September 27, 2023

Rupee Continues Decline on Weakness in Indian Economy

MUMBAI — The Indian rupee began slipping lower in currency markets again on Monday after a two-day respite, as further signs emerged of broad troubles in the Indian economy.

An HSBC survey of purchasing managers at manufacturers across India, released on Monday, showed them to be their gloomiest since March 2009, at the bottom of the global economic downturn. Businesses across the country are bracing for a sharp increase in the regulated price of diesel fuel, as the rupee’s steep drop in August has driven up the Indian cost of crude oil, priced in dollars and almost entirely imported.

The rupee was down another 0.5 percent against the dollar, to 66.08 rupees to the dollar, bringing its decline since early May to almost 20 percent.

Currency traders said that they perceived hints of modest intervention to cushion the decline by the Reserve Bank of India, the country’s central bank, which acts through state-controlled commercial banks when it does intervene so as to camouflage its activity.

The Mumbai stock market showed signs of recovery on Monday, with the benchmark Sensex index rallying 1.43 percent by late afternoon.

Exporters would be expected to benefit from a cheaper rupee. But poor roads, restrictive labor laws and heavy regulation have left India with a manufacturing sector that, although stronger than a decade ago, still struggles to compete with China and other East Asian economies. Indian companies rely heavily on imports for materials and equipment that they cannot buy within India, and the costs of those imports are surging as the rupee falls, limiting gains in Indian competitiveness.

At Challenge Overseas, a manufacturer of trousers on the northern outskirts of Mumbai that exports mainly to the Mideast, the floor and corners of the factory were piled high over the weekend with rolls of gray and black fabric, six feet long and a foot in diameter. But all of the fabric had been imported from China.

“Our owner goes to China every three months,” said Javeri Savia, the general manager of production. “The newer textures and weaves all come from China.”

Like many Indian factories, Challenge also lacks economies of scale. It has just 60 workers to cut, sew and iron its trousers, which sell at wholesale for about 1,000 rupees, or $15, apiece. Similar factories in China often employ several thousand workers. “When you compare with China and all of them, we are peanuts,” Mr. Savia said.

The rupee traded from 52 to 55 to the dollar until early May, when it began a gradual slide that the Indian government tried to arrest through market intervention and other measures, including raising the tax on gold imports. The rupee continued drifting down through the summer, then began falling faster in mid-August when senior government officials made it clear in speeches that they were reluctant to resort to more drastic measures to arrest the rupee’s decline, like sharp increases in interest rates or an imposition of stringent controls on moving large sums of money in and out of the country.

The rupee briefly fell last Wednesday to almost 69 to the dollar, prompting the Reserve Bank of India to supply dollars from its reserves through a local bank to the country’s state-controlled oil refiners and distributors. That industry tends to be India’s biggest buyer of dollars so as to pay for crude oil imports. The rupee slowly crawled back above 66 to the dollar on Thursday and Friday before drifting down a little on Monday.

Paritosh Mathur, the head of fixed-income and currency trading in India for Deutsche Bank, said that volatility in the rupee’s value appeared to be diminishing. He said he saw little chance that the rupee would return to its levels of last spring in the next two or three months, but also little chance that it would test the lows of last Wednesday.

The HSBC index of purchasing managers’ sentiment fell to 48.5 in August, from 50.1 in July. A figure below 50 indicates a contraction in activity. Overall new orders and new export orders declined. Purchasing managers also indicated that they were buying less material for future production and were keeping smaller inventories of finished goods on hand, apparently in anticipation of weak sales.

Leif Eskesen, HSBC’s chief economist for India and Southeast Asia, cut his forecast for Indian economic output to 4 percent for the Indian fiscal year through the end of next March, from a previous forecast of 5.5 percent. He also cut his forecast for the following fiscal year to 5.5 percent, from 6.6 percent.

