You're thinking, "Good! I can buy more stuff with less money!" This is true, but the problem is that if everyone can buy more stuff with less money — what motivation is there to manufacture more stuff? Ah-ha. Troubling, isn't it?

From the NYT:

“We’re looking at a pretty deep recession now,” Mr. Behravesh said. “ All of a sudden, any pricing power that companies might have had is gone. You’re going to see discounting like crazy going on. All kinds of sales. You’re going to see all kinds of prices being slashed.”

With consumers pulling back, many analysts are expecting a difficult Christmas shopping season. Retail sales, for example, were down 2.8 percent in October from September, and 4.1 percent from October 2007 as consumers pared their spending.

In Wednesday’s report, even excluding volatile food and energy prices, prices dropped 0.1 percent in October. It was the first such decline in more than two decades and raises the specter of deflation as the economy contracts and demand for goods and services across the board plunges.

“This month it’s more than slowing, it’s outright contraction,” Mr. O’Sullivan said. “And yes, if you extrapolate that, it’s deflation.”

For those of you wondering what deflation is — you can click here for a bleak explanation.

Consumer Prices Fall by Record Amount [NYTimes]
(Photo: Ben Popken )

It's called "sticky prices" — the tendency for companies to delay both raising — and then lowering prices in response to changes in the cost of raw materials. You see, what you pay at the grocery store has more to do with what competitors charge than it does with how much it actually costs to produce the item.

The AP explains:

Prices have been going up broadly across whole categories of products, meaning competitors have been hiking prices in unison. For example, both Anheuser-Busch Cos. Inc. and SABMiller's U.S. unit have been raising the price for beer, with neither one too worried that the price hikes will push customers to their competitor.

"They may be upset about it, but you really have fairly limited options as a consumer," Perner said.

For prices to drop, consumers have to hope that companies' competitive juices start flowing again. The drop in oil and ingredient prices is creating a high-stakes game of chicken in the shopping aisle, Perner said.

If companies keep their prices at current levels, they can reap higher profit margins. But if one company starts cutting prices to lure customers away from competitors, it could start a price war.

"As soon as the first (company) in a category reduces prices, the others will follow suit. But they're all hoping the other one doesn't" cut prices, Perner said.

...And in case you're wondering if the same applies to airfares... the answer is yes. Don't expect the airlines to let go of any of those new fees without a fight.

Grocery bill still high? Blame ‘sticky’ prices [Newsweek]
(Photo: Ben Popken )

From the NYT:

In response to the falling value of their homes and high gasoline prices, Americans have become more frugal all year. But in recent weeks, as the financial crisis reverberated from Wall Street to Washington, consumers appear to have cut back sharply. Even with the government beginning a giant bailout of the financial system, their confidence may have been too shaken for them to resume their free-spending ways any time soon.

Recent figures from companies, and interviews across the country, show that automobile sales are plummeting, airline traffic is dropping, restaurant chains are struggling to fill tables, customers are sparse in stores.

When the final tally is in, consumer spending for the quarter just ended will almost certainly shrink, the first quarterly decline in nearly two decades.

The Times says that when the government releases the numbers this month, they are expected to show that consumer spending shrank by 3%, which would be the steepest decline since 1981 and the only decline since 1990.

Consumers are apparently buying more groceries, enjoying fewer meals out, and spending less on clothes, school supplies, and air travel. Nintendo Wiis, however, are still flying off shelves.

“My view is that when consumers get concerned about their nest egg, or their country, they need entertainment,” said Bo Andersen, president and chief executive of the Entertainment Merchants Association, which represents distributors and retailers of home entertainment products.

Full of Doubts, U.S. Shoppers Cut Spending [NYT]
(Photo: robinryan )

It's just too bad that it doesn't go all the way back to the Panic of 1893. That's my favorite panic. In fact, it doesn't even go back to 1929. Still, it's interesting.

