Tuesday, October 12, 2010
Google is creating a Google Price Index using the vast data they have on prices of goods and services available online. This provides a daily measure of inflation.
Hal Varian, Google's Chief Economist, says that the GPI shows a “very clear deflationary trend” for web-traded goods in the US since last year. In contrast, the GPI rose during the same period a year ago. Meanwhile, the official government "core" consumer price index shows a small 0.9% increase since last year.
When I met with Ben Bernanke last fall, I encouraged the Fed to rely more heavily on the vast amounts of "nanodata" and "nowcasting" available via the web and other sources to get more fine-grained and timely information about the state of the economy. Given the damage that deflation can cause to an economy, I have no doubt he's looking closely at the GPI as he thinks about how to manage monetary policy.