“The recovery is likely to prove protracted as confidence will only return reluctantly, and the structural reforms will only pass through to growth very slowly,” he said in a research report.

Julian D’Souza, the South Asia director in the Mumbai office of the Conference Board, a group based in New York that issues leading economic indicators, said many manufacturing industries were hobbled by high transport and electricity costs. But auto parts factories tend to have modern equipment and good locations close to ports.

“That’s one area where India can start exporting,” he said.

American and European auto parts makers are already facing heavy competition from China, however, so further exports from India might fan trade tensions.

Neha Thirani Bagri contributed reporting.

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SAP Sees Profitability Rise on New Web Products

SAP, based in Walldorf, southern Germany, is betting on faster growing, web-based software products that are less vulnerable to the economic downturn as there are no upfront costs for program licenses, hardware or installation.

SAP said on Wednesday it expected operating profit this year to be 5.85-5.95 billion euros at constant currencies, up 12-14 percent from 5.21 billion in 2012, and beating an average analyst forecast for a 6 percent rise in a Reuters poll.

However, revenue growth in software and software-related services as a whole would slow to 11-13 percent this year after a 17 percent jump to 13.2 billion euros ($17.5 billion) last year, SAP said.

Software sales generate high-margin, long-term maintenance contracts and are an important gauge of future profit.

Goldman Sachs analyst Mohammed Moawalla said SAP’s outlook implied an improvement of 60-70 basis points in this year’s operating margin to 32.3 percent at constant currencies.

“We believe that 2012-13 are peak years of investments and we expect better operating leverage going forward,” he said in a client note, rating the shares ‘buy’.

SAP shares were up 2.5 percent by 6.00 a.m. ET, partly erasing last week’s drop when it announced worse-than-expected quarterly revenue and operating profit and investors feared it was failing to keep up with arch-rival Oracle.

Traders said SAP shares as well as those of software groups Cap Gemini and Software AG, were also helped by strong IBM results, published late on Tuesday.

Shares in UK peer Sage Group bucked the trend after it said conditions in mainland Europe were still challenging.

SAP last year splashed out $7.7 billion to buy internet-based computing companies Ariba and SuccessFactors. These so-called cloud services, which deliver services via the Internet from remote data centers, will approach revenues of 1 billion euros this year.

Profitability will also be boosted by a new product called Hana, which helps firms analyze large amounts of data quickly.

The product will have revenues of 650-700 million euros this year, up from 392 million euros in 2012, and will steal business away from its main competitor Oracle, the company’s co-chief executive Bill McDermott told reporters.

SAP said it still saw 2015 revenue above 20 billion euros.

($1=0.7526 euro)

(Reporting by Harro ten Wolde; Editing by Dan Lalor and Helen Massy-Beresford)

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In Florida, Facing the Political Implications of Housing Crisis

He offered no new policy prescriptions to help people whose homes are worth less than they owe, and suggested that the best remedy was a stronger economy. But in contrast to earlier statements he and other Republican candidates have made about letting the market correct itself by first hitting bottom, Mr. Romney, a former governor of Massachusetts, instead offered a reassuring if vague message: “People in Florida have seen home values go down,” he said, striking an empathetic tone. “It’s time to turn that around.”

Among those cheering for Mr. Romney was Eric Brandon, 41, a nurse who paid close to half a million dollars for his two-story, four-bedroom home in Palm Coast, Fla., in 2005. Now it is worth only about $130,000, he said. And he felt that Mr. Romney, as a successful businessman, was best poised to confront the problem.

“As long as people have jobs, they will be able to buy houses,” he said “The economy is my issue, and I know Romney is strong on that.”

The Republican presidential campaign is now moving into a state consumed by the housing crisis, perhaps the most enduring legacy of the economic downturn, and the primary battle is the first serious test of how it plays out as a political issue in the race. For Republicans, it is an especially tricky topic, forcing them to balance their free-market instincts against intense demand among homeowners for more to be done.

