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'Google Price Index' to track inflation

world Updated: Oct 12, 2010 17:40 IST

Internet major Google is using its extensive database of web shopping information to create a price index to track inflation trends on daily basis.

"Google is using its vast database of web shopping data to construct the 'Google Price Index' – a daily measure of inflation that could one day provide an alternative to official statistics," according to UK daily Financial Times.

Quoting Google's chief economist Hal Varian, the report said that Google Price Index (GPI) was a work in progress and the company had not yet decided whether to publish it.

The report noted that the official Consumer Price Index (CPI) data are collected by hand from shops, and only published monthly with a time lag of several weeks.

"... the GPI is not a direct replacement for the CPI because the mix of goods that are sold on the web is different to the mix in the wider economy," Varian said.

Housing accounts for about 40 per cent of the US CPI, for example, but only 18 per cent of the GPI.

According to Varian, the GPI shows a "very clear deflationary trend" for web-traded goods in the US since Christmas.

The Financial Times said the GPI shows a "pretty good correlation" with the CPI for goods such as cameras and watches that are often sold on the web.