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Technology

E-Commerce Gets Its Own Consumer Price Index

Adobe launches a new service to track inflation and deflation, in near real time, for certain online purchases.

[Photo: Flickr user frankieleon]

Inflation can be a troublesome phenomenon, even when the rate is low. That 2% raise you got this year? If the inflation rate is 2.1%, as it was in 2012, you just lost money. While inflation has been quite low lately—just 1.4% in January—individual sectors see big swings up and down. The U.S. government's consumer price index (CPI) measures these economic oscillations by surveying what Americans in urban areas pay for staple products like food, clothing, and medical care.

Now Adobe has launched its own measure of inflation, called the "Digital Price Index," based on data from online purchases. So far it covers only electronics and groceries, but Adobe says it plans to add more categories to these monthly price updates. Yes, this is the same Adobe that makes creative software, including Photoshop. In recent years, the company has diversified with an analytics service called "Marketing Cloud," which, among other things, measures online purchasing. Adobe claims that Marketing Cloud tracks 75% of the money spent online with the top 500 retailers.

Among the trends Adobe has noticed:

Prices for electronics are plummeting, down 10.4% overall in the past year, with TVs dropping 19.4% and tablets down 21.1%.

Groceries bought online went up 0.7%, with apples, eggs, meat, and coffee going up the most.

There are some obvious limitations to Adobe's measurements. People don't buy most of their food online, for example, and they buy a lot more than just food and electronics. While Adobe shows food prices going up 0.7%, the government shows a 0.5% decline. So maybe just prices charged by online food sellers are rising.

The government's CPI isn't perfect, though. It covers only urban areas, or about 87% of the total U.S. population. The Great Recession recovery has passed over much of rural America, which has higher unemployment and poverty rates. And CPI data collection is still fairly old fashioned, based on Bureau of Labor Statistics employees calling or visiting retail stores and other businesses each month. Adobe measures the total number of products sold (online, in two categories) on a daily basis.

Adobe is also tracking housing and job searches. Its Digital Housing Index shows a 20.5% spike in searches (not purchase) for the past year, based on 2 billion requests to housing-search sites. The company's Job Seeking Index shows a 10.3% drop in searches, based on 1 billion inquiries on job-search engines and to major employers. (Adobe claims it has data on 20 of the top 30 employers.)

Adobe's indices are possibly an effort to create publicity for its Marketing Cloud product. But they do get some legitimacy from the participation of two economics professors: Pete Klenow of Stanford University (and a former Federal Reserve Bank economist), and Austan Goolsbee from the University of Chicago. Goolsbee was also chairman of the Council of Economic Advisers under Obama.

Adobe's numbers won't replace the government's CPI, but they do provide an interesting complement to that data.

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