Michael Eriksson's Blog

A Swede in Germany

Posts Tagged ‘inflation

Inflation comparisons based on a receipt from 2020

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A weakness of my various writings on inflation is that I usually lack exact price comparisons. At an extreme, in [1], I noted that a certain brand and package of toilet paper was priced at 4.05 Euro, which was “more expensive than in the past”.

Today, I found an old receipt and the price of 2.86 Euro for what must be the same product. The receipt is from October 5th, 2020, to be compared with [1], published on January, 11th, 2023, or roughly 27 months later. This gives us a relative increase of 4.05/2.86 or roughly 42 percent in 27 months, and a yearly average of (4.05/2.86)^(12/27) or roughly 17 percent.

To this must be added that the inflation rate is unlikely to have been uniform, which could give us a single year of well above those 17 percent at some point.

Comparing with a receipt from yesterday, I only see two items in common with the 2020 receipt:*

*Note that both items are from house brands (Ja! resp. Rewe) and that the “average” German price level for comparable products is higher. The below “per year” values are a little higher based on 27 months, a little lower based on 29 months.

Chewing gum at 1.25 -> 1.49, for roughly 19 (overall) and 8 (per year) percent.

Pizza at 1.76 -> 2.19, for roughly 24 (overall) and 10 (per year) percent.

(In both cases with reservations for “shrinkflation” and other issues that I cannot detect based on the receipt.)

This is better and more in line with claimed* inflation, but “better” does not imply “good”, and we must not forget that these numbers could and should have been a lot smaller, and would have been so with more sensible politicians.

*One of my original motivations to write about inflation was the discrepancy between various official inflation measures and the actual price changes on my food purchases, combined with a suspicion that “cost of living”, in general, was affected more strongly than official inflation measures might lead us to believe. At the end of the day, “cost of living” is what really matters to most of us.

Excursion on prices ending with a “9”:
On yesterday’s receipt, 13-out-of-13 products had a price ending with a “9”. On the 2020 receipt, it was 1-out-of-10. What the implications of this might be is up for speculation, but my speculation would be that the store is holding back the current prices a little for reasons of psychology and that the “true” price of this-and-that might average another few cents more. Cf. parts of [2].


Written by michaeleriksson

March 21, 2023 at 12:29 pm

Inflation again / Meals for frying

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For another inflation follow-up:

A little more than two weeks ago, I revisited some inflation items from last September ([1]), and noted that the “[m]eals for frying” that I (originally, often; increasingly, rarely) buy had not changed in price in the interim—unlike most others items.

Today, I bought another one, looked at my receipt, and found a horrible 2.99 Euro!

Compared to [1], this is another 11–15 (!) percent* in five (!) months, after the price had already risen by 40 percent or more during the COVID-countermeasure era. Going back to the original price (“1.80-something”), we now have an increase of some 60 percent…** From another perspective, if the same rate of increase continues, the price come next September might close in on twice the original.***

*2.99 vs. “2.60-something”: 2.99/2.60 = 1.15 and 2.99/2.69 > 1.11.

**2.99/1.80 > 1.66; 2.99/1.89 > 1.58.

***Good predictions are impossible, because (a) trends can change, (b) prices, as above, often increase in jerks rather than smaller gradual increases. (In particular, cf. an excursion in [1], there is some chance that breaking the 3-Euro barrier would be too painful for the store.) However, if we assume a reasonably smooth increase, a rate of 13 percent for the previous five months, and add another seven months, then the 2.99 Euro would be scaled by a factor of (1.13)^(7/5), which amounts to approximately 3.55 Euro, while the original price, again, was “1.80-something”.

Fucking politicians!

Written by michaeleriksson

February 22, 2023 at 10:43 am

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McDonald’s and another inflation follow-up

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Disclaimer: The details of the below should be taken with several grains of salt, as I go by memory, as there are great uncertainties about various years and values, and as even a small change in inputs can lead to noticeable changes in outputs. The big-picture illustration of uneven price developments and whatnots holds true, however. (And note that this is really a text about prices in general. McDonald’s and the specific prices of McDonald’s are just the inspiration and illustration—not the underlying topic.)

To give another inflation update ([1]) and some observations around prices:

Earlier today, I made a rare visit to a German McDonald’s and bought two cheese burgers for a total of 3.98 Euro. This amount was so large that I, for a brief moment, believed that the prices had fallen, and that a > 2 Euro per cheese burger had returned below 2 Euro. In actuality, the 2 Euro of my memory was for the pair. (Cf. below.) In other words, we were at almost twice the price that I had “internalized”.*

*This is not the first time that a high current price has temporarily tricked me into, in some sense, misremembering a base price, be it through rapid inflation or through an encounter with an unnecessarily expensive brand or store. A good lesson is to actually think back and find the “true” base price before comparing. (But here it would have made no difference to my decision.)

This simultaneously illustrates the extreme price increases in recent years and how hard it can be to assign a “true” price increase to a “when” (also note an excursion on “mis-yearing” price increases in [2]):

Cheese burgers from McDonald’s were a common food for me and a few friends during our Swedish college days, based on a temporary rebate from 14 (?) SEK to 9 SEK during (maybe) the summer of 1995. To some approximation, this amounts to a nominal 1 Euro per cheese burger.* After a brief rebound to 14, McDonald’s appeared to have seen a business loss and soon went back to 9, which might have remained the price until I left for Germany in 1997.

*As a rough heuristic, a SEK to EUR conversion can be found by dividing by 10, making this approximately 1.4 and 0.9 Euro, respectively—without (!) inflation adjustment. (However, at any given time, the actual exchange rate might be something different. To make the situation more complicated, the Euro was not yet in existence at the time. Also bear in mind that Sweden is generally more expensive in terms of food than Germany, implying that a direct comparison between e.g. 1 Euro’s worth of food in Sweden and Germany can be misleading.)

I do not remember what the early German price (in D-Mark) was, but at some point after the switch to Euro that same 1 Euro was a typical price—and remained stable there for a long time. (I have not kept statistics on McDonald’s products, but I remember finding the comparative lack of price increases at McDonald’s during the “00s” pleasant.)

