What Is Shadow Inflation? It Could Be More Prevalent Than You Realize

We’re all familiar with inflation, whether it’s at the grocery store or gas pump. What cost you $10 last year might cost you $12 or more today, representing a hidden “tax” that steadily corrodes your purchasing power like rust on iron.

But did you realize there’s another form of inflation that’s just as corrosive and yet is nearly impossible to measure? Some economists call it “shadow inflation,” and it refers to instances when you pay the same price for a good or service one year to the next, but the quality or quantity has diminished.

Many companies, faced with paying higher prices for materials, labor and transportation, pass some or all of the extra costs on to customers. Others opt to charge the same as before but cut back on certain things.

Ever felt like you’re being gypped on potato chips in the bag you just bought? Or that your hotel room isn’t cleaned as well or as frequently as you once remembered? Granted, it could just be poor customer service. Or it could be shadow inflation.