Utilizing their vast collection of shopping data, Google is developing an alternative means of tracking inflation known as the Google Price Index (GPI). The effort is being headed by Google’s chief economist Hal Varian, and has the grand goal of providing more timely price index data.
The well known Consumer Price Index (CPI) provides a monthly measure of inflation based on pricing data gathered by hand from brick-and-mortar retailers along with other sources. The CPI data is published monthly and can be delayed by several weeks. Google’s method of utilizing online sources of pricing data offers a more real time reflection of pricing indexes.
As reported in the Financial Times, the Google system will not replace CPI since it represents a different sector of goods and services. Housing accounts for 40 percent of the CPI in the United States but only 18% of the GPI. Consumer goods are in line with the CPI while goods like cars, which are bought less frequently online differ.
Google’s Larry Page once said “Basically, our goal is to organize the world’s information and to make it universally accessible and useful”.
With products like Google Merchant Center and Google Checkout there is little doubt Google has a large collection of online pricing data. Using this data to create a price index which might aid economists in creating more accurate price indexes certainly falls in the “useful” category in my book.