Beginning in maybe 2012, prices began to increase, and also lost a prior perceived uniformity.* At this juncture, the old two-for-two (the convenience of which had been a contributing reason for my frequent purchases during commuter phases) no longer held, but prices always remained solidly below 3 Euro resp. 1.5 Euro/pc. We might, in a very rough guestimate, have an increase of less than fifty percent in 15 years. (In Germany; looking at my own timeline, including Sweden, it might be 20 years.) Playing with numbers, fifty percent would give an annual average increase of 1.5^(1/15) or roughly 2.7 percent per year, while forty percent gives 1.4^(1/15) or roughly 2.3 percent per year, and thirty 1.8. These numbers are approximately the same as the official inflation goal.**

*I did a lot of commuting between Düsseldorf and Cologne in the few years following, and various items were more expensive in Düsseldorf. My impression prior to this was that prices were virtually the same everywhere. (However, I suspect that the individual restaurants have always had some leeway on paper and just been loath to use it.)

**But they also illustrate how dangerous it can be to see a small difference in a yearly rate and conclude that the long term effects will be small—a common problem with politicians.

However, these calculations assume a uniform increase. If we instead assume 10 years of a fix price + 5 years of increases, we find respectively 8.4, 7, and 5.4 percent per year for five years. On the one hand, this is well above the inflation goals; on the other, it might be argued that McDonald’s was simply catching up after keeping prices artificially low for a prolonged time. Indeed, a 2 percent increase per year (identical to the inflation goal) over 10 years accumulates to 1.02^10, or almost 22 percent, which to that date was not reflected in the price. Then again, the interpretation can depend on whether the original prices were fair or unnecessarily high, as these 22 percent, in the latter case, would have been an implicit reduction in a “too high” price.

With less or no commuting, my McDonald’s visits dropped considerably, and the COVID-countermeasures near killed them. There was a span of maybe two years without even a single visit; and today’s visit might have been the third within the last year.* The last time that I bought my two cheese burgers “pre” might have been in late 2019 or early 2020. I suspect that the price was still below 3 Euro for the pair, but call it exactly 3 Euro resp. 1.5 Euro/pc. Today, February 12th, 2023, I landed at the aforementioned 3.98 Euro resp. 1.99 Euro/pc. Call it 3 years. We then have an average yearly increase of (1.99/1.5)^(1/3) or just shy of 10 percent. However, looking at overall inflation, it began comparatively low in 2020 and has since gradually increased. Assuming the same with McDonald’s prices, we might have an increase very considerably above 10 percent for the last 12 months—and an average of 10 percent is well above the overall official average for the same 3 years. It is, however, not necessarily remarkable compared to some other food-price increases, as discussed in [1] and the preceding texts.

*And others seem to have had a similar reaction: a McDonald’s a few hundred meter from my apartment, next to the local town-center, and in a semi-prime position, seems to have closed permanently during the COVID-countermeasure era.

Excursion on McDonald’s:
As I have noted at some point in the past, fast food has grown increasingly slow. This was certainly the case today: despite a short queue, I had to wait roughly five minutes for my cheese burgers, because these were not ready to go and there was queue of others waiting for their food—a longer one than were waiting to order. This is the more interesting as cheese burgers have, in my experience, been a sure bet: they have almost always been ready to go, even when there has been a delay for e.g. Big Macs; or have become ready sooner, in the unlikely event that they were out. In all fairness, today’s specimens were well above average in quality, but this points to a problem with priorities: McDonald’s is fast food—not gourmet food. Sacrificing speed in an effort to bring up quality kills the concept. (As opposed to bringing up quality while keeping speed constant.) This especially as this particular restaurant is adjacent to a train station (many customers will be in a hurry), and especially as it points to poor planning. To the latter: With better logistics, it should be possible to keep close to “real time” deliveries for the most popular products, while having a high quality, at such times when there is a steady stream of customers. Such a steady stream was present. Nevertheless, there seemed to be a delay of several minutes per order on every order, as the respective orders were cooked “on demand”.

As an aside, staff at McDonald’s seem to have some weird blind spot regarding specifically my cheese-burger orders. If I order any of the full meals, everything is OK. If I order two cheese burgers, half the time, a variation of the following dialogue plays out:

“To go?” (“Zum Mitnehmen?”)

“To eat here.” (“Hier essen.”)

“To go.” (“Zum Mitnehmen.” This in an affirmative tone, implying “Your confirmation of ‘to go’ has been understood.”.)

I give a big sigh and roll my eyes—after which I receive a brown to-go bag, take it to a suitable seat and eat the contents in the restaurant.

Written by michaeleriksson

February 12, 2023 at 7:16 pm

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Follow-ups on inflation

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To revisit a few texts on or relating to inflation:

In [1], I note that inflation seemed to hit harder than it officially should, giving some specific examples. To briefly look at these examples again, what has changed price-wise in the four-and-half months since then, and how my own habits have been altered:

  1. Milk: Has gone from 99 Cents to 1.05 Euro for the cheapest brands that I have noticed—and that is for “light” milk, with “regular” milk coming in another 5 (?) Cents higher.* This makes for another 6-or-so percent** for the “light” version, maybe 11 or more for “regular”. (The price, to my recollection, used to be the same.)

    *I grew up on the “light” versions as a child and still prefer them, so this is no issue for me, but it might be for others.

    **Here and elsewhere, note that this is not an annualized number. For instance, with the same trend, a yearly increase based on 6 percent might be approximated through 1.06^(12/4.5) – 1 or, equivalently, almost 17 percent. Whether the trend will remain the same, I leave unstated.

    (Also note a later text on the “small savings count” fallacy fallacy for why this price difference might not be as trivial as it seems. Also note that milk is a very common ingredient in other products and that an increase in the price of milk can result in price increases in these too, even be it smaller ones.)

  2. Meals for frying: Those that I buy seem to be at approximately the same price as before, but some others, for sale next to them, are more expensive. Understandably, I have not paid that much attention to the prices of the latter, but I suspect that the price difference has increased, making the neighboring products even more vulnerable to inflation.

    (Also note that similar meals from Akzenta/Rewe, instead of Aldi, might be another twenty or thirty percent more expensive; however, here I have no baseline to compare with.)

