Is Real Inflation Soaring Due to Hidden Quality Cuts?

A recent social media post by developer Pieter Levels sparked a lively discussion by claiming that inflation is far more severe than official figures suggest. He pointed out that while prices may not always rise dramatically, the noticeable decline in product and service quality effectively masks a deeper inflationary pressure.

In his post, Levels described what he views as a hidden hyperinflationary environment. Rather than manifesting solely through price hikes, this inflation reveals itself through a sharp deterioration in the standards of nearly all goods and services available to consumers. He noted an ongoing asset market surge, where rising stock values primarily reflect the rapid erosion of currency purchasing power rather than genuine economic growth.

Levels illustrated his argument with a straightforward example: a product or service purchased two years ago might now cost double the price while delivering less than half the previous quality. This combination results in an effective cost increase of four times the original amount. Measuring this type of inflation proves challenging because quality assessments are inherently subjective and excluded from standard inflation metrics, which focus primarily on price changes.

While I hesitate to label our current situation as hyperinflationary, Levels’ perspective resonates strongly. Just last year, I documented the decline of premium airport lounges offered by American Express and linked it to the surge in high-net-worth individuals holding between $1 million and $10 million in assets. This influx has strained many services traditionally associated with the upper middle class, leading to widespread quality reductions.

The restaurant sector provides a clear example of this trend. On a visit to one of my preferred steakhouses, I was pleased to find the ribeye price unchanged from previous occasions. However, my satisfaction turned to dismay when the dish arrived—it was the tiniest portion I had ever encountered. Staring at the plate, I wondered if it was meant for insects rather than humans. Though I chose not to complain at the time, that experience ensured I have not returned.

My spouse encountered a comparable disappointment at a popular Brazilian all-you-can-eat steakhouse. After trying several meats circulated by servers, she requested her favorite, ribeye. The staff informed her it was still cooking, and after a 45-minute wait, a single round of slices appeared—never to return during the remainder of her two-hour meal. She ended up with just one thin slice overall, undermining the all-you-can-eat promise, though at least the price tag remained steady.

These personal stories, while subjective, highlight a subtler yet more insidious inflation variant: diminishment in portion sizes or overall quality without corresponding price adjustments. The Bureau of Labor Statistics (BLS) does account for shrinkflation, where product quantities shrink even as prices hold steady. Consumers have likely observed this in familiar items like reduced-size candy bars and thinner paper goods in recent years.

However, the BLS overlooks skimpflation, a term describing instances where businesses cut corners on quality—using inferior ingredients or materials—while maintaining the same price point. Chocolate enthusiasts, for instance, have detected flavor shifts as producers substitute costly cocoa with more affordable options. Similar tactics appear in salad dressings, where some brands have diluted oil content to cut expenses.

Declines in service quality might prove even more pronounced than product downgrades. According to the American Customer Satisfaction Index (ACSI) Restaurant and Food Delivery 2025 study, satisfaction scores plummeted across all categories for full-service restaurants compared to 2024.

This average 5% decline in service quality across categories coincided with restaurant prices rising approximately 5% in 2025. Although service degradation differs from direct price inflation, the practical outcome remains identical: consumers receive diminished value for their expenditure. Consequently, the actual inflation experienced in 2025 exceeds official reports.

What drives skimpflation? Businesses find it simpler to obscure quality reductions than to implement overt price increases. Loyal patrons spot menu price jumps instantly, but they may overlook subtler changes, such as the elimination of support staff leading to slower service times.

Skimpflation’s stealthy nature exacerbates the problem, as it evades inclusion in official economic statistics. Consider a company replacing human customer support with AI-driven chatbots: the service fee stays identical, yet resolution times balloon from one minute with a knowledgeable agent to ten frustrating minutes wrestling with automated responses. The listed price holds, but the true time and effort cost escalates dramatically.

Research indicates shrinkflation contributed minimally to overall inflation, but skimpflation’s impact could be more substantial. In certain sectors, I estimate it might add up to 5% annually at its peak. Economy-wide, it could average half that—around 2% to 3% per year—pushing the perceived inflation rate toward 5% to 6%. This falls far short of hyperinflation but surpasses the roughly 3% officially documented.

This phenomenon does not stem from orchestrated deceit but from pragmatic responses by companies to consumer fatigue with relentless price hikes in recent years. Firms recognize the backlash potential of further increases, opting instead for shrinkflation or skimpflation as less conspicuous alternatives.

Does skimpflation signal broad currency devaluation? Not inevitably. The U.S. dollar consistently loses purchasing power over time—a historical certainty. The sole exception in the past century occurred during the Great Depression, an era few would wish to revisit.

The core challenge lies in our acclimation to the long-standing 2% inflation target over recent decades. Deviations above this norm prompt exaggerated reactions, with some interpreting moderate upticks as harbingers of hyperinflation. From 1913 through 2025, average annual U.S. dollar inflation hovered slightly above 3%. Including skimpflation places us modestly higher today, but equating 5%-6% rates to hyperinflation represents an overreach.

Elevated inflation undoubtedly poses risks, eroding consumer confidence and market stability. Nevertheless, distinguishing between heightened inflation and true hyperinflation remains crucial. One can only hope we never witness the latter up close.