Breif History of Recessions [HBR via BuzzFeed]

When we wrote last month about the financial hardships facing 99 Cents Only, we questioned their CEO's idea of raising prices above the $1.00 threshold:

Of course, breaking their 99-cent promise—the core of their branding—would be risky, not to mention expensive (think of all the signage they'd have to change).

Congratulations on staying somewhat true to your core values, 99 Cents Only. We anticipate a flood of emails from consumers angry at being denied their hundredth of a cent.

Top Price Jumps to 99.99 Cents at 99 Cents Only Stores [NBC] (Thanks to Sunny!)
(Photo: greenwenvy08)

Sometimes truth in advertising hurts, especially when you can still see the outline of the former sign above the new one.

Update: The new sign may have actually gone up a while back, in which case it's more an illustration of NYC's high cost of living than current inflation. Even if that's the case, you'd think they'd do something about the remnants of that old sign taunting everyone.

Update #2: Another reader, David, sent us a picture he took last summer of the same store. It appears "99¢ Dreams" is in a constant state of naming flux:

We sort of like "OR LESS OR MORE" as a slogan—makes it seem more like a carnival game, somehow.

(Thanks to Larry!)

In addition to the classic Hershey's chocolate bar, Hershey makes Kisses, Reese's Cups, Whoppers, Mounds and Almond Joy, Rolo, York Peppermint Pattie, Mr. Goodbar, Payday, Kit Kat, Heath, 5th Avenue, and some Cadbury products.

"Hershey boosts prices as commodities cost more" [MarketWatch]
(Photo: Getty)

In an interview, Don Thompson, president of McDonald's U.S. business, said the company has tested ways to make the burger less expensive to make. Some restaurants are selling it with one slice of cheese instead of two, and billing it as a "double hamburger with cheese." Others are offering a double hamburger without cheese. Some are selling the traditional double cheeseburger at prices ranging from $1.09 to $1.19.

Will you eat a cheeseless Double Cheeseburger?

McDonald's Tests Changes
In $1 Burger As Costs Rise [WSJ] (Thanks, Orlando!)
(Photo: Paxton Holley )

Jobless Rate Climbs to 5.7% as 51,000 Jobs Lost in July [NYT] (Photo: Getty)

But in this first real slowdown of the wireless age, consumers seem to be saying that home-based telephones are expendable luxuries, like Starbucks lattes or Coach handbags. And it makes sense. Confronted with high inflation, soaring energy costs, and stagnant wages, millions of households are facing choices about which monthly bills to pay and which commitments to maintain. And if it comes down to one or the other, the mobile or the home-based land line, it's clear which is a necessity and which is an option.

It's not just tight budgets, though. Slate speculates that foreclosures are also having an effect, because as people move into rentals or in with relatives, they shut off existing landlines and don't bother reconnecting.

I haven't had a traditional landline since 2002. At first I moved to Vonage, then a DIY SIP setup that I never could get working correctly. Finally I realized it was both cheaper and simpler to just forego a home line entirely.

"Phones Without Homes" [Slate] (Thanks to SpiderJerusalem!)
(Photo: Getty)

"The cost implications of having that value menu have changed when you see what's going on in beef and chicken," CEO Ralph Alvarez told investors, "The way the dollar menu looks today won't be the way it's going to look next year. In this current environment, we've got to make sure we're pricing smart, not just pricing low."

The Chicago Tribune reports that McDonald's did not elaborate on what exactly they will be changing about the popular menu, but did disclose that "tests" are underway in which the double cheeseburger is more expensive.

Get them while they're cheap.

Changes ahead for dollar menu [Chicago Tribune]
(Photo: Matt McGee )

• Cereal makers General Mills and Kellogg Co. have both said they will raise prices. General Mills "said it needed to make up for cost increases that it expects will total 9 percent."
• Kraft Foods, whose brands include Oscar Mayer, Philadelphia cream cheese, Oreos and Wheat Thins, will follow its 8% price increase earlier this year with another one to offset rising commodity costs.
• Sara Lee will raise prices 20% for its meat products like Jimmy Dean sausages and Ball Park Franks. Sara Lee's COO gave this mangled explanation to Datamonitor: "Price increases vary a lot by type of products but the increases will be as low as zero and some products we will decrease on and other increases (will be) in excess of 20%."

