It’s being billed as a clash of the corporate titans. Last week McDonald's filed suit against the four biggest US meatpacking companies, alleging that they had conspired to push up the cost of ground beef. But the issue at stake is one that is near and dear to the hearts of ordinary Americans. If inflation is finally slowing, why is everything from eggs and burgers to luxury hotel rooms still so expensive, and who is to blame?
One reason consumers feel so squeezed is what has come to be known as “cheapflation”. There is growing evidence that the prices of inexpensive goods rose faster than more expensive varieties of the same goods during the pandemic. Price differences between brand-name and discount versions significantly narrowed and have stayed that way.
That form of inflation punishes those consumers who are least able to absorb the pain. Shoppers who employ the traditional tactic of trading down to save money reap fewer benefits, says Harvard’s Alberto Cavallo, co-author of a study that used food price data from large store chains to document cheapflation in 10 countries including the US.