The candidates have not offered detailed plans of how to respond to the crisis, although Mr. Romney has opposed giving help to homeowners facing the loss of their homes, while Mr. Gingrich has faulted banks for being too quick to foreclose.

But seeing an opening to win over Florida voters on an issue that hits home, Mr. Romney on Monday attacked Newt Gingrich’s ties to the giant mortgage lender Freddie Mac, saying Mr. Gingrich had profited while homeowners suffered.

In interviews across Florida over the last several days, likely Republican primary voters echoed sentiments similar to Mr. Brandon’s, indicating that in a state where one in every 360 housing units is in foreclosure, and where the economy is lagging behind much of the rest of the nation, Mr. Romney’s business background could serve him well because of perceptions that he might have a better sense of how the economy works than his Republican rivals.

But his past statements about allowing market forces to address the problem continue to be a challenge for Mr. Romney. Since arriving in Florida on Sunday, Mr. Romney has been slightly moderating his tone on foreclosures, telling people in Tampa Bay on Monday that “the idea that somehow this is going to cure itself all by itself is unreal” and, “There’s going to have to be a much more concerted effort to work with the lending institutions and help them take action.”

That is a shift in emphasis from an interview in October with the editorial board of the Las Vegas Review-Journal, he said, “Don’t try and stop the foreclosure process,” adding, “let it run its course and hit the bottom.”

Mr. Gingrich has criticized banks as profiting from foreclosures, and has said he would like to repeal policies stemming from the Dodd-Frank financial overhaul, which he says are keeping small banks from making loans. He wants to change the rules to encourage banks to do more short sales of so-called underwater properties.

Some of the anger over the foreclosure crisis is directed at President Obama, who many say has not done enough to address the issue.

In parts of Florida such as Homestead and Florida City, the anger driving some of the Republican vote is visible on the street. For several hours Saturday, Carols Castellano Triana, the owner of a painting business, held a hand-painted sign saying, “Vote Republican” at the busy intersection of Palm Avenue and Dixie Highway in Florida City, an area that has been ravaged by the housing implosion.

Mr. Triana is a renter with aspirations of owning a home. He is an undecided voter, but said he would most likely vote for Mr. Romney.

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Economic Downturn Took a Detour at Capitol Hill

Today, Mr. Pastor, a miner’s son and a former high school teacher, is a member of a not-so-exclusive club: Capitol Hill millionaires. That group has grown in recent years to include nearly half of all members of Congress — 250 in all — and the wealth gap between lawmakers and their constituents appears to be growing quickly, even as Congress debates unemployment benefits, possible cuts in food stamps and a “millionaire’s tax.”

Mr. Pastor buys a Powerball lottery ticket every weekend and says he does not consider himself rich. Indeed, within the halls of Congress, where the median net worth is $913,000 and climbing, he is not. He is a rank-and-file millionaire. But compared with the country at large, where the median net worth is $100,000 and has dropped significantly since 2004, he and most of his fellow lawmakers are true aristocrats.

Largely insulated from the country’s economic downturn since 2008, members of Congress — many of them among the “1 percenters” denounced by Occupy Wall Street protesters — have gotten much richer even as most of the country has become much poorer in the last six years, according to an analysis by The New York Times based on data from the Center for Responsive Politics, a nonprofit research group.

Congress has never been a place for paupers. From plantation owners in the pre-Civil War era to industrialists in the early 1900s to ex-Wall Street financiers and Internet executives today, it has long been populated with the rich, including scions of families like the Guggenheims, Hearsts, Kennedys and Rockefellers.

But rarely has the divide appeared so wide, or the public contrast so stark, between lawmakers and those they represent.

The wealth gap may go largely unnoticed in good times. “But with the American public feeling all this economic pain, people just resent it more,” said Alan J. Ziobrowski, a professor at Georgia State who studied lawmakers’ stock investments.