  3. Sausages: The same type that sold at 2.39 is now typically at 2.49 or more, for roughly 4 or more percent. For a while, I switched to a different type, which was more expensive but contained a greater quantity, but I ultimately lost interest. Excepting a purchase for Christmas, I have not eaten sausages since, maybe, October. This is largely because I tend to move in cycles of eating something fairly often, growing tired of it, not eating it at all, at some point re-discovering it, etc.; however, the price increases do not help.
  4. Coffee: Here, there actually seems to have been an improvement, with rebated prices back below 5 Euro and regular prices at, maybe, 6.x. As I noted in [1], “[C]offee often underlies price fluctuations based on e.g. how successful harvests have been. The overall change might reflect more than just inflation.”, and I suspect that an improvement in such other factors might have taken place. The overall price, however, is still considerably above the original. (Also note some remarks on Dolce Gusto, below.)
  5. Muesli: In the wake of the deterioration, I decided to make a private experiment by simply buying my own rolled oats (reservations for terminology), nuts, and whatnots, and mixing them to preference. I never got farther than the rolled oats, which actually work quite well together with just milk, are quite cheap relative both nuts and ready-made muesli, and (as a single item) are more convenient than buying and mixing several components. I might revisit this in the future, to vary the diet a bit, especially once summer comes. (I tend to consume relatively more colder foods and more fluids in the summer, e.g. muesli with milk, and relatively more warmer foods and solids in the winter. Just rolled oats might turn out to be boring, once my frequency of eating increases again.)
  6. (Rote Grütze: I have not bought it once since the change, partly because of the reduced convenience of the smaller container, partly due to the aforementioned cycles, partly due to the aforementioned summer and winter habits for food. Correspondingly, I have not kept tabs on prices.)

In [2] and [3], I discuss how my regular toilet paper and chewing gum had seemingly been taken off the market. Both now seem to be back (knock on wood). Why, I do not know, with options ranging from an inflow of costumer complaints to a temporary shortage (e.g. with resources prioritized for more expensive brands) eventually ending.

However, it is also possible that this is an example of inadvertently leaving a niche open for competitors: If store-chain A scraps a certain product to favor more expensive products in the same category, while store-chain B keeps the equivalently positioned product, many customers might prefer to switch to store-chain B for that type of product, rather than picking the next best alternative from store-chain A. This could then foul the plans of store-chain A and force a re-introduction.

Worse, some new competitor could move into a newly created niche or otherwise increase the competitive pressure. This might be what is happening with Dolce Gusto, where I have repeatedly seen newer and cheaper versions of these capsules, e.g. when I went to Aldi last Friday. As I noted in [1], the price increase on the “brand versions” had been smaller than for coffee in general, but it was still large. Now imagine a prospective competitor, who is able to sell a cheaper product, be it by cutting profit margins or by lowering quality,* but only can undercut the “brands” by, say, ten percent. Not only is this a potentially poor incentive for him, as he has little room to find a satisfactory profit-maximizing price, but the customers have little incentive to switch from the “brands”,** and it might be that there is no viable niche for him. Now say that the competitors raise their prices by another twenty percent. Suddenly, he has thrice the price span to play with and a much greater chance of finding a viable niche. (But note that this calculation is just intended as an illustration of principle. I claim neither that these are the actual values at hand, nor that a calculation focused on a single factor would be enough in real life.)

*I have tried a few of these competitors and they have been lower in quality. Moreover, the choices available have been far fewer. There might or might not also be an issue with lack of cooperation from Dolce Gusto (or its equivalent in whatever field is at hand) in developing and manufacturing the capsules (or whatnots) in a sufficiently compatible form.

**If in doubt, note that Dolce-Gusto customers are likely to be less price-sensitive than the average coffee drinker.

***If we index the original “brand” price at 100, he originally had a span of 90 to 100. Afterwards, he stands at 90 to 120, which is three times the span.

Written by michaeleriksson

February 5, 2023 at 6:53 am

Follow-up II: A new toilet paper shortage?

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In [1] and [2], I wrote about a potential new toilet-paper shortage and a feared attempt to force customers into buying over-priced 4-ply instead of 3-ply. In the almost two months since then, I have not spotted 3-ply at Akzenta* during my visits. These have been fewer than in the past, but as the toilet paper is easily visible from the main get-from-point-A-to-point-B aisle, I have been able to easily check, even when having no intention of actually buying toilet paper.

*The store referenced.

Yesterday, however, the 3-ply 10-packs (but not 16-packs) were back. At 4.05* Euro, they were more expensive than in the past, but cheaper than the inferior 4-ply 10-packs.** The reason for this is beyond my knowledge, but I would suspect costumer complaints or misguided proportions in orders (cf. excursion), e.g. in that both 3-ply and 4-ply is ordered, the 3-ply runs out much faster, and the shelves are then completely stocked with 4-ply to avoid the appearance of “out of product”. (I was there very early in the morning yesterday and, if relevant, reasonably early in the week, as it was a Tuesday.)

*Why 4.05 over 3.99? It is puzzling, as this is one of the prime cases where that 9 could truly have a psychological effect. As I note from my receipt, the other seven items that I bought all had an “ends with a 9” price, even when it cannot have had much of an effect. The difference between, say, 1.79 and 1.80 is highly unlikely to make even a psychological difference (let alone a practical one). I might speculate that Akzenta is trying to “acclimatize” the customers to “toilet paper costs 4-Euro-something” or maybe minimize the perceived prize difference to the over-prized 4-ply, as with a comparison between 4.05 and 4.99 instead of 3.99 and 4.99, but neither explanation truly makes sense to me. (Why 4.05 instead of 4.09? Beats me.)

**As I failed to note the price of the latter, an exact comparison is hard, but already last time around it was “close to five Euro”, and the arguments from [1] on plies, sheets, and quantity of paper apply, e.g. in that we compare 6,000 plies and 2,000 sheets per 10-pack of 3-ply with 6,000 plies and 1,500 sheets per 10-pack of 4-ply.

While I suspect that the dependency of toilet paper on gas has been overstated, I note that I saw another update on the gas stores very recently—apparently, the stores where ninety percent full. (After a few cold weeks in late November, December 2022 was likely the warmest that I have ever experienced, and January 2023 has, so far, been similar. Unless there is a very drastic change for the colder, sheer luck will make the politician-created gas crisis be a storm-in-a-tea-cup or cause it to be postponed until next winter.)

