Google Price Index – a new KPI for mapping inflation trends using web data

Written by Adelina Chelniciuc on October 26, 2010. Posted in Articles, KPI

According with a recent article published by Harding (2010) in the Financial Times citing Google’s Chief Economist, Hal Varian, Google is currently developing and testing a new daily measure of inflation using web data.

Google Price Index (GPI) is envisaged to provide accurate daily statistics of the inflation trends for the products and services transacted via web, and could one day provide an alternative to the Consumer Price Index (CPI), once with the generalization of the online shopping.

Currently, the Consumer Price Index data is collected manually from shops and published monthly with a time lag of several weeks. Alternatively, the new Google Price Index will be able to offer automated daily updated figures, a tremendous improvement in the current status of the inflation intelligence data provision process.

Even, if the Google Price Index is already considered by many as an extraordinary alternative for the Consumer Price Index, as Google Chief Economist emphasizes, GPI is not a direct replacement of the CPI and most probably will not be in the near future. This is mostly due to the differences between the mix in the online shopping basket and the mix in the wider economy one.

As an example, housing accounts count for about 40% of the US CPI, while only for 18% of the GPI at this point.

While promising, the GPI is still in development and Google has not decided yet if it will be released to the public. In the meantime, Google Product Search provides a product research and comparison service and gives a glimpse of the algoritm behind GPI.

For more details on Key Performance Indicators specific to the Online Presence – eCommerce or Sales functional areas visit the KPI examples section on smartkpis.com.

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