There is broad debate about just why the wealth gap appears to be growing. For starters, the prohibitive costs of political campaigning may discourage the less affluent from even considering a candidacy. Beyond that, loose ethics controls, shrewd stock picks, profitable land deals, favorable tax laws, inheritances and even marriages to wealthy spouses are all cited as possible explanations for the rising fortunes on Capitol Hill.

What is clear is that members of Congress are getting richer compared not only with the average American worker, but also with other very rich Americans.

While the median net worth of members of Congress jumped 15 percent from 2004 to 2010, the net worth of the richest 10 percent of Americans remained essentially flat. For all Americans, median net worth dropped 8 percent, based on inflation-adjusted data from Moody’s Analytics.

Going back further, the median wealth of House members grew some two and a half times between 1984 and 2009 in inflation-adjusted dollars, while the wealth of the average American family has actually declined slightly in that same time period, according to data cited by The Washington Post in an article published Monday on its Web site.

With millionaire status now the norm, the rarefied air in the Capitol these days is $100 million. That lofty level appears to have been surpassed by at least 10 members, led by Representative Darrell Issa, a California Republican and former auto alarm magnate who is worth somewhere between $195 million and $700 million. (Because federal law requires lawmakers to disclose their assets only in broad dollar ranges, more precise estimates are impossible.)

Their wealth has created occasional political problems for Congress’s richest.

Mr. Issa, for instance, has faced outside scrutiny because of the overlap of his Congressional work and outside interests, including extensive investments with Wall Street firms like Merrill Lynch and Goldman Sachs, as well as land holdings in his San Diego district. In one case, he obtained some $800,000 in federal earmarks for a road-widening project running along his commercial property.

Senator John Kerry, a Massachusetts Democrat who is married to Teresa Heinz Kerry, set off an uproar last year when it was disclosed that he had docked his $7 million, 76-foot yacht not in his home state but in neighboring Rhode Island, which has no sales or use tax on pleasure boats. (Mr. Kerry, worth at least $181 million, voluntarily paid $400,000 in Massachusetts taxes after criticism.)

Emmarie Huetteman and Derek Willis contributed reporting.

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Letters: Letters: Protests and Solutions

In “Know What You’re Protesting” (Economic View, Dec. 4), N. Gregory Mankiw repeats the often-heard complaint that many Occupy protesters — and, in his case, students who walked out of his own course — have “no clear policy prescriptions” for our current economic mess.

But why should students in an introductory economics class, or others without economic training, be the ones to come up with solutions? The purpose of the protests is to keep the problem in the public limelight and, it is hoped, force elected officials to do something about it rather than just kick the can down the road and take political postures.

Solutions exist, but part of the problem is that we are dealing with conflicting economic theories that have been taken to extreme positions by both sides. Until Washington relearns the art of compromise, this mess will continue. Charles Repka

East Windsor, N.J., Dec. 5

To the Editor:

In the column, N. Gregory Mankiw makes this statement: “I don’t view the study of economics as laden with ideology.” He then goes on to say that “the recent financial crisis, economic downturn and meager recovery are vivid reminders that we still have much to learn.”

He seems not to understand that economists aren’t really objective and dispassionate scientists. Economics is merely a set of tools with which we build the kind of society we want to live in. Defining what that means is, of course, an ideological proposition, and thus all economic “theory” is freighted with ideological baggage.

And by treating the current economic crisis as a teachable moment, not as a result of very specific economic policies, the column pooh-poohs anyone who would hold economic ideas accountable for the mess we are in.

Indeed, to judge by the economic policies being promoted by Mitt Romney, whom Mr. Mankiw serves as an adviser, neither Mr. Romney nor Mr. Mankiw has learned anything about what caused our economy to fall off the cliff in 2007. Steven Conn

Yellow Springs, Ohio, Dec. 4

The writer is a history professor at Ohio State University.

