Google has launched a new ‘Price Index’ tool, which will be based on the cost of goods sold online and could use real-time search data to forecast official figures.
The Google Price Index could prove more accurate and up-to-date than official statistics due to the instant nature of the transactions measured.
Google’s mountain of web shopping data could also be used by the online group for economic forecasting ahead of the publication of official statistics, the Financial Times reported.
Google’s chief economist Hal Varian said that he is working on “predicting the present” by using real-time search data to forecast official figures which often are published at least a month after the period they cover.
For example, the search results for “unemployment insurance” could forecast actual claims for unemployment insurance, and be used as an alternative measure for the unemployment rate.
Varian was speaking at the National Association of Business Economists conference in Denver, Colorado. He added that the GPI was a new concept and that Google had not decided whether to publish it.
He said that since Christmas, the GPI shows a “very clear deflationary trend” for web-traded goods in the US. America’s “core” CPI – the consumer price index official inflation rate which excludes food and energy – rose 0.9% in the year to August.
“It’s a quite different picture if you go to the UK where you see a slight inflationary trend,” Varian was quoted as saying by the newspaper, which he attributed to the weakness of sterling.
He stressed that the GPI is not a straight replacement for the CPI as mortgage and other housing costs only accounted for about 18% of the Google index, compared to about 40% of the official index.
Varian also discussed some of his other work on using Google’s search data for economic forecasting. He said that he is working on “predicting the present” by using real-time search data to forecast official data that are only released with time lags.
For example, searches for “unemployment insurance” may be a good tool to predict actual claims for unemployment insurance, or the unemployment rate.
Varian said that Wall Street analysts are still more accurate, because they can take account of changes such as lay-offs of census workers, but Google search data may help to improve the accuracy of their forecasts.