of the Amazon tampon flipper. “I wanted them so badly.”
Now she can find her tampons for a more reasonable price, but they are still more expensive than they used to be, like everything else. Andrea, who works in data analytics, has had a pay rise in recent years, but inflation has essentially made it obsolete. “How come I earn the 75th percentile of county income and yet I’m struggling and can’t save money?” she says. “I’m still broke.” She is divorced and being single is expensive. She jokes that she could find another man, but she really doesn’t want to – she likes to be alone. “If you’re in your late 40s, if there are men, you probably don’t want them.”
Over the past few days, I’ve been talking to many people about the specific places and moments in their lives where they really felt at a breaking point due to inflation.
For Vanessa Santos, who had not one but two Covid babies, it was trying to buy new professional outfits to go back to work meetings. “It’s made me pick up my post-baby exercise routine so I can fit into my old clothes,” she says. For Kail Zepeda, a father of four in New Jersey, the moment of shock came when car dealers asked him to pay $11,000 on the sticker price for a new car, a phenomenon many buyers encounter in the market. “It’s insane now,” he says.
I heard from people about asparagus, butter and donuts, about vacations, apartment rentals and beer. “$19 for a 12-pack of Coors… come on,” one person commented on Twitter. “I bought what I thought was half a dozen bagels, realized in the checkout aisle there were only 5 in the bag and almost lost it,” wrote another.
Ober, the Indianapolis engineer, says gas prices are hitting him too, but in a different way. Where he lives, there aren’t really great alternatives to owning a car and driving yourself. “I feel powerless about it,” he says. “You can cut back a bit on where you’re going, but I mean, it’s harder to do.”
Existing as a consumer in today’s economy just feels really bad. It’s like we’re all constantly being pricked by a thousand little needles, all of which sting; every now and then one really touches a nerve.
It will come to an end someday, but that will probably hurt too. American consumers, especially young people, are not used to inflation, and many are not used to making sacrifices or being equally attentive to their purchases. The whole situation is just not ideal.
As for Lewis, this isn’t his first inflation rodeo. He recalls what it was like to watch prices creep up in the 1970s, the last time inflation was a big deal in the United States, as a young professional living in Manhattan. “I just assumed it would go on forever,” he says. It didn’t – the end of the country’s inflation problem was finally brought to a powerful and painful end.
With those memories, he worries about what awaits him. “I realized what it takes to stop it, and it’s not a pretty picture,” he says. He remembers his friends who lost their jobs when the country plunged into recession, and the never-ending paranoia that he could be next. He also recalls that while the inflation acceleration stopped, most prices did not fall either. “It just stayed a little bit,” says Lewis, who now lives in Florida. “For most things, if they fall, it will be small.”
In other words, the breaking point you’ve reached in terms of inflation isn’t going to go away anytime soon.