Monday, February 14, 2011

Forget Bernanke: MIT Says Online Inflation Jumps in The U.S. in 2011

While Ben Bernanke still says there is little sign of inflation, consumers know what they are paying for necessities. The MIT publishes an inflation index that is based on available and reliably measurable online prices.

Prices have risen sharply in 2011:

Since the beginning of the year, prices have gone up 1.43%. Extrapolated over 12 months, this is equivalent to approximately 12.0%/year.

Details of the methodology can be found here.

"Data collection: our data are collected every day from online retailers using a software that scans the underlying code in public webpages and stores the relevant price information in a database. The resulting dataset contains daily prices on the full array of products sold by these retailers. Our data include information on product descriptions, package sizes, brands, special characteristics (e.g. “organic”), and whether the item is on sale or price control.
Daily Online Price Index Computation: The daily online index is an average of individual price changes across multiple categories and retailers. The index uses a basket of goods that changes over time as products appear and disappear from a retailer’s webpage. It is updated on a daily basis and leveraged to estimate annual and monthly inflation. This index is not designed to forecast official inflation announcements, but to provide real-time information on major inflation trends".

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