The Chicago Sun-Times advises,

Overall grocery prices are expected to rise 5 percent to 6 percent this year. But some categories are projected to post higher increases, such as eggs, fats and oils and cereals.

A report by the Food Institute, a research group for manufacturers, predicted 2008 increases of at least 9 percent for those products.

"Grocery bills going up — again" [Chicago Sun-Times]
"US food firms to increase prices again" [Datamonitor] (subscription only)
(Photo: Getty)

Meg writes:

Bought new hairspray the other day, and didn't notice until i got home that the new one had 15% less product in it for the same price. Bought this at ShopRite in NJ.

To keeping the public informed!

Notice how the tasty kangaroo was replaced by an eery "No Worries Guarantee."

Careful mates, the Grocery Shrink Ray silently lurks everywhere; but from the looks of our ongoing poll, that's how you like it, anyway. If you see a shrunken product, break out your camera and send your sighting to the tipline.

Reader Neal's receipt:

Gawker Media polls require Javascript; if you're viewing this in an RSS reader, click through to view in your Javascript-enabled web browser.

Coca-Cola Enterprises, which has about 80 percent of the United States market for Coke, said it would raise prices after Labor Day because of higher commodity costs and declining American soda sales. It said prices would go up by a percentage in the mid-single digit to high-single digit range. Bottlers set prices for retailers like grocery stores.

Hey, at least they didn't change the bottle size, right?

Biggest Bottler of Coke Plans to Increase Prices [NYT]
(Photo: balmes. )

Luke says:

I've been using White Rain shampoo for years. It's in every Walgreens in the nation, and it is the cheapest shampoo ever. It's a dollar a bottle. It's always been a dollar a bottle. Ask anyone. It's also always been in a 590 mL bottle. But now they changed it to a 532 mL bottle. They still insist it's "33% MORE" than something.

Well, it certainly isn't 33% more than it used to be.

From the NYT:

Mr. Bernanke was especially pessimistic about any easing of energy prices, dismissing suggestions that they were being driven by speculation in futures markets. Instead, he said high energy costs reflected the markets’ recognition that demand was outstripping supplies.

“Over the past several years, the world economy has expanded at its fastest pace in decades, leading to substantial increases in the demand for oil,” Mr. Bernanke said. “On the supply side, despite sharp increases in prices, the production of oil has risen only slightly in the past few years.”

Before Mr. Bernanke’s remarks, the Labor Department reported that wholesale prices rose 1.8 percent in June, making for the fastest 12-month inflation rate in more than a quarter century.

Economy Will Stay Sluggish, Bernanke Tells Congress [NYT]
(AP Photo/Susan Walsh)

We grabbed these images of Chicago as an example. As you can see, the percentage of income that people are dedicating to transportation has grown — especially in more rural areas. The site also has an interactive map of the Housing and Transportation Affordability Index (below)— so you can see where people are dedicating less than 45% (shown in yellow) of their income to housing and transportation. Living in the city never looked so good.

Housing + Transportation Affordability Index [CNT]

A P&G spokesperson told the Boston Globe:
"We don't price in anticipation," Fox said. "We only price to recover costs."

The company has already raised prices 4-8% in order to counter the skyrocketing cost of raw materials such as "pulp, used in paper, tallow, an animal fat used in soap, and oil-based products such as plastics."

Oh well, at least they're being straightforward about it! Honesty is better than the Grocery Shrink Ray.