I also wrote about an apparently scrapped brand of cheap-but-high-quality chewing gum. A few weeks ago, the chewing gum was back—but then gone again for my next visit, and it has not resurfaced. Here there might be similar issues or there might e.g. be a situation where some rest store is present and portioned out to simultaneously avoid a write-off and a downward pressure on higher markup products. (But, again, here there is too much speculation necessary for my taste.)

Excursion on misguided proportions:
I have repeatedly made the experience that decision makers have no sense for what proportions of e.g. manufacture are suitable and fail to take empirical evidence into consideration to modify such proportions. The first such experience was school-lunches during my childhood: Evidently the same amount* of food was ordered regardless of what the food was. This resulted in everyone asking for seconds, and most being turned away for a lack of further supply, when there was e.g. a pasta dish, but great amounts of e.g. over-fried** fish and over-boiled** potatoes having to be thrown away on other days. The children noticed, the teachers noticed, the staff handling the school lunches certainly noticed—whoever made orders either did not or did not take action. The, maybe, most recent is ready-made rice dishes intended for the microwave that I occasionally buy at Aldi. There are three variations: “Mediterranean”, “Mexican”, and “Asian”. These appear to be delivered in cartons with an equal proportion of each. As it happens, I find the former two passable, the latter not—and apparently so do most other customers: if I visit in the evening, there is usually plenty of “Asian” left, but none of the others to be found. Why not just change the proportions to, maybe, 40–40–20, see happier customers, and reap greater profits? For that matter, why not pack cartons with just one type of dish, and let the stores order what proportions of cartons that they prefer?

*By some measure, maybe portions, maybe something else.

**Here note that this was not just a matter of these foods being inherently less to the taste of the children, which they certainly were, but also that the mass preparation, prolonged heating to keep the food warm, whatnot, hit such foods harder than they did, say, spaghetti and lasagna.

Written by michaeleriksson

January 11, 2023 at 10:01 am

Follow-up: A new toilet paper shortage?

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As a brief follow-up to [1]: Monday came and I tried my luck with Aldi. Here I did indeed find the 3-ply paper, and brought home an 8-pack (1600 sheets, 4800 plies; compare with the “Ja!” 4-ply 10-pack at 1500 sheets, 6000 plies). Even with a switch from 10 to 8 rolls, I do better with 3-ply. Moreover, my 8-pack cost me three* Euro, which compares very favorably to the “close to five Euro” of that 10-pack. In the good old days of 2-ply, I might, depending on priorities, have done even better with a 6-pack (!) at 1800 sheets and 3600 plies.

*2.95 or 2.99 or whatnot.

Excursion on consumer resistance:
But is so small an amount of money worth the extra effort? This is open to debate, at least for a single person.* My main motivation is something different, namely that by not buying 4-ply I make it harder for the stores and manufacturers to pull the artificially created switch to 4-ply.** If consumers were to even semi-consistently push against disputable methods, these would be less attractive to stores/manufacturers and the lives of consumers would be easier. Imagine, for instance, that many were to follow my example and deliberately avoid products encountered in advertising for some time period—advertisers might now see disappointing gains, no gains, or even a drop in sales as a result of an advertising campaign, which would make the amount of advertising decrease and, in turn, make the world less annoying and prices lower as the need to factor in advertising costs when setting prices is reduced.

*The economics might look very differently with two adults and four children.

**Strictly speaking, I cannot rule out that there was an element of coincidence behind the situation of [1]; however, looking at shelf arrangements and price labels, a deliberate change is the most likely explanation.

(A secondary motivation is that being somewhat price conscious might bring a considerable gain over the sum of all products, even when it does not do so over a single product. Shave, say, 10 percent of the yearly grocery bill and we are talking something noticeable.)

Excursion on comparing toilet papers:
One reason why I have never bothered much with toilet-paper comparisons in the past (let alone put them in writing) is the great problems with such comparisons—I have simply preferred to take the easy way out and, whenever possible, stick to the same brand. Consider that we have at least price, pack-size, number of sheets per roll, number of plies per sheet, the size of each individual sheet/ply,* and, to some degree, quality as core criteria—and then, depending on personal preferences, we might have secondary criteria, e.g. what proportion of the paper stems from recycling and what coloring** or pattering** might have been applied.

*Although I suspect that the differences are too small to bother with in most cases. The width, in particular, is likely to be standardized, to ensure that rolls from different brands fit in the same dispensers. (This might or might not also affect the number of plies, which has been 600 per roll for all the variations mentioned in these two texts.)

**Might influence popularity with many children and some women.

Written by michaeleriksson

November 21, 2022 at 11:09 pm

A new toilet paper shortage?

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Shortly before I bought toilet paper the last time, I was met with the news that lack of gas* could have a negative effect on the availability of toilet paper. Remembering the empty shelves caused by hoarding when there was no underlying supply problem,** I decided to go from my usual 10-pack of 3-ply (“Ja!” brand) to a 16-pack, to be set for a good long while—after all, if a real supply problem is combined with hoarding, things could get really ugly.

*Feel free to apply your own toilet humor.

**Cf. e.g. [1] and [2].

Earlier today, I encountered the claim that the German gas situation was under control, after all, that the storage tanks were full, and that everything would be fine during the winter.* I also, coincidentally, found myself on my last roll of toilet paper.**

*Maybe as a result of the unusually warm October and, to date, November. I caution that various claims around gas and whatnot might not always be reliable—the previous track record has been spotty.

**I usually buy the next pack well in advance, but the greater quantity of the 16-pack made it drop from my mind.

I went to the store to fill my supplies, preferably with the same type of 16-pack. No such luck. Not only were there no 16-packs, but there was no 3-ply paper at all—only the wasteful and over-expensive 4-ply (cf. below). The cheapest available was at close to five Euro, for a “Ja!” 10-pack of 4-ply, given as 150 sheets* per roll, equalling 1500 sheets and 6000 plies. Other brands charged even more for 8-packs, still in the wasteful 4-ply version. The old 16-pack? 200 sheets per roll for a total of 3200 sheets and 9600 plies. While I do not remember the price of this 16-pack, after so long a time, I believe that it was on a similar level, and I do know that I have bought 10-packs of 3-ply for 2-Euro-something in the past. (How far back in the past, I do not know. Toilet paper is not normally a priority.) I decided to forego the purchase and make a new attempt in another store tomorrow or on Monday.

