This morning’s round-up tells quite a story. Under its “Business” heading, the Post features three stories — all about rising prices and “sticker shock”:

BUSINESS

One way companies are concealing higher prices: Smaller packages — Consumers are paying more for a growing range of household staples in ways that don’t show up on receipts — thinner rolls, lighter bags, smaller cans — as companies look to offset rising labor and materials costs without scaring off customers. By Abha Bhattarai 

Even in the face of surging grocery prices, retail beef and pork prices cause sticker shock — Meat processing plant shutdowns last April caused the largest drop in feedlot populations since records began in 1996, according to Gro Intelligence, an agriculture data platform. And with declines in pork production last year and diminished stockpiles in cold storage (some of this due to the federal Farmers to Families Food Box program, which distributed excess commodity foods to food banks), Nepveux said things might get worse before they get better. By Laura Reiley 

USPS raises stamp price to 58 cents as part of DeJoy’s 10-year plan — The rate structure announced Friday is the latest installment of Postmaster General Louis DeJoy’s plan to erase a projected $160 billon in liabilities over the next decade. The agency has struggled for the better part of a year with inconsistent delivery service and soaring package volumes that have gridlocked its processing network. The Postal Service’s on-time delivery scores have not topped 90 percent since July 2020. By Jacob Bogage  

That’s quite a range of stories on inflation, either overt or covert, as in the report from Abha Bhattari. In fact, if this represents the Post’s idea of its hottest stories in the business world, then inflation has not just become a major story but the story in commerce.

CNBC thinks so as well, and the bond yields movement this morning suggests that investors agree:

Bonds yields rose on Tuesday, as investors digested last week’s inflation data and look ahead to Friday’s all-important jobs report.

The yield on the benchmark 10-year Treasury note ticked up to 1.6130%, while the yield on the 30-year Treasury bond rose to 2.2924%. Yields move inversely to prices.

Inflation is even more in focus since the release of April’s core personal consumption expenditures price index last week, a key measure of inflation, which rose 3.1% — hotter than expected. Gold, which often is used as an inflation hedge, is still holding above a key level of $1,900.

Inflation isn’t just a worry in the US, either. The Financial Times reports that the EU is beginning to worry about it, and for the same reasons — “ultra-loose monetary policy”:

Eurozone inflation rose to 2 per cent in May, the first time the rate has surpassed the European Central Bank’s target in more than two years, complicating policymakers’ decision next week on whether to maintain its ultra-loose monetary policy.

The jump from 1.6 per cent in April followed an even sharper acceleration of consumer price growth in the US, which recently hit 4.2 per cent. The eurozone’s increase is likely to fuel investors’ anxiety that central banks will bring forward the winding down of the vast monetary stimulus they launched last year in response to the coronavirus pandemic.

What happens when governments dump helicopter money into the economy? They promote consumer spending, mainly in the form of short-term “sugar high” demand. When supply chains are still restricted, this leads to shortages, as in the beef and pork markets, and therefore higher prices.

Even where supply isn’t as restricted, the demand spike can create pressure on future deliveries, fueling a rationing impulse. Higher prices are one form of rationing, but the Bhattari report demonstrates another form of rationing. Rather than raise prices, companies are charging the same for less product or fewer services. It’s called “shrinkflation,” Bhattari informs us:

Consumers are paying more for a growing range of household staples in ways that don’t show up on receipts — thinner rolls, lighter bags, smaller cans — as companies look to offset rising labor and materials costs without scaring off customers.

It’s a form of retail camouflage known as “shrinkflation,” and economists and consumer advocates who track packaging expect it to become more pronounced as inflation ratchets up, taking hold of such everyday items such as paper towels, potato chips and diapers.

“Consumers check the price every time they buy, but they don’t check the net weight,” said Edgar Dworsky, a consumer advocate and former assistant attorney general in Massachusetts, who has been tracking product sizes for more than 30 years. “When the price of raw materials, like coffee beans or paper pulp goes up, manufacturers are faced with a choice: Do we raise the price knowing consumers will see it and grumble about it? Or do we give them a little bit less and accomplish the same thing? Often it’s easier to do the latter.”

Such cutbacks, economists say, typically coincide with economic downturns, when shoppers tend to be more mindful of cost. There was similar product shrinkage during the 2008 recession, according to John Gourville, a marketing professor at Harvard Business School.

Bear in mind that most of the shortage pressure driving this results from a labor shortage. We still have over 12 million continuing claims for pandemic unemployment benefits being paid each week, a massive overhang that is being maintained by the extension of those benefits. That extra money made sense while governments forced businesses to close, but now we have over seven million unfilled job openings while we incentivize workers to sit.

That extra cash also fuels consumption, which amplifies the shortage issues. Because many consumers are still recovering from the hit they took financially in the first months of the pandemic, raising prices isn’t a good option in competitive markets. Hence we get “shrinkflation,” and the need to accelerate purchases.

Consumers already see this unfolding, but media economists keep trying to tell them that inflation isn’t a problem. It certainly looks like a problem from today’s Washington Post, however, and one can foresee investors coming to the same conclusion. The best way to solve this is to cut off the helicopter money and remove the incentives for turning down work, but Congress isn’t exactly known for cutting off “free money.” We can expect this to continue all the way to September, when the incentives finally expire — and then, perhaps, people get back to work and supply chains right themselves.