P&G will boost product prices by up to 16% [Boston Globe](Thanks, Jill!)
(Photo: kandh07 )

1. Make a list and stick to it. Lists focus your shopping and are the single best way to save money.
2. Compare unit pricing, not box size. As with good things, good prices sometimes come in small packages.
3. If you only need a handful of items, use a basket, not a cart. Empty space cries to be filled.
4. If it's not on your list, don't pick it up. According to Paco Underhill in Why We Buy: “Virtually all unplanned purchases…come as a result of the shopper seeing, touching, smelling, or tasting something that promises pleasure, if not total fulfillment.”
5. Shop at the edge of the store. That's where the healthier, cheaper items hide.
6. Disavow brand loyalty and swear allegiance to the lowest price.
7. Consider generics. You usually get the same quality, without the unnecessary branding.
8. Learn to love coupons. With practice, you can buy almost $150 worth of stuff for $5.
9. Make one big shop, rather than several small ones. You'll save on gas while inoculating against wasteful spending.
10. Buy from bulk bins. Why pay for packaging and marketing when you can reach right in and scoop out exactly what you need?
11. Check your receipt. Don't let an errant scan ruin your hard work.
12. Shop alone. Science shows that we spend more when we're with company.
13. Track your spending so you can see what's eating your money. Committed receipt hawks can spot price cycles to help guide their shopping.
14. Eat a meal before shopping. Shopping on a full stomach tamps down impulse spending and keeps you focused on your list.
15. Shop without a car. Nothing limits spending like knowing you'll have to carry your goods home.

Saving at the Supermarket: 15 Great Grocery Shopping Tips [Get Rich Slowly]

(Photo: Getty)

Josh says:

Publix did a great job not making it obvious — they pulled all of each flavor off the shelf before replacing it. But I found that one Mango one in the back and was able to make this comparison.

Speaking of not making it too obvious— these two containers look the same. Why does one have 6 ounces and the other have 4?

if you look at the bottom, that's where they get you. In the old days, the bottoms were flat. Now, not so much.

If you spot evidence of the ray's malevolent beam in your grocery store — take a photo and send it to us at tips@consumerist.com — or upload it to Flickr and submit it to our Flickr pool.

(Photos: Listener42

Listener42

Listener42 )

The price of Spam is up too, with the average 12 oz. can costing about $2.62. That's an increase of 17 cents, or nearly 7 percent, from the same time last year. But it's not stopping sales, as the pork meat in a can seems like a good alternative to consumers.

Kimberly Quan, a stay-at-home mom of three who lives just outside San Francisco, has been feeding her family more Spam in the last six months as she tries to make her food budget go further.

She cooks meals like Spam fried rice and Spam sandwiches two or three times a month, up from once a month previously.

Pulling Spam from the shelf prevents last-minute grocery store trips and overspending, said Quan, 38, of Pleasanton, Calif.

"It's canned meat and it's in the cupboard and if everything else is gone from the fridge, it's there," she said.

Spam's maker, Hormel Foods Corp., reported last week that it saw strong sales of Spam in the second quarter, helping push up its profits 14 percent. According to sales information coming from Hormel, provided by The Nielsen Co., Spam sales were up 10.6 percent in the 12-week period ending May 3, compared to last year. In the last 24 weeks, sales were up nearly 9 percent.

The Austin, Minn.-based company, also known for the Jennie-O Turkey Store, has embarked on its first national advertising campaign for the 71-year-old brand in several years. They've credited the sales increase to that, along with new products like individually packaged "Spam Singles" slices. Also helping sales, executives said in an earnings conference call, was the fact that people looking to save money are skipping restaurant meals and eating more at home.

Spam Singles? According to the article Spam costs about $3.49 per lbs. Is this a good deal? Our local grocery store in Brooklyn has boneless chicken breasts on sale for $2.49 per lbs.

Another woman in the article says she's feeding her kids ramen more often:

April Smith has been changing the way she feeds her family in Broken Arrow, Okla., to keep up with rising costs. This summer the 33-year-old administrative assistant will feed her two boys, ages 11 and 8, more ramen for lunch. Normally they eat the noodle soup on Saturdays, but since ramen costs about a dime per pack, they'll get it twice a week. Smith says she'll throw in some leftover frozen vegetables to make it more nutritious.

"Since it's cheap and easy, I figure why not let them eat it twice a week instead of once a week," Smith said.

