CASE CPI might be an early indicator of price changes in the economy

Price measurement is crucial for all actors in the economy, thus the information about the price changes and fluctuations needs to be published as often as possible and at a wide scale. To answer to this need, CASE – Center for Social and Economic Research developed the CASE CPI, a unique indicator which measures price fluctuations in real time. It gathers thousands of data from the Internet and analyses them using innovative methods. Economists Bartosz Radzikowski and Adam Śmietanka have discussed the CASE CPI index during the seminar “CASE CPI - Measuring Consumer Inflation in the Internet”.

Bartosz Radzikowski started the meeting by explaining the concept of Big Data, focusing on the three necessary conditions to its functioning: large size, quick access to information and diversity. The analysis of large amounts of data from the Internet also allows to measure inflation, which is now made possible through CASE CPI.

Radzikowski discussed similar projects implemented abroad, in particular the Billion Prices Project created by researchers from the Massachusetts Institute of Technology. In this project, the results of inflation indicators based on internet prices in Argentina, Colombia, Germany and USA have been compared to the countries’ official price indexes. The comparison showed that due to the use of this innovative price measurement approach, it is possible to estimate the direction and strength of price changes in the economy, although short-term variations may occur.

In the next part of the meeting, Adam Śmietanka outlined the main differences between traditional inflation measurement tools and the CASE CPI index. In order to calculate price dynamics, the CASE CPI exclusively uses data from the Internet: prices are collected from approx. 50 websites, and the list of products actively changes depending on their introduction and withdrawal from the shops. The data is segregated according to the categories and sections adopted by the official GUS (Polish Main Statistics Office) inflation basket. The calculations are carried out automatically, which reduces the costs and time needed to publish the latest data: the entire process takes about 8 hours, enabling the publication of the index on the same day. It is also worth noting that the CASE CPI covers about 85% of the consumer basket, and does not include all the categories of its products.

After the presentation of the CASE CPI, the discussions topics with the audience regarded price sources and the weights used to calculate the index, as well as the latter’s methodology, including the possibility of taking into account the seasonality of purchases. Data regarding the products representing a category have been discussed as well: their number is comparable with the ones of the GUS index (approx. 1400 items).

The CASE CPI inflation index will be published weekly on www.case-research.eu