Google’s chief economist, Hal Varian, announced last week that the search engine giant is planning to launch the ‘Google Price Index (GPI)’, a daily measure of inflation that they say could one day provide an alternative to official statistics.

The index will highlight how economic information can be gathered in a faster way using online sources. The current format, the Consumer Price Index, collects data by hand from retailers and only publishes the results on a monthly basis with a time lag of a number of weeks.

Mr Varian, speaking at the National Association of Business Economists conference in Denver, Colorado, stated that the GPI was something of a work in progress and would not confirm or deny that Google would publish the results.

Varian said that the GPI shows a “very clear deflationary trend” for all web-traded goods in the United States since December 2009. Despite the fact the data is not seasonally adjusted, Varian added that prices increased for the same time period 12 months earlier.

The UK had shown a slight inflationary trend for the same period, which Varian attributed to the weakness of the pound.

Google insist that the GPI is not a direct replacement for the CPI mainly because the mix of goods sold on the web does not fully represent the wider economy.

Although admitting that financial analysts are still more accurate in the current analysis, Varian said he believed Google search data can help to improve the accuracy of their forecasts.

It remains to be seen if the index will ever be launched but it is something which will capture people’s interest for the foreseeable future.

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com