Cheap cheese goes up in price faster than brie: The sister of inflation, chipflation, has arrived

The prices of the cheapest domestic cheese are rising much faster than the prices of luxury brie, while yogurt costs the same, but the tetrapack in which it is filled is almost half the price. During that time, the price of bread increases, even though the costs necessary for its production have not increased - only because traders can, in situations of some collective social gluttony.

This would be the case in specific situations stores could the sisters be shown inflation which have been widely distributed in markets in Serbia in recent years.

That's right analysis of the National Bank of Serbia showed that chipflation has arrived in the country, and that shrinkflation and gridflation have existed for several years.

Chipflation is a phenomenon that occurs when, during inflationary pressures, the prices of cheaper brands of the same products rise faster than more expensive ones.

"Our analysis confirmed that within the category of food and beverages in the period from 2022 to 2024, the cumulative price increase of cheaper brands was five percentage points higher than that of more expensive brands," said NBS Vice-Governor Željko Jović.

Jović stated that another feature of that phenomenon was also confirmed, namely that the biggest difference in price movements of cheaper and more expensive brands occurs during the most pronounced inflationary pressures.

What did the analysis show?

NBS analyzed 58 products, including dairy products, meat products, confectionery, coffee and soft drinks. Products from the category of fresh meat, fruits and vegetables did not participate in the analysis, for methodological reasons.

The survey showed that prices rose by an average of 37,7 percent overall, which is close to the rate of cumulative inflation in the processed food and soft drinks sector and based on official data from the Republic Institute of Statistics (RZS).

Cheaper brands rose in price by 40 percent in that period, and more than two-thirds (67 percent) of that price increase was realized in 2022. When it comes to more expensive brands, their cumulative price increase was about 35 percent. More than 50 percent of growth was also achieved in 2022.

What is shrinkflation and what is gridflation

Other variants that pay for inflation are shrinkflation, a phenomenon when for the same or even higher price you get a smaller quantity of products, that is, smaller packaging.

What is currently evident in the market is the so-called gridflation, which occurs as a greedy reaction, where inflation is used as an excuse for retail prices to rise more than production costs have increased.

In Serbia, this phenomenon was widespread during the coronavirus pandemic, when many increased prices to artificially high levels for the sake of higher profits, all under the pretext of the crisis caused by covid-19.

Deflation - has it ever happened in Serbia

Deflation is an economic phenomenon that represents a general decline in the prices of goods and services in an economy during a certain period. In contrast to inflation, which causes prices to rise, deflation leads to a decrease in overall prices, thereby increasing the purchasing power of money.

The main cause of deflation is the reduction of total demand in the economy. When people and businesses reduce consumption and investment due to fear of economic problems, consumption declines, causing businesses to be unable to sell their goods at their previous prices, so they lower prices to attract buyers.

This phenomenon is not related to Serbia, but it happened in Japan during the 1990s, when there was a long deflation that caused the stagnation of the economy known as the "lost decade". During that period, falling prices and economic stagnation caused long-term economic problems that hampered recovery.

Deflation may seem like something that should be desirable because it increases the purchasing power of money, however, in the long run, it creates very serious consequences for economic growth and stability.

Stagflation was

This is an economic phenomenon characterized by the simultaneous existence of two negative economic trends: high inflation and high unemployment. This phenomenon is particularly problematic because these factors are usually associated with opposite conditions.

Inflation usually occurs when the economy is growing and the demand for goods and services exceeds the supply, while high unemployment usually follows an economic downturn. In the case of stagflation, however, both problems arise simultaneously, creating serious challenges for the economy.