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Google Price Index: Google To Track Its Own Inflation Data

October 13, 2010 by Samuel Chong

Berkeley, CA - According to Hal Varian, Google's chief economist, Google will use its vast database of web shopping data to construct the ‘Google Price Index’(GPI) – a daily measure of inflation that could one day provide an alternative to official statistics.

"This will may be an alternative to the official Consumer Price Index", says Sandra Peters, an economist. The official Consumer Price Index data are collected by hand from shops, and only published monthly with a time lag of several weeks.

The Google Price Index has shown a “very clear deflationary trend” for web-traded goods in the US since Christmas, according to Mr. Varian. However, the GPI is a work in progress and Google had not yet decided whether to publish it.

“It’s a quite different picture if you go to the UK where you see a slight inflationary trend,” Mr Varian said. He attributed the rise in the UK GPI to the weakness of sterling.

The "clear deflationary trend" is in sharp contrast to some beliefs that the US government low interest rates policies will cause inflation.  Some people, including Jim Rogers, have long proclaimed that we are in an inflationary period.

Mr. Varian emphasized 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.

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