*With reservations for exact terminology. Think the part between two sets of perforations.

Oh, and there was also a limit of two packs per customer.

Here we see another case of artificial limits on choice (cf. [3] and follow-ups): Why should I, as a customer, be restricted to 4-ply, when I was reasonably content with 3-ply, and very happy with the old 2-ply?* In sufficiently far away times and in Sweden I have even used 1-ply, which my father used to buy for a while. My sole complaint against 1-ply was that the paper quality was lower—but that is not an inherent property of 1-ply and was likely a result of the producers assuming that 1-ply users were cheap-skates who would prefer lower quality too.** Indeed, it could easily be argued that a lower ply number is better, as it allows a greater flexibility: maybe there are tasks where a single sheet of 4-ply is a good choice, but a 4-ply user is inherently limited to multiples of four, where a 2-ply user can use multiples of two, and the 1-ply user multiples of one. Say that a given task requires a quantity equivalent to 6 plies. The 4-ply user has the choice between 4, too little and maybe inadequate, and 8, too much and wasteful, while the 2- and 1-ply users hit the spot. Often, it is the sheets that count, and the 4-ply user is then naturally wasteful.

*2-ply has already disappeared from the consumer market in Germany, some years ago, in a similar customer-hostile and price-raising move. If not, I would still be buying it by preference.

**This is a common problem, e.g. with electronics, that quality is something that co-varies with quantity resp. set of features, when it should be an independent factor. For instance, a consumer might have a choice between a small low-quality TV and a large high-quality one—but rarely has the option of a small high-quality one. (He might find a small expensive TV with greater ease, but that is another matter.)

To take another perspective and look at how to handle a shortage: It would make sense to lower the ply number and, thereby, increase the total number of sheets available. For instance, the above 4-ply had 150 sheets and 600 plies per roll. The same number of plies/the same quantity of paper would give 300 (!) sheets of 2-ply or 600 (!!!) sheets of 1-ply. The number of sheets is, of course, not everything that counts, but sheets are often equivalent or near-equivalent, regardless of the number of plies; and when the plies do count for more, there is always the option of just folding one sheet of 2-ply over another for effective 4-ply, while dividing 4-ply into 2-ply is a different story. (Also note the environmental angle, where 4-ply fares correspondingly worse.)

The reason for this is ultimately a matter of higher markups, as with the earlier removal of 2-ply in favor of 3-ply. Despite more plies leading to an inferior product, the price per quantity of paper increases, while the production costs do not, leading to a higher markup. (A contrafactual “superior product” is pushed by non-arguments like “Supersoft!!!”, while providing nothing not achievable through folding 2-ply.) However, in the current era of inflation, it also likely carries an element of increasing-prices-without-increasing-prices: markets are segmented into different price and product ranges, and by simply removing relatively low-end products the average price increases—even when no individual product sees a price increase. Similarly, a few weeks ago, I noted that Akzenta had scrapped my favorite brand (also “Ja!”) of sugar-free* gum—cheap, good quality, and not as ridiculously strong-tasting as some of the more expensive brands.** My first attempt at a replacement (“Fresh and Free Active” from Aldi) seems to do the job, but is a little carton-y in taste and texture—definitely a lesser choice.

*Strictly speaking, “sugar-free” partially misses the point, but I have found no good translation for the German “Zahnpflegekaugummi” (literally, roughly, “tooth-care chewing-gum”) for which the key point is increased salivation, while being “sugar-free” is a mere prerequisite to avoid doing more harm than good.

**I strongly suspect that many tooth-care, household cleaning, whatnot products work with an artificially increased taste resp. smell in order to create a misleading impression of a greater effect.

An interesting complication is how short-term this approach is: Yes, removing the cheaper products from the markets, shrinking package sizes, whatnot can lead to customers not noticing price increases that strongly in the now—but what about tomorrow? The basics of market segmentation and competition have not changed, an optimization of profits will not be possible without a sufficiently granular segmentation, and, if one company foregoes a market segment, some competitor will, sooner or later, move in. Chances are that these short-term manipulations are a bad idea in the long-term.

Excursion on price increases vs. dishonest price increases:
I stress that I do not (necessarily) object to prices rising, as long as this reflects market forces and is done in an honest manner. Given a certain quantity and quality, I do prefer to pay less—duh! However, it is better to have a higher price and the ability to actually buy something than a lower price and empty shelves. My main beef above is about the dishonest manipulations involved, including attempts to mislead and to artificially limit choice. A lesser beef revolves around a poor way to handle a supply deficit, and one that might be argued as irresponsible, but here care must be taken not to put too great demands on the industry. (Note, as a negative example, the rhetoric and demands made by many governments around energy prices—up to and including the demand that suppliers should sell gas and electricity at prices that would cause them to lose money…)

Written by michaeleriksson

November 18, 2022 at 10:54 pm

Being better off vs. merely being less worse off

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An interesting phenomenon is politicians claiming that we are “better off” (or similar), because conditions have worsened less. Say that the price increase last month was 10 percent relative the same month last year and, by the same measure, 9.5 percent this month—are we better off or worse off? Well, we are better off than if it had been 10 percent this month too, but we are worse off, and that is more important, than last month.* Correspondingly, it is misleading to speak of “better off”; and outright dishonest to try to score political points (“we are better off because of my policies”). The best that honestly could be said is that the hope of getting back down to normal inflation values within a reasonable time frame has increased—but, even here, it is not much to brag about, seeing that it would take half an eternity, at this tempo, to get back to 2** percent a year and that fluctuations from one month to another do not necessarily point to a trend. (The difference between 10 and 9.5 could, for instance, be the result of a fluctuation in Russian gas deliveries, which might reverse next month, and maybe send us to 10.5 percent.)

*Probably. Note the scenarios used in a below excursion—e.g. how we can have a move from 10 to 9.5 above correspond to a price change of 0 percent for this month alone. Then again, I have yet to see a politician go through numbers in an attempt to disentangle something like that and to give the voters a correct view of matters. The claim is typically a simplistic “Only 9.5 percent! Yay me!”.

**This being a typical wanted-by-the-politicians value over the last few decades, and one which has often been reasonably matched by official measures. I am, myself, by no means convinced that 2 percent would be better than 0 percent or, even, -2 percent. (Whether the official measures reflect the true inflation rate is another question open to debate.)

