I'm not sure how this fares in reguard to speed, but it only uses 2-5 scalars, tries to avoid generating intermidiate lists, and modifies their arguments inplace. 
sub shrink {
    my $dbit = 0;
    for (my $sbit = 0; $sbit < length($_[0]) * 8; $sbit++) {
        next if $sbit % 8 == 7;
        vec($_[0], $dbit++, 1) = vec($_[0], $sbit, 1);
    }
    my $dlen = length($_[0]) * 7 / 8;
    $dlen++ unless $dlen == int($dlen);
    $dlen = int($dlen);
    my $extra = length($_[0]) - $dlen;
    if ($extra > 0) {
        substr($_[0], $dlen, $extra, '');
    }
    for (my $pbit = $dbit; $pbit < $dlen * 8; $pbit++) {
        vec($_[0], $pbit, 1) = 0;
    }
}

sub grow {
    my $sbit = int(length($_[0]) * 8 / 7) * 7 - 1;
    for (my $dbit = int(length($_[0]) * 8 / 7) * 8 - 1; $dbit >= 0; $d
+bit--) {
        vec($_[0], $dbit, 1) = $dbit % 8 == 7 ? 0 : vec($_[0], $sbit--
+, 1);
    }
}

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I have the nagging fealing there is a better way to implement ceil (near the middle of shrink).
If padding the compressed string with 0 bits is not needed then the second for loop of shrink can be omitted to save (on average) 4 bits of time.

In reply to Re^3: Efficient 7bit compression by Ven'Tatsu
in thread Efficient 7bit compression by Limbic~Region

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