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In Downturn, Medicaid Takes Up More of State Budgets, Analysis Finds

That is one of the changes that the lingering economic downturn and the changing American economy have wrought on state finances, according to an analysis of state spending over the last few years released Tuesday by the National Association of State Budget Officers.

The increased spending on Medicaid, the state and federal health program for the poor, was driven by steadily rising medical costs, an infusion of money from the federal stimulus bill and a significant rise in the number of people who became poor enough to qualify for the program as the downturn wore on. The Medicaid program accounted for 21.9 percent of all state expenditures in 2009, 22.3 percent in 2010, and is estimated to account for 23.6 percent in 2011, the report found.

At the same time the share spent on elementary and secondary education has declined, dropping to 20.1 percent in 2011 from 21.5 percent of all state expenditures in 2009.

Education used to make up a bigger share of state spending: when the association first began compiling the report in 1987, elementary and secondary education made up the biggest share of state spending, and higher education the second biggest share. Medicaid surpassed higher education as the second biggest state program in 1990, and in 2003 it became largest state program for the first time. Since then it has vied with schools for the biggest share of state spending, but for the past three years it has been in the lead, with an increasing margin.

The report said that after the recession hit, spending from state funds declined in 2009 and 2010, but federal aid from the stimulus package allowed states to continue to increase overall spending. But a summary warned that the uncertain economy, the likelihood of reduced federal aid, the expected costs from the health care overhaul and continuing pressure to pay for pensions and health care for retired workers means that “states are likely to face austere budgets for at least the next several years and will continue to make difficult spending decisions.”

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Prescriptions: Health Insurers Keep Reporting Robust Profits

UnitedHealth Group, one of the nation’s largest health insurers, reported its second-quarter results on Tuesday, and the good news for the industry looked as if it was likely to continue.

The company announced a double-digit increase in profits and raised its estimates for what it thought it would make for 2011, according to the company’s news release.

Once again, the high profits of the insurers appear to be partly the result of more budget-consciousness by their customers, even as the insurers ask for higher premiums. Many Americans seem to be putting off or forgoing medical care because of the weak economy and the increasing amount they are required to pay in medical bills as their deductibles and co-payments climb, as I wrote in a front-page article in May.

At the time, many health insurers insisted it was too soon to tell whether utilization would eventually rebound to the same levels as before the economic downturn. They argued that they could not count on the demand for medical care staying at relatively low levels.

Even now, UnitedHealth executives say they expect people to start using health services much more the way they did before the recession than they are currently. “We expect pressure on UnitedHealthcare’s gross margin percentage in the second half of 2011 and into 2012, due to increasing rate pressure from government customers and more overall normal utilization trends,” UnitedHealth’s chief executive, Stephen J. Hemsley, told analysts and investors.

Are the insurers right? Do you think once the economy rebounds people will be as quick to agree to a costly medical test or procedure? Will they start going to the doctor more? Or have high deductibles and co-payments changed the way people think about medical care?

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Economix: The Case for Higher Taxes

Today's Economist

Uwe E. Reinhardt is an economics professor at Princeton.

Alan Greenspan, the former chairman of the Federal Reserve, opined on “Meet the Press” last month that to cope with the growing federal deficit the United States should go back to the federal income tax rates of the Clinton years. Such a step would raise tax rates for all American taxpayers.

I was reminded of that remark earlier this week at this year’s Princeton Conference on Health Policy, organized by the Council on Health Care Economics and Policy, housed at Brandeis University’s Heller School for Social Policy and Management.

In a session on “Future Health Care Spending: Political Preferences and Fiscal Realities,” Henry J. Aaron of the Brookings Institution presented this fascinating chart:

Center on Budget and Policy Priorities, based on estimates from Congressional Budget Office

Dr. Aaron was quick to add that he took the chart directly from an analysis by the Center on Budget and Policy Priorities. The chart illustrates how prominent a role the tax cuts of 2001 and 2003 have played in the buildup of deficits and public debt in the United States.