By analogy, consider if you were robbed yesterday and that the robber absconded with a hundred dollars. Would anyone in his right mind say that you were better off because someone else robbed you today and absconded with only five dollars?* No. In contrast, if yesterday’s robber had a change of heart, decided to repent and repair, and gave you your hundred dollars back, you would be better off (than yesterday, post-robbery, but not necessarily pre-robbery).

*A comparison involving a long series of robberies would match inflation better, but the point should be clear.

Whenever a politician speaks of “better off”, “improvement”, or similar, do ask whether that is actually the truth—or whether things are merely not growing worse as fast as they used to.

Excursion on inflation numbers:
Inflation numbers are potentially a little misleading, but I use them because they (a) are easy to understand and relate to on a superficial level, (b) match at least one real example (likely involving Biden and U.S. inflation). The hitch is that neither a prices-this-month-to-prices-last-month measure of inflation nor a prices-this-month-to-prices-the-same-month-last-year comparison is flawless.* For instance, comparing prices today with prices one month ago, the difference might be caused by a “true” change in the inflation rate or by seasonal fluctuations; and shorter measures tend to be more vulnerable to fluctuations and aberrations of other kinds. For instance, comparing prices today vs. a year ago for both this month and last month (as in the main text) does not necessarily tell us anything about these two last months, as the difference might be rooted in the past; and longer measures can be poor at discovering short-term trends, in general. Assume e.g. that January of year 1 sees a 10-percent price increase for that month alone, and that price increases (unrealistically; for the sake of easy calculations) is then fixed at 1 percent per month. The inflation for year 1, New Year to New Year, is 1.10 x 1.01^11 or about 22.7 percent.** Tag on a month, and the yearly inflation rate is 1.01^12 or about 12.7 percent. Are we to conclude that January of year 2 was much better (less bad) than December of year 1? No: they both had an equally poor monthly rate of 1 percent, while the apparent improvement goes back to January of year 1 being a disaster, while January of year 2 was merely bad. (And note how we, as discussed in the main text, are actually worse off, because we have had an additional percent of price increases on top of all the previous increases. Overall, counting from the beginning of year 1, we have just moved from “about 22.7 percent” to just shy of 24 percent.) Vice versa, if January of year 2 had also seen a 10-percent price increase, this would have implied a massive worsening relative the previous month, but the yearly inflation rate would have remained unchanged.

*The best comparison might conceivably be between price increases for this individual month (compared to the previous month) and the corresponding price increase for the same individual month last year, but I have no recollection of seeing that done. Interestingly, as can be seen from the rest of the discussion, the ratio of the (multiplicative) increase rates for new January vs. old January can be found by dividing the new yearly inflation rate with the old yearly rate. Correspondingly, a drop from 10 to 9.5 (resp. 1.10 to 1.095), as above, implies a lower price increase than the same month last year—nothing more, nothing less. (Or a larger price decrease, or an increase turned into a decrease—but how often do we actually see a decrease in real life?)

**The transformation from multiplicative factors to percentages is y = 100 (x – 1). In the other direction: x = 1 + y/100.

How about the scenario from an above footnote? Simply put the price increase for January year 2 at 0, and base the increase for January year 1 on 1.10/1.095 (roughly 0.46 percent) and the rest of year 1 on a geometric mean equal to 1.095^(1/11) (or a little more than 0.8 percent). This gives a yearly multiplicative rate, New Year to New Year, of 1.10/1.095 x 1.095^(11/11) = 1.10 (=> 10 percent), while the yearly rate after January year 2 is 1.095^(11/11) x 1 = 1.095 (=> 9.5 percent). The reader is invited to construct own scenarios with deflation resp. an increase in inflation for January year 2 (under the constraint of yearly inflation rates of 10 and 9.5 percent).

Note on terminology:
I wrote the draft of this text using “inflation” (“inflation rate”, or similar) everywhere where I now use some version of “price increase”. I found the result confusing, especially when speaking of e.g. a monthly inflation rate. Consequently, I changed most of the “inflations” for greater clarity. I note, however, that “price increase” can be a little simplistic and begs for a specification of “What price?”, which is handled automatically by using a well-defined inflation measure, price index, or similar.

Written by michaeleriksson

November 11, 2022 at 6:08 pm

U.S. inflation hitting harder than it officially should

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In a recent text, I gave some examples of how German food prices seemed to have risen considerably above the, already high, nominal inflation rate.

Today, I encountered a U.S. article making a similar analysis based on a mixture of personal observation and official statistics, comparing the prices around the respective mid-terms* of Trump and Biden.

*The author counts the “now” as part of Biden’s mid-term. I am uncertain whether this is correct, as the actual elections presumably are in November. (The article was published on September 23rd, 2022; my time of writing is the 25th.)

Examples given include a roughly 70 percent increase on the price of milk (over roughly four years), which annualizes naively* to more than 14 percent. In a less naive calculation, we would almost certainly see lower or considerably lower annualized values for the remainder of Trump’s term, correspondingly higher values for Biden up-til-now, and a higher value for Biden in 2022 than for Biden in 2021.** My text also included a milk comparison, with a (very roughly) estimated 50 percent in 2022 alone.

*Just go with four equally contributing years and take the fourth root of 1.7 for the geometric mean. This is naive, as the years are not equally contributing. Depending on the exact definition of “mid-term” (cf. above), we might also have less than four years to explain the 1.7.

**Giving even a rough approximation of the correct values would require much more research. However, some feel for the principle can be had by simply taking the tenth root of 1.7 for year one, this squared for year two, to the third power for year three, and to the fourth power for year four, which accumulates to 1.7 over four years. This would give inflation rates of respectively 5, 11, 17 and 24 percent for years one through four. (Note that this still likely makes Biden look too good relative Trump—it is just a demonstration of principle.)

Written by michaeleriksson

September 25, 2022 at 1:57 pm

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Inflation hitting harder than it officially should

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During the days of comparatively low inflation, before the COVID-countermeasure and Russia-boycott era[s] took over, I repeatedly saw claims that inflation numbers were highly misleading and that the “true” inflation rate was higher than officially indicated.* While I never looked into this in detail, it does seem to hold in the current world, where price hikes on at least food** have often been far larger than the alleged, already high, inflation rate.

