Real-Time Inflation Tracking

[Munger]

Pretty interesting. Verdict: no inflation.

The Billion Prices Project is an academic initiative that collects prices from hundreds of online retailers around the world on a daily basis to conduct economic research. We currently monitor daily price fluctuations of ~5 million items sold by ~300 online retailers in more than 70 countries.

This webpage showcases examples of average inflation indexes that we created to illustrate the type of statistical work that can be done with this data. Our team is currently working on developing econometric models that leverage the data to forecast future trends and conduct economic research.

http://bpp.mit.edu/

[GRG55]

Re: Real-Time Inflation Tracking

Pretty interesting. Verdict: no inflation.



http://bpp.mit.edu/

Nice data-driven way to add to the overall picture!

But I don't think one can come to a firm "no inflation" conclusion from this. Among other things, tracking online retailer prices, even for so many items, leaves out a hell of a lot of things that ordinary people have to pay for. Stuff like health insurance costs, and other services not normally purchased through online retailers, are probably not included in this sample, large as it is. How many people buy big ticket durables, such as cars or large appliances, from online retailers? When was the last time any of us went shopping for college tuition online?

[Sharky]

Re: Real-Time Inflation Tracking

Since the prices being tracked are for things you can buy from online retailers, what this data leads me to believe is that manufacturers and possibly retailers as well, are having their margins squeezed; input prices (raw materials / commodities) are up significantly, but sales prices are flat.

I wouldn't be surprised to see a new round of company failures and M&A over the next 12 to 18 months as manufacturers finish going through their cash reserves. Is the Fed intentionally trying to drive what little manufacturing is left in the US overseas? I heard Dell is moving to China, for example. Who's next? For that matter, who's left?

On top of the margin squeeze, we also have the weakening USD, which has the same net effect as an across-the-board tariff on imports. The modern version of Smoot-Hawley? And we know how that ended.

[shiny!]

Re: Real-Time Inflation Tracking

If it only measures prices and not how much you're getting for the price, it probably underestimates the real inflation by quite a bit. We're all seeing packages selling for the same price but with less in them than before.

It's a good effort but not accurate, IMO.

[flintlock]

Re: Real-Time Inflation Tracking

Agreed for all the reasons given above.

I have noticed prices are still dropping on electronics. A common item purchased online. TVs seem to be in one of their big price drop phases . I'm seeing 42" TVs for $400 now.

Food, energy, education, health care. Most people spend more on any one of these than they do online. So hard to draw any conclusions from the study. At least if you are interested in determining real inflation, not just the govt statistic version. And isn't 1.75% inflation still inflation?

[touchring]

Re: Real-Time Inflation Tracking

Agreed for all the reasons given above.

I have noticed prices are still dropping on electronics. A common item purchased online. TVs seem to be in one of their big price drop phases . I'm seeing 42" TVs for $400 now.

Food, energy, education, health care. Most people spend more on any one of these than they do online. So hard to draw any conclusions from the study. At least if you are interested in determining real inflation, not just the govt statistic version. And isn't 1.75% inflation still inflation?

The price has dropped, but you're not going to spend less by that amount. 10 years ago, a good 29 inch CRT TV may last 12-15 years with poorer image quality towards the end. Today, a 42inch LCD blows out in 3-4 years. I still own a 12 year old made in Korea Samsung VCD player.

I just bought a notebook and guess what, a midrange one cost me $1900, a made in Japan. The same notebook of similar quality would cost me the same 7-8 years ago.

[thriftyandboringinohio]

Re: Real-Time Inflation Tracking

Yes, the real-time picture of retail hard-goods is fascniiating and useful.
But energy, food and services matter much to real people.

As EJ has pointed out, the things that cannot come from China, like tuition and medical treatment behave quite differently, with those prices rising as retail goods fall.

[jiimbergin]

Re: Real-Time Inflation Tracking

http://www.cnbc.com/id/40135092

Secret Walmart Survey Shows Inflation Already Here

There might not have been a second round of quantitative easing, if Federal Reserve Chairman Ben Bernanke shopped at Walmart.

A new pricing survey of products sold at the world's largest retailershowed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed's mandate.
The inaugural price survey shows a small, but meaningful increase on an 86-item grocery basket, said Patrick McKeever, MKM Partners analyst, in a note. Most of the items McKeever chose to track were every day items like food and detergent and made by national brands.
On November 3, the Fed announced its much-anticipated purchase of $600 billion in Treasury securities. An effort to keep market rates low since the central bank's benchmark rate is already at zero. The Federal Open Market Committee's statement said, "Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate." But since that statement, interest rates have actually gone up, backfiring on a Fed chief who wants his quantitative easing to spark inflation of 2 percent annually. A moderate amount of inflation would be considered good for the economy. The problem is that inflation is already running well above a healthy level, investors said, Bernanke is just not looking in the right place, like a Walmart.

I suspect that when the Chairman thinks about reflation he has a difficult time seeing any other asset besides real estate, said Jim Iuorio of TJM Institutional Services. Somehow the Fed thinks that if its not wage driven inflation that it is somehow unimportant. It's not unimportant to people who see everything they own (homes) going down in value and everything they need (food and energy) going up in price.Next week, the government is expected to say its official measure of inflation, the Consumer Price Index, increased at a 0.3 percent annual rate, according to economists consensus estimate. Core CPI, excluding food and energy, is expected to climb just 0.1 percent.

The biggest dollar increase in McKeevers survey was on a jug of Tide Original laundry detergent, manufactured by Procter & Gamble [PG 64.33 -0.03 (-0.05%) ]. Both P&G and Kimberly-Clark [KMB 62.02 -0.13 (-0.21%) ] gave tentative forecasts for this quarter on concern they wont be able to pass rising input costs on to the consumer. They may have no choice.

Prices of cotton, silver wheat, soybeans, corn are all up big this year. Cotton futures are up the most, climbing 90 percent so far in 2010. The price of silver is up 63 percent.

The purpose of McKeevers note was actually not to be a commentary on Fed policy. The retail analyst is just trying to find out if Walmart is subtlety-increasing prices without decreasing foot traffic. A process he would deem bullish the stock.
If the pricing dynamic is shifting, as our survey suggests, this would lend some upside bias to our sales and earnings expectations, said McKeever.

Bernanke keeping interest rates artificially low is sparking outrage among central bank chiefs around the world, who feel the U.S. is essentially exporting inflation.
China's CPI surged 4.4% in October, according to figures released Thursday, higher than economists expected and up from a 3.6 percent annual reading in the month prior.

Said EmergingMoney.com Founder Tim Seymour, Bernanke definitely must not shop at WalMart in China.

[doom&gloom]

Re: Real-Time Inflation Tracking

aw what do they know, if Bennie and the Feds say there is no inflation, who are WE to question them?

[jk]

Re: Real-Time Inflation Tracking

Secret Walmart Survey Shows Inflation Already Here

shhhhh...... it's a secret.