Leaviss: The Billion Prices Project - a daily estimate