What's Missing From Google's Proposed Inflation Index
The GPI is the work of Google's chief economist, Hal Varian, and it shows a "very clear deflationary trend" for Web-traded goods in the U.S. since Christmas, the FT reports. This compares to the official consumer price index's "core" rate, which excludes food and energy and rose 0.9% year-over-year in August.
Well, speed is definitely a bonus. Official CPI data are collected by hand from shops and businesses and published only monthly with a time lag of several weeks. But Google can gather its data much faster and publish daily.
However, the mix of goods now sold over the Internet is very different than those sold in the wider economy. Housing accounts for about 40% of the U.S. CPI, for example, but only 18% of the GPI. So while the GPI indeed shows a "pretty good correlation" with the CPI for goods commonly sold on the Web, it's less accurate for everything else.