What are you doing to save money at the grocery store? Is canned meat involved?

Sales of Spam rise as consumers trim food costs [AP]
(Photo: jodsey )

Food's getting too expensive, leaving us with two choices: lose our lead on per capita obesity, or find new ways to save money. We're not the type of nation to give up a first place position on anything, so that leaves us with saving money, and one way to do this is to make your own stuff. We know, it's crazy! Apparently early settlers somehow created their own Cheetos and Frappuccinos, but we're not going to get that primitive. Instead, here's a quick rundown of some interesting Do It Yourself tutorials we found that might give you some ideas on how to cut costs the next time you go grocery shopping.

Make Your Own Baby Food
The process is pretty easy—puree the food and strain it. This post suggests you spoon individual servings into an ice tray, then cover it with plastic wrap and freeze it. "Then, put the frozen blocks of food into a freezer bag." The author doesn't go on to mention thawing out the food, which leaves us with images of her babies sucking toothlessly on foodsicles, but we assume you're supposed to reheat the food when you're ready to use it.

Of course, if you need advice on how to make your own baby, you can head over to our sister site Fleshbot.

Make Your Own Instant Oatmeal
Trent at The Simple Dollar makes his own instant oatmeal packets. Instant oatmeal is a simple recipe, which means even the kitchen-phobic can accomplish this without ruining anything. Trent writes that the initial batch actually comes out to slightly more per serving than prepackaged, if you factor in the purchase of one-time supplies like reusable baggies and salt. Batch #2 is the same price as pre-packaged, and batch #3 is where the real savings kick in.

While this is a great idea, we think you can go one better and forego the plastic bags entirely, which drops the cost per serving immediately. Baggies are good if you have to eat your breakfast in the break room at work, but otherwise the "recipe" is so simple that you can assemble it on the spot each morning in less than 30 seconds. If you follow Trent's advice to grind up some of the oatmeal to make the final product thicker, simply grind up a predetermined amount and keep it in a plastic container.

Make Your Own Ice Cream and Sorbet
Real ice cream requires cooking a custard first, and you'll have to purchase eggs, heavy cream, and milk, which are exactly the sort of ingredients that are going up in price. Since the point is to save money, you're better off buying in-season fruit and trying your hand at sorbets.

This is maybe the funniest/laziest sorbet recipe we can find: freeze a can of fruit, then puree it in a blender with a little liquor. (We're going to try this over the weekend.)

If you're too lazy to puree and blend, go even simpler and just make ice pops.

Make Your Own Hot Dogs
Just kidding.

The Big Question: Is This Really Worth My Time?
If you're asking yourself that, there's a good chance you already know the answer: you probably feel your time is better suited doing something more productive and/or entertaining.

However, Trent the Oatmeal Guy writes that he made his instant oatmeal packets while talking on the phone with his mother. We've discovered family phone calls are the perfect time to multitask with housework and kitchen activities, especially if you have a hands-free headset.

(Photo: Getty Images)

All of Inflation’s Little Parts [NYT] (Thanks to Natan!)

"We can only serve two options and beef and pork obviously have religious restrictions.

"We have to try to use two meals which appeal to as many customers as possible."

BA says that cost has (cough) nothing to do with it. [Daily Mail]

The Times graph, a form of Voronoi Treemap, divides consumer spending into numerous categories and subcategories, allowing you to see what percentage of an average consumer's spending is used for food versus transportation, or on citrus fruit versus tires. Some interesting highlights:

• Electronics took the biggest dip in prices. From March 2007 to March 2008, TVs dropped 18.3% and computers dropped 12%.
• Not surprisingly, the biggest price increases were in fuel: Gas went up 26%, propane and firewood went up 23.4%, and fuel oil (for home heating) went up 48.4%.
• The only non-fuel item that increased by more than 20% was eggs, which went up 29.9%.
• Consumers spend the same amount on "alcohol away from home" (0.5%) as they do on health insurance.
• We spend too much damn money on fast food. The only categories where we spend more money are rent, gas, electricity, new cars, and meals at non-fast food restaurants. Yes, this is because other categories like groceries are subdivided into produce and meat and so on, but 2.4% is still a sizable chunk of spending.