An additional factor, of course, has been the economic downturn (dark blue), along with two wars. Evidently, the stimulus package (the bulk of the “recovery measures”) played a role as well, although probably not nearly as prominent a role as seems to have been widely assumed.

This next chart, taken from a report by the Congressional Budget Office, illustrates more clearly the shock that the deep recession brought on by the financial crisis dealt to American fiscal policy, on top of dubious decisions in that policies.

Congressional Budget Office, Feb. 15, 2011

It can be seen that the “politics of joy” – granting tax cuts without commensurate cuts in government spending – began in earnest in the 1980s. That strategy was briefly interrupted by President Clinton who, as legend has it, was converted by his Treasury secretary, Robert Rubin, to worship the bond market and therefore sought to keep interest rates low by sharply lowering the federal deficit.

In that lapse into fiscal responsibility the Clinton-Rubin duo found support, after 1994, with a Republican Congress and a House of Representatives firmly led by Newt Gingrich.

Sadly for fiscal policy, the politics of joy was revived with the tax cuts of 2001 and 2003. To my mind, the pièce de resistance of that era was the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which bestowed on the nation’s elderly, known to be active voters, a large and generous entitlement that was entirely financed by the deficit. It is projected to add close to $1 trillion to the federal deficit during the current decade alone, and much more in decades beyond.

Starting in 2008, the deep recession saw federal tax revenues plummet as federal outlays soared, driven in part by economic stabilizers such as unemployment insurance. Large deficits are a natural byproduct of deep recessions.

As early as January 2009, two weeks before President Obama took office, the Congressional Budget Office projected in its “Budget and Economic Outlook” a federal deficit of close to $1.2 trillion. As the chart above shows, the federal government now budgets with red ink as far as the eye can see.

The chart demonstrates a chronic affliction of American politics aptly diagnosed by Douglas W. Elmendorf, director of the Congressional Budget Office:

The United States faces a fundamental disconnect between the services that people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services.

Note that Mr. Elmendorf does not accept the usual folklore — that Americans are inherently mature and fiscally responsible and are victimized by a sinister, alien force called government. Rather, he asserts that we, the people, have time and time again favored at the ballot box politicians who promise tax cuts, even though a mature people would have noticed long ago that government spending will never be cut commensurately – mainly because, as voters, we do not countenance major spending cuts, either.

We are now seeing this adolescent posture on fiscal policy playing out once again, as voters angrily react to the recently passed House of Representatives budget plan. And it explains why my friend and fellow economist Eugene Steuerle of the Urban Institute, who served at the Treasury under President Reagan, has aptly and with exasperation named his periodic column on United States fiscal policy: The Government We Deserve.”

Looking at the Congressional Budget Office’s chart, I came away convinced that Mr. Greenspan had it right: given what we, the people, expect the federal government to deliver – including, once again these days, a social insurance program called “federal disaster relief” — the only way to avoid a looming fiscal disaster would be to return to the higher taxes across the board that prevailed during the Clinton administration. (An alternative would be to bite the bullet and adopt a value-added tax, as other nations have done.)

Would this make America a relatively overtaxed nation? Not by international standards, as can be inferred from data regularly published by the Organization for Economic Cooperation and Development.

Organization for Economic Cooperation and Development tax database

There is little evidence of a strong, negative correlation between total taxes as a percentage of G.D.P. and economic growth, as is suggested by the chart below (for a similar perspective, see this).

Organization for Economic Cooperation and Development

This is not to say, of course, that a nation’s rate of economic growth is impervious to the composition of its total tax burden – what fraction of taxation comes from levies on business income compared with that on individual incomes, the level of marginal income-tax rates and so on.

One should think, for example, that judiciously targeted investment tax credits would encourage economic growth, or tax preferences for start-ups.

On the other hand, it has never been clear to me in what way granting tax preferences to gains from trades in already existing assets — like those on long-term gains on already issued stock certificates or gains on speculating on the value of already built real estate — fuels economic growth.

