Measuring inflation: What price is right?

Checking prices online could produce more accurate statistics

BRITISH consumers increasingly live in an online world. Price-comparison websites abound and flash sales are common. This dynamic market makes the traditional method of collecting price data, which involves sending researchers out to shops and markets once a month, seem archaic. On June 8th the Office for National Statistics (ONS) published the results of a year-long trial in which prices were collected every day from three large supermarkets’ websites, to explore the potential benefits of “web scraping” price data. Using this method the ONS collected over 1.5m price quotes from 35 grocery product groups, covering 2,886 items.

The web-scraped inflation index dropped by significantly more than the index based on traditionally collected price data (see chart). But the new method is a work in progress. After cleaning the data to account for product-description changes, replacements and missing items, the initial basket of 2,886 items was reduced by almost half. With just three retailers, compared with the traditional measure’s wide coverage (which includes outdoor markets and convenience stores, as well as supermarkets), differences were inevitable. Still, the ONS is confident that it can refine the methodology to produce a robust, high-frequency index, which covers a larger basket of goods at a reduced cost.

(Economist.com)