*Including some interesting side-claims, e.g. that governmental dietary recommendations were less aimed at improving health and more at shifting consumption to cheaper foodstuffs, e.g. from meat to bread. (I make no statement about the correctness of this claim, but I note that the recommendations that I remember from school were quite heavy in carbohydrates, which are often viewed less positively today, and easy on proteins, in general, and non-dairy animal products, in particular.)

**My consumption of other things than food and energy tends to be small and irregular, making changes hard to judge. (There are books and the like, but I buy a book once, and a difference in price between two different books tells me little about inflation.) Moreover, I do not pay attention to my own energy prices unless my supplier sends me a letter; and the price increases on energy are complicated through government interventions, and correspondingly hard to judge relative inflation when we look at the direct consumption. (But it is a major driver of inflation through indirect consumption, as electricity goes into virtually everything else that we buy.)

Some examples that have particularly annoyed me,* typically** with a price change taking place in 2022 alone:

*Especially in light of their being unnecessary, being largely caused by flawed government interventions of various types, notably regarding COVID and energy.

**As I have not kept actual notes, I cannot be more specific than that.

Milk: Used to be 60-something cents for a liter.* Is now at 99 cents, for an increase of around 50 (!) percent.**

*Here and elsewhere, I go by the brands that I usually buy. Note that I tend to buy cheaper brands, including store brands. (Germans might recognize “Ja!” as a good example.)

**I will use rough approximations throughout, as I do not usually know the exact old and/or the exact new price. Here, as a lower limit based on an original price of 69 cents, we have 43 percent. With lower original prices, the percentage increases.

Meals for frying: The local Aldi has a range of ready meals that just need a few minutes in a frying pan.* The one that I bought most often, a great personal favorite, was at 1.80-something. A few months ago, it was raised to 2.20-something, and then, again, to 2.60-something—40 percent or more.

*There is almost certainly a good English word for such, but I have no idea what it might be.

(Various other frozen meals? In a very rough guesstimate, the average price increase has been in excess of 20 percent on e.g. frozen pizzas, frozen lasagnas, and whatnots, with a variation from product to product.)

Sausages: The type and package of sausage that I have bought most frequently over the last few years, used to be at (likely) 1.99 Euro. The last time around, it was at 2.39 (?), for around 20 percent.

Coffee: I used to be able to buy the “good” brands for around 2.50 Euro per 500g package at ever recurring* sales, with a regular price of around 5 Euro. Today, the rebated price tends to be above 5 Euro and the regular price at 7-something Euro. Moreover, there are fewer sales. From my point of view, the prices have roughly doubled. (However, coffee often underlies price fluctuations based on e.g. how successful harvests have been. The overall change might reflect more than just inflation.)

*For a long stretch, the brands took turns with sales in a near continuous manner.

Rote Grütze:* Aldi used to sell this in 1kg buckets (handle and all). By now, the buckets are gone and 0.5kg containers have come instead. The buckets used to sell for around 2.50 Euro; the cones are at around 1.50 Euro, for a price/kg of around 3 Euro and, again, an increase of roughly 20 percent.

*There appears to be no good English name, but compote seems to be something slightly similar.

An interesting “maybe” is a great deterioration in the quality of my (previously) favorite brand* of muesli: For a period of maybe six months, every new package that I bought contained less and less nuts and more and more raisins. While I have nothing against raisins, this has shifted both the taste- and the health-profiles in a negative direction: The taste is by now over-powered by the raisins, the benefits of the nuts are gone, and the fast sugars of the raisins are likely to screw with how the body reacts.** The last time around, I actually found myself manually picking out as many raisins as I (with a reasonable effort) could. This was a few months ago and I have no intention of revisiting the brand.

*One of the two versions of the Rewe store-brand to be specific.

**Indeed, one of the reasons that I preferred this brand was that is was, originally, lower in fast sugars than many others. Notably, as great as good muesli is, it is very energy rich. Combine this energy richness with fast sugars and the associated ups-and-downs in blood sugar level, and I suspect bad things to be the result.

Excursion on shrinkflation:
With some reservations for rote Grütze above, I am not aware of any case of shrinkflation, but as the intent of shrinkflation is typically subterfuge, there might well be such cases that I simply have missed.

Excursion on low-end products being hit harder:
I would speculate that low-end products are more sensitive to the current problems, which might make me more affected by price increases, as the margins are lower. Higher-end products tend to have higher margins, which could mean that the seller and/or producer are willing to swallow more of a cost increase and/or to delay the price increase for some time—especially, when a portion of the cost increase is believed to be temporary. (Then again, maybe it is the other way around, as they might consider their customers less price sensitive.) An interesting potential example of this is coffee (cf. above): not only have the rebated prices taken a proportionally worse hit than the “full” prices, but capsules for Dolce Gusto* have taken a smaller hit still, at maybe 20 percent. A regular carton of 16 capsules used to be almost as expensive as a 0.5kg package of plain ground coffee, but, obviously, only gives 16 cups, which is far less than the 0.5kg package used for drip brews,** and the margins were correspondingly much larger. (I would not be surprised if most of the price was markup.) Correspondingly, the sellers might prefer to reduce the margin a bit and keep the customers, over keeping the margin and potentially losing customers.

*I buy these once in a blue moon, as the speed and convenience can be pleasant, but I taste-wise (and price-wise…) prefer regular drip brews.

**I have never kept tabs on the number of cups, especially as I make smaller cups when brewing; however, going by weight, my recently purchased “Grande” appears to have “16 x 8g = 128g” according to the carton. This is marginally more than a quarter of the regular coffee; most other types of “black coffee” Dolce Gusto use less or considerably less coffee; and the various cappuccinos, lattes, and whatnot only have 8 doses of coffee (and 8 doses of e.g. milk), making their coffee content correspondingly smaller. (However, they sell at the same price, regardless of coffee content.)

Excursion on inflation vs. deflation vs. fix value:
Even in the glorious days of 2-percent inflation, I was highly skeptical to the approach taken by various governments, central banks, and whatnots. I am not convinced that even this level of inflation was justified by sound Economics, but suspect that it was a matter of governmental convenience at the cost of the people.* Would not a zero inflation be fairer and better for everyone? Alternatively, like in some stretches of “yore”, that prices may have risen one year, sunk the next, and averaged out to near constancy over a longer stretch of time.**

*This might include aspects like a lower debt burden, exchange rates that do not grow too high (by some standard), an implicit shifting of tax brackets to put more and more of the people in higher brackets, and similar. For Leftist governments, we have the added “advantage” of existing fortunes being undermined; and, maybe even for non-Leftist governments, that there is a greater incentive to work, as saving up for the future and living on money already earned is harder.

