naked capitalism

Hhm, is there any use of data that won’t in the end interest Google? The idea of using price information on websites as a way of developing an inflation index is clever, but I wonder how they will deal with the issues that bedevil statisticians, like discounting (I can tell a gym in my area is a tad desperate, for instance, by its unusual generosity with one month passes to possible new members. That suggests a prospective member can bargain for goodies, like extra free months, but you’d never get that from its published membership rates).

From the Financial Times:

Google is using its vast database of web shopping data to construct the ‘Google Price Index’ – a daily measure of inflation that could one day provide an alternative to official statistics.

The work by Google’s chief economist, Hal Varian, highlights how economic data can be gathered far more rapidly using online sources. The official Consumer Price Index data are collected by hand from shops, and only published monthly with a time lag of several weeks….

While the Federal Reserve is unlikely to panic just yet, Mr Varian said that the GPI shows a “very clear deflationary trend” for web-traded goods in the US since Christmas. Although the data are not seasonally adjusted, Mr Varian said that prices rose during the same period a year ago. The ‘core’ CPI in the US, which excludes food and energy, rose 0.9 per cent on a year ago in August….

Mr Varian emphasised that the GPI is not a direct replacement for the CPI because the mix of goods that are sold on the web is different to the mix in the wider economy. Housing accounts for about 40 per cent of the US CPI, for example, but only 18 per cent of the GPI.

The GPI shows a “pretty good correlation” with the CPI for goods such as cameras and watches that are often sold on the web, but less so for others, such as car parts, that are infrequently traded online.