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Food Inflation Kept Hidden in Tinier Bags

As an expected increase in the cost of raw materials looms for late summer, consumers are beginning to encounter shrinking food packages.

With unemployment still high, companies in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most visible at the grocery store, where shoppers are paying the same amount, but getting less.

For Lisa Stauber, stretching her budget to feed her nine children in Houston often requires careful monitoring at the store. Recently, when she cooked her usual three boxes of pasta for a big family dinner, she was surprised by a smaller yield, and she began to suspect something was up.

“Whole wheat pasta had gone from 16 ounces to 13.25 ounces,” she said. “I bought three boxes and it wasn’t enough — that was a little embarrassing. I bought the same amount I always buy, I just didn’t realize it, because who reads the sizes all the time?”

Ms. Stauber, 33, said she began inspecting her other purchases, aisle by aisle. Many canned vegetables dropped to 13 or 14 ounces from 16; boxes of baby wipes went to 72 from 80; and sugar was stacked in 4-pound, not 5-pound, bags, she said.

Five or so years ago, Ms. Stauber bought 16-ounce cans of corn. Then they were 15.5 ounces, then 14.5 ounces, and the size is still dropping. “The first time I’ve ever seen an 11-ounce can of corn at the store was about three weeks ago, and I was just floored,” she said. “It’s sneaky, because they figure people won’t know.”

In every economic downturn in the last few decades, companies have reduced the size of some products, disguising price increases and avoiding comparisons on same-size packages, before and after an increase. Each time, the marketing campaigns are coy; this time, the smaller versions are “greener” (packages good for the environment) or more “portable” (little carry bags for the takeout lifestyle) or “healthier” (fewer calories).

Where companies cannot change sizes — as in clothing or appliances — they have warned that prices will be going up, as the costs of cotton, energy, grain and other raw materials are rising.

“Consumers are generally more sensitive to changes in prices than to changes in quantity,” John T. Gourville, a marketing professor at Harvard Business School, said. “And companies try to do it in such a way that you don’t notice, maybe keeping the height and width the same, but changing the depth so the silhouette of the package on the shelf looks the same. Or sometimes they add more air to the chips bag or a scoop in the bottom of the peanut butter jar so it looks the same size.”

Thomas J. Alexander, a finance professor at Northwood University, said that businesses had little choice these days when faced with increases in the costs of their raw goods. “Companies only have pricing power when wages are also increasing, and we’re not seeing that right now because of the high unemployment,” he said. 

Most companies reduce products quietly, hoping consumers are not reading labels too closely.

But the downsizing keeps occurring. A can of Chicken of the Sea albacore tuna is now packed at 5 ounces, instead of the 6-ounce version still on some shelves, and in some cases, the 5-ounce can costs more than the larger one. Bags of Doritos, Tostitos and Fritos now hold 20 percent fewer chips than in 2009, though a spokesman said those extra chips were just a “limited time” offer.

Trying to keep customers from feeling cheated, some companies are introducing new containers that, they say, have terrific advantages — and just happen to contain less product.

Kraft is introducing “Fresh Stacks” packages for its Nabisco Premium saltines and Honey Maid graham crackers. Each has about 15 percent fewer crackers than the standard boxes, but the price has not changed. Kraft says that because the Fresh Stacks include more sleeves of crackers, they are more portable and “the packaging format offers the benefit of added freshness,” said Basil T. Maglaris, a Kraft spokesman, in an e-mail.

And Procter Gamble is expanding its “Future Friendly” products, which it promotes as using at least 15 percent less energy, water or packaging than the standard ones.

“They are more environmentally friendly, that’s true — but they’re also smaller,” said Paula Rosenblum, managing partner for retail systems research at, an online specialist network. “They announce it as great new packaging, and in fact what it is is smaller packaging, smaller amounts of the product,” she said.

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