Bank to publish inflation data from internet
By Robin Harding in Washington
Published: May 4 2011 23:22 | Last updated: May 4 2011 23:22
Inflation data harvested from the internet will take its first big step into financial markets on Thursday after a bank agreed to publish real-time price indices developed at the Massachusetts Institute of Technology.
State Street will initially publish inflation data for the US, UK, Germany, France and Brazil in a partnership with PriceStats, a spin-off from MIT.
The new indices will allow investors to track inflation almost as it happens and may help them to forecast official inflation data, which often move markets, with greater accuracy.
Unlike official inflation numbers, which come out monthly with a lag of weeks, the new indices will come out every day with a lag of just three days. A further advantage is that the methodology used for different countries is the same whereas official agencies use different techniques.
Roberto Rigobon, an economics professor who set up MIT’s Billion Prices Project’ with colleague Alberto Cavallo, told the Financial Times that a long-term goal is to “change the way that data is collected around the world”.
The deal marks another step in the rapid development of real-time information on the economy, using electronic collection of data to produce statistics faster and at lower cost than traditional surveys.
The MIT data is collected by automatically scanning retailer websites. By contrast, traditional inflation data is collected by researchers who visit thousands of shops to record prices.
There are several other projects to collect economic information electronically or publish it in real time. For example, the payroll processor ADP publishes a monthly jobs index based on its internal data, which on Wednesday reported a 179,000 increase in private payrolls from March to April.
Ceridian, another payment processor, publishes an industrial activity index based on credit card payments by truckers to buy fuel. Real estate websites have produced price indices and employment sites have published data on job openings.
Google has developed its own Google Price Index based on similar scouring of internet retailers but has not yet published its results.
Mr Rigobon said the PriceStats inflation indices are similar to official data in many countries. There are still differences, however, because some goods are not bought online so internet data is unlikely to displace official statistics soon.
”We’re collecting information on almost every sector except for the services sector,” said Mr Rigobon.
The PriceStats index for the US rose 1.91 per cent from January to March compared with a 1.96 per cent rise in the official consumer price index published by the Bureau of Labour Statistics.
But the PriceStats index moved earlier – rising 0.81 per cent in January, before the official CPI caught up in March.
“Our prices seem to move earlier than the official statistics,” Mr Rigobon said. State Street said using this to forecast official data would be an early priority.
Mr Rigobon said a likely reason was that online shoppers tend to have higher incomes and are less price sensitive when they are buying. That may mean that online retailers can raise prices earlier than physical shops when they suffer an increase in their own costs.
Neither PriceStats nor State Street would comment on the financial terms of the partnership or whether State Street has invested in PriceStats.