**Notably, for countries on a gold or silver standard when the amount of available gold resp. silver was approximately constant or grew approximately in proportion to the overall economy.

Take it one step further: Would not deflation (i.e. “negative inflation”) be the way to go to increase the wealth of the people? Keep your salary and your bank account at the same level—and ten years down the line you will still earn more and be wealthier (in real terms). Let better production methods and other developments drive prices down, even if slowly, and everyone might be better off. Ditto if product quantity and/or quality improves at a fix price.

There are claims that a little inflation would be a good thing, and that deflation would be bad; however, these claims have so far left me unconvinced as their are too many conditions applied and/or too much speculation.* For instance, with a deflation of 2 percent a year (compare the longstanding inflation goals of 2 percent a year), why would anyone be deterred from consumption? A similar** effect has not prevented e.g. the computer industry from flourishing and leaving products like food for next year, when they will be cheaper, is either silly or suicidal. Inflation allows (real) wages to go down? Only very temporarily, as the unions will factor in the inflation in the next round of increases. There might be less incentives to borrow money, but I do not see that as a bad thing. Etc.

*Including assumptions about an otherwise fixed economy, without productivity improvements; use of severe deflation (e.g. 20 percent a year) instead of mild (e.g. 2 percent a year); and application of short-term thinking on the agents within the economy in that deflation is a rare abnormality that causes unusual concerns and behaviors. (The latter does match the current situation, but not the situation suggested by me.) Indeed, I suspect that the point of various claims is less to give a fair analysis and more to “prove” that “deflation is bad; ergo, we must have inflation”.

**Here we have a deflationary effect specific to the product group, as opposed to an economy-wide one.

Excursion on “mis-yearing” price increases:
A confounding factor is that businesses do not necessarily increase prices immediately in reaction to various events. The reasons for this can be manifold, including e.g. a wish to wait until the competition raises prices, a wish to avoid unnecessary up-and-down fluctuations, a fear that raising too many prices at once (in e.g. a grocery store) can put off too many customers. Then there is the wish to keep those annoying “x.99” prices. For instance, if a certain product sells at 0.99* and a 10-percent increase is called for (according to some set of criteria), then this would result in a price of 1.09. If the margins are large enough and the fear present that the leading “1” will be a greater deterrent than the leading “0”, it might make sense to wait. A year later, another 10-percent increase is called for, or a “real” price of 1.19**. Foregoing 10 cent is one thing, 20 another, and now the price is raised by the full amount. The impression of the customers might then be misleading, because they are not aware that they had been given an implicit 10-cent rebate in the past. It is certainly possible that the strong price increases in 2022 go back partially to such delays in the increases.

*Here and below, I will leave out the currency units. They would add nothing to the illustration. Note, however, that I implicitly assume an x.yz system in both currency units and notation, which does not apply to all currencies.

**Strictly speaking, 1.20, but that would violate the prices-must-always-end-with-a-9 rule.

Excursion on multiplicative rates and underestimating inflation:
One reason that many underestimate inflation is that they fail to consider its multiplicative nature. For instance, to repeat and extend the above calculations with a more sensible 1 as a basis:

Iteration/Year True value* Naive value**
0 1.00 1.00
1 1.10 1.10
2 1.21 1.20
3 1.33 1.30
4 1.46 1.40
10 2.59 2.00
20 6.73 3.00

*Value achieved by multiplying with a factor of 1.1 for each iteration. Rounded and/or padded to fit the normal price format.

**Value achieved by just adding 10 percent of the original price per iteration. Padded to fit the normal price format.

As we can see, the difference between the true and the naive value is small for the first few years, although a difference is notable already in iteration/year 3 and certainly 4.* However, as time passes, it explodes upwards.

*The naivety of the naive estimate might be increased, should typical pricing be used, as we might then have e.g. 1.29 instead of 1.33 for the third iteration/year—but we might see an apparent explosion to 1.49 for the fourth. (The same phenomenon as discussed in the previous excursion.)

Excursion on other attempts to mislead customers:
Attempts at e.g. “shrinkflation” are not the only problems. For instance, I have recently bought quite a few semi-ready meals from Knorr, where a ready-made mix of pasta, cheese, and various other ingredients are heated in water for a few minutes—convenient, tastes well, and very filling if enough water is used to create something closer to soup than a “dry” meal. (Healthy? More dubious.) However, the misleading claims about energy are definitely problematic. For instance, the package that I am looking at right now makes three claims about energy content: (a) 397 kJ per 100 g of cooked (“zubereitet”) product. A careless customer will now look at the 100 g and the overall raw weight of 153 g and assume roughly an overall of 600 kJ—which borders on diet food. The true value is 2598 kJ, or well above four times as much. The more pleasant value is an illusion created by counting the water. (b) 1294 kJ per alleged serving* (“Portion”). The careless customer would now naturally assume that this is the result of cooking the overall, but he is still off by a factor of two—allegedly, two servings result from a single package. To this, I note that cooking just half the contents while keeping an even distribution of various ingredients would be tricky, that the dish is not suitable for a keep-and-reheat scenario, and that only half would be too little for a full meal for one person. (Half might or might not do as a snack or as a part of a multi-course meal.) (c) 15 % of the energy needed per day.* This, again, per alleged serving and with the same misunderstanding likely to arise. (But, oddly, the value is kept high by using a reference person at 8400 kJ per day, which, I suspect, is on the low side for men and growing teenagers of either sex.)

*Both servings and energy-per-day measures are next to useless, as they vary much too much from person to person. The former does more harm-than-good and should be banned, as they are often outright abused. (I recall seeing bags of potato chips that used servings of 20 g, or well below an ounce. Does not sound like a typical serving to me.) The latter likely do more harm-than-good, and it would be better for the individuals to learn what fits them on an individual basis.

The two values that would have made the most sense, energy per uncooked weight (kJ/100g) and energy per entire package, are very, very absent.

Written by michaeleriksson

September 19, 2022 at 5:57 pm