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posted on 13 August 2016

July 2016 Adobe Digital Price Index Shows Falling Consumer Goods Prices for Six Consecutive Months. Pokemon Soars.

from Adobe

Digital Price Index (DPI) for July identifies new trends in online grocery shopping and the continued impact of Brexit on London flight and hotel prices. Online grocery shopping and in-store pickup were at a record high, while sales of Pokémon branded items grew significantly as well. Prices across nearly all other categories the DPI tracks continued to decline. which identifies new trends in online grocery shopping and the continued impact of Brexit on London flight and hotel prices. Online grocery shopping and in-store pickup were at a record high, while sales of Pokémon branded items grew significantly as well.

Prices across nearly all other categories the DPI tracks continued to decline. Leveraging big data, the DPI looks at inflation rates by analyzing actual transactions in real-time to account for changes in consumer behaviors, filling a void in traditional, survey-based economic reporting.

For July, the DPI reports substantial growth in online grocery sales with 66 percent Year-over-Year (YoY). The share of groceries purchased online and picked up in-store rose from 18 percent in January 2015 to a record 45 percent in July 2016, whereas 55 percent accounted for in-home deliveries. The rise in online grocery shopping reflects people's desire for convenience and time savings while delivery cost and availability beyond metropolitan areas contributed to the increase of in-store pickups. Online grocery shopping grew beyond major tech centers, with Oregon, Kentucky, Washington, Colorado and Indiana seeing the highest increase with up to 350 percent YoY. While prices for a majority of online groceries continued to fall (0.8 percent YoY), prices for fruits and vegetables increased - with prices for organic produce surging at twice the rate of non-organic. Said Mickey Mericle, vice president, Marketing and Customer Insights at Adobe:

The Federal Reserve is looking for an uptick in inflation, yet we're seeing further deflation, even for categories with significant increase in demand such as groceries and popular merchandise like Pokémon items.

In the toys and electronics categories DPI data shows continued price deflation. Sales for Pokémon items, for example, fell 2.9 percent Month-over-Month (MoM) despite sales volume for Pokémon items increasing up to 170 percent YoY. Pokémon toys and electronics saw even more deflation than the overall categories (1.2 percent for toys and 1 percent for electronics). Additionally, Brexit continued to impact London travel prices. London airfares declined significantly at 13.3 percent since the Brexit referendum and are down 12.3 percent YoY. Hotel prices in London dropped 15.2 percent YoY.

Latest findings include:

  • Groceries: The DPI reports that prices dropped 0.2 percent MoM in July for online groceries. In June, the DPI saw prices decrease 0.1 percent YoY. The CPI saw 1.3 percent deflation during the same period. The DPI covers 30 to 40 percent of online grocery transactions for approximately 195,000 products, and is heavily comprised of groceries purchased online and picked up in-store.
  • Toys: For July, the DPI shows deflation of 1.2 percent MoM for toys. In June 2016, the DPI reported prices dropped 4.9 percent YoY, whereas the CPI showed 8.5 percent deflation. Data contains transactions for approximately 249,000 products.
  • Nonprescription Drugs: Non-prescription drugs prices rose 0.3 percent MoM in July. In June 2016, the DPI saw prices increase 0.3 percent YoY, whereas the CPI reported prices dropped 0.4 percent during the same time period. DPI nonprescription drug data is based on transactions of 16,000 products.
  • Electronics: In July, prices for electronics continued to decrease, with the DPI reporting 0.9 percent deflation MoM. The CPI doesn't break out electronics overall, but reported that prices fell 19.4 percent for TVs and 7.6 percent YoY for computers in June. For the same period, the DPI saw slightly less deflation for TVs, down 17.5 percent, and significantly more deflation for computers, reporting that prices dropped 12.3 percent. DPI data is based on online transactions of one million electronics products.
  • Flights: Domestic airfares decreased 4.8 percent MoM in July and 7.5 percent YoY. All domestic flights saw price decreases in July except Florida. Prices for international airfares dropped 0.2 percent MoM. Data is based on approximately 370,000 flight routes.
  • Hotels: In July, domestic hotel prices saw 2.3 percent inflation MoM. Hotels in Nevada saw the largest price increase. In June, the DPI saw a 0.8 percent increase in domestic hotel prices, whereas the CPI reported 6.0 percent inflation YoY. Data is based on approximately 250,000 hotel properties and includes associated fees.

The complete Adobe Digital Economy Project July report can be found here.

Caveats and Comments Relating To This Index

As this is a new index, it has not been tested over time. The index author claims:

By tracking seven dollars and fifty cents out of every ten dollars spent online with the top 500 U.S. retailers, the DPI is able to analyze billions of digital transactions, while the Bureau of Labor Statistics' Consumer Price Index (CPI) relies on consumer surveys to approximate the actual sales in each product category tracking only 87,000 products.

Inflation rates constantly fluctuate and are heavily dependent on the surge of online shopping. Yet traditional economic reporting fails to capture real-time price and quantity changes as well as actual consumer behavior, and is therefore unable to measure the impact of major market changes as quickly, such as recent bankruptcy announcements of retailers or Intel's softness in the PC market. By contrast, Adobe's (Nasdaq:ADBE) monthly Digital Price Index (DPI) measures prices and quantities of online purchases in real-time. Two economists - Austan Goolsbee, professor of economics at The University of Chicago's Booth School of Business and former chairman of the Council of Economic Advisers for President Obama, and Pete Klenow, professor, department of economics at Stanford University - are collaborating with Adobe on the DPI.

Adobe is the first company to conduct a digital-centric analysis based on real-time access to price-paid data and actual quantities sold. Adobe Digital Index leverages the Fisher Ideal Price method, which uses actual quantities purchased to measure inflation and is recognized by leading economists as the gold standard for the calculation of inflation. No other organization can use the Fisher Ideal Price method today because the calculation requires knowing the quantity of each product purchased in each period. Before Adobe, this has been impossible to measure at a sufficient scale.

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