What is Google's Price Index?

Google's beta site for product search.

TEXT OF STORY

Kai Ryssdal: Inflation at the wholesale level rose just a tad last month, four-tenths of one percent. We'll get the Consumer Price Index tomorrow, a statistic you are probably familiar with even if only by name. It's a government measure of inflation. The Labor Department looks at a typical set of purchases by the average person. 'Course, none of us are really average, are we? So Google is looking to create its own price index.

From Chicago Public Radio, Tony Arnold reports.


Tony Arnold: The Consumer Price Index measures how the price of any product -- from soup to houses -- changes over time. Google would analyze the same prices, but only for products online.

Francisco Torralba is an analyst with Morningstar. He says the Google Price Index would give retailers a whole new set of data to work with.

Francisco Torralba: You would be able to compare prices very quickly and very effectively.

Torralba says it would allow retailers to see how their competitors are pricing specific products, and they'll be able to do it much faster. The Consumer Price Index comes out monthly. Google's would be updated daily. Nobody at Google would formally comment on its price index. A spokesperson would only say the project is in development.

Torralba says he can see a few disadvantages to the Google Price Index, though. One is that it represents only online sales, and two is transparency.

Torralba: We know how the government's CPI is constructed. It has its problems, it's not a perfect measure of prices, but we know how it's constructed. The GPI, we have no idea.

The federal government's Bureau of Labor Statistics -- which puts out the Consumer Price Index -- had no comment on Google intruding on its turf. An economist there says it does use online prices in coming up with inflation rates.

I'm Tony Arnold for Marketplace.

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