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posted on 11 May 2017

April 2017 Adobe Digital Price Index Marked the End of a Four-Month streak of Rising Prices

from Adobe

In April, Adobe's Digital Price Index (DPI) took a close look at economic shifts in the U.K. following the Brexit vote and March's triggering of Article 50, which sets the Brexit process in motion. According to the numbers, U.K. consumers are feeling a financial impact—they're paying higher prices for necessities, and they're tightening spending.

Adobe Digital Economy Project -- April 2017 from Adobe

Grocery prices across the U.K. have been rising since September and are now up 1.0 percent year-over-year (YoY), in contrast to U.S. food prices, which remain down from last year.

And, while U.K. spending in the first few months after the Brexit vote followed normal trends, consumer uncertainty is beginning to show. We tracked a 4.9 percent YoY decline in sales of computers and televisions in the first quarter of 2017 —a measure of consumer confidence—compared with 13.9 percent YoY growth in the U.S.

"U.K. consumers are now in the tough position of facing higher prices for food, which is up 1.0 percent year-over-year," said Sid Kulkarni, data science analyst for the DPI. "And other reports suggest that wages are stagnating in Britain, which makes increases in food prices doubly hard on Britons' wallets. They seem to be reacting to this pinch in their pocketbooks, as evidenced by the decline in computer and TV sales in our data."

Travel, however, shows strong growth. Despite an initial dip in the weeks after the Brexit vote, revenue for domestic and international flight bookings in the U.K. between January and March 2017 is up 14.0 percent. The volume of reservations doubled in comparison to January 2015.

Adobe is collaborating with the U.K. Office for National Statistics (ONS) as part of its effort to develop a global methodology for the DPI. According to the ONS, between the last quarter of 2016 and the first quarter of 2017, U.K. retailers saw a -1.4 percent drop in sales. "This is the first time we've seen a quarterly decline since 2013, and it seems to be a consequence of price increases across a whole range of sectors," said Kate Davies, senior statistician at the ONS.

April was the DPI's eighth month tracking the U.K. economy. Our analysis in the U.K. is based on aggregated, anonymous data from 1 billion website visits and 100,000 products sold online. $6 of every $10 spent with the top 100 European retailers online goes through the Adobe Experience Cloud.

U.S. Sees a Month of Deflation After Four Months of Rising Prices

According to the DPI's U.S. data, April marked the end of a four-month streak of rising prices. Inflation was down across DPI categories (-0.1 percent in the all-items index, -0.2 percent in the all-items less groceries index). But even with four months of inflation right behind us, U.S. prices remain down YoY for both indexes (-0.6 percent in the all-items index, -1.3 percent in the all-items less groceries index).

This month's deflation was driven mainly by drops in flight prices (-0.5 percent MoM), and among durable-goods categories including appliances (-0.5 percent MoM), computers (-0.7 percent MoM), toys (-1.5 percent MoM) and tablets (-2.1 percent MoM).

U.S. grocery inflation in April was near zero, but slightly positive, which means grocery prices may still be on track to hit YoY inflation in coming months—prices are currently down 0.2 percent YoY. The highest grocery increases in April were in meats and poultry (0.9 percent), rice and pastas (0.5 percent) and breakfast foods (0.3 percent). The rises were offset by declines in dairy including milk (-0.6 percent), other dairy (-0.9 percent) and eggs (-1.9 percent).

April was the DPI's third month tracking how the U.S. economy differs state-by-state—ours is the first-ever comprehensive data on the country's local inflation rates. This month, about half of the country experienced inflation, while half saw deflation—showing again that Americans experience inflation differently, depending on where they live. We saw the biggest state-by-state disparities in prices for flights, hotels and groceries.

Caveats and Comments Relating To This Index

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

The data behind the Adobe DPI is sourced through Adobe Experience Cloud. It represents 80 percent of all online transactions from the top 100 U.S. retailers, including aggregated, anonymous data from 15 billion website visits and 2.2 million products sold online. Unlike the Consumer Price Index (CPI), the DPI can track real-time prices and quantities of items sold. The data also enable unprecedented views of the U.S. economy, including state-by-state analysis. Our U.K. data offers a window into how economic trends differ internationally.

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