All of Inflation's Little Parts [NYT]
(Photo: =Rah=)

The numbers are still nowhere near where they were before 2006 (PDF), when the new bankruptcy laws caused a massive drop in filings. If the trend continues, however, we can expect the number of bankruptcies this year to bring us back up to pre-2006 numbers, says the American Bankruptcy Institute:

"The sharp spike in consumer bankruptcies reflects the growing financial stress faced by American families, saddled with household debt and mortgage woes," said ABI Executive Director Samuel J. Gerdano. "We expect consumer bankruptcies to top 1 million new cases this year".

"Inevitably there would be an increase in the cost of the products that is passed on to the consumer," Cal Dooley, the group's president and a former Democratic lawmaker, told a House Energy and Commerce subcommittee. "You are further compounding the rapid increase in food prices, the likes of which we haven't seen in recent years."

With the legislative changes, "you would get safe food from places like China, where they sell all manner of crap," Dingell told Dooley.
 
Under the proposal, food producers would have to pay annual registration fees of $2,000 per facility, generating $600 million for FDA food-safety activities, more than doubling the current budget. The FDA would be required to conduct inspections every two years of both domestic and foreign makers of drugs and medical devices.

Anderson also was asked if a combined Delta-Northwest would be profitable in its first year, and he responded, "It will all be a product of fuel prices ... and stay tuned for earnings tomorrow and you'll see what a dramatic effect it's had."

"Report: Delta CEO says airline fares to rise 15-20 %" [BizJournals]
(Photo: Getty)

The move — which came to light as oil prices topped $115 a barrel for the first time — could pressure other carriers to follow suit. But it also runs the risk of driving customers away at a time when they are growing fed up with air travel and coping with financial stresses of their own.

"There has to be a price point where the consumer says, 'OK kids, we're staying home,"' said Terry Trippler of tripplertravel.com.
...
Chicago-based United, the second largest U.S. carrier, said it was technically raising its fuel surcharge, not the base fare customers typically see in ads.

Travelers on some flights, such as Chicago to Minneapolis, who were paying a surcharge of $50 roundtrip will now see that charge increase to $70, spokeswoman Robin Urbanski said.

Fliers in markets where United previously did not apply a surcharge — mostly where the carrier competes head-to-head with low-cost carriers — will now be charged an additional $10 roundtrip. Urbanski said United faces competition from budget carriers like Southwest Airlines Co. on about 80% of its domestic routes.

United last week raised fares by $4 to $30 round-trip, citing record fuel costs.

United raises fuel surcharges for second time in a week [USAToday]
(Photo:tiangotlost)

Okay, so it's not like more expensive gum causes cancer or anything, but we thought you'd like to know why Wrigley's is bragging about their new packaging in the near future. From Brandweek:

When asked if the package shrink would turn consumers off to the product, Paul Chibe, Wrigley's vp North American consumer market-gum, said consumers wouldn't care if they were getting 15 sticks of gum instead of 17 sticks. "To them the value goes up because they're getting a better tasting product in a better package. Price is not the way the consumer is looking at this," he said.
 
Brian Morgan, senior research analyst at Euromonitor, Chicago, concurred: "[Package shrink] is the strategy that has been used in many categories to accomplish a price increase without consumers really noticing or to smooth over the negative reaction."
 
Morgan added that, in the gum category more so than in other categories, consumers would likely respond positively to slimmer packaging: "Packaging innovations like that do make a difference, independent of what that does to the price."
 
Though the new packaging is, in effect, a price increase, Wrigley is hailing it as a packaging breakthrough. "Consumers like the fact that [the envelope] is slim, sleek; it feels very contemporary," said Chibe.

China's Inflation Hits American Price Tags [NYT]
(Photo: DCvision2006)