Education

What is inflation? Glossary of terms, definitions, and meanings

Education

What is inflation? Glossary of terms, definitions, and meanings


Inflation is a hot topic of conversation at the moment and for good reason. Inflationary pressure around the world is on the rise, impacting the prices of products, consumer purchasing power, and the cost of living.

We’ve compiled this glossary to help break down the various economic terms, acronyms, and jargon that are now popping up in news stories, social posts, and table top talk. We’ll be updating this word bank as the global conversation evolves.


What is inflation?

Inflation is the increase in the sustained level of prices of goods and services in the economy. Generally, when the total amount of money in an economy increases too rapidly, the value of the market’s currency likely decreases—meaning inflation lowers consumer purchasing power.

What is hyperinflation?

Hyperinflation is the rapid rise in prices of goods and services in an unpredictable manner. It’s considered hyperinflation when prices sharply increase more than 50% a month. For consumers this means that a box of cookies could cost one amount in the morning and be higher in price by the afternoon. 

What is stagflation?

Stagflation is when a market’s economic growth is slow during a high inflation climate. High unemployment numbers and low wage growth usually contribute to an economy in stagflation. For businesses, enduring pressures like high prices of raw materials and commodities can challenge productivity, economic, and business growth.

What is shrinkflation?

Shrinkflation is associated with product downsizing. It occurs usually during a time of heightened inflation, when a company sells less product for the same price. For consumers, this shows up on shelves as slightly reduced sizes of products without a discount.

What is skimpflation?

Skimpflation speaks of situations where the quality of a product or service changes while price remains the same. Skimpflation during times of heightening inflation may be a result of a labor shortage and rising business costs. For consumers, this can show up in various forms. Reduction of services as seen in airlines that no longer offer free meals or hotels that have eliminated daily housekeeping could be seen as skimpflation examples.

What is a supply chain?

A supply chain is a full operational network that fuels the entire process of making and selling goods. It includes everything, starting with the raw supply materials, the manufacturing process, and the distribution of products, and the sale of goods.

What is a value chain?

Value chain speaks to a set of strategic business activities that focuses on creating added desirability or relevance to a product or service to enhance customer value.

Is inflation always bad?

When inflation is mild (where prices rise 3% or less a year), it can actually trigger consumer spending, which has a healthy effect on the economy. In an environment where consumers expect inflation, the tendency would be to spend now rather than later (because prices would be higher in the future). Consumer spending drives economic growth.


Acronyms

What is CPI?

Consumer Price Index (CPI). CPI measures price changes seen by the average urban consumer based on a fixed basket of goods and services representing what people buy in their everyday lives—from gasoline to groceries to cellphone fees and doctor visits. The CPI is the most widely reported measure of price changes across countries. 

What is PCE?

Within the United States, there are two primary measures of the consumer prices. One is the Consumer Price Index (CPI), and the other is the Personal Consumption Expenditure (PCE). PCE measures goods and services bought by all U.S. households and nonprofits and is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior. The PCE is issued by the Bureau of Economic Analysis.

What is HICP?

Within Euro markets, the Harmonised Index of Consumer Prices (HICP) is used to measure consumer price inflation. That means the change over time in the prices of consumer goods and services purchased by Euro area households.

What is PPI?

While CPI measures price changes from the consumer’s perspective, markets like China also leans into its Producer Price Index (PPI), which reflects the prices factories charge wholesalers for their products.


Help us build this glossary. Is there an inflation-related word that you’ve heard that you’d like us to define? Is there a term that you’d like us to add to this glossary? If so, feel free to submit here. We’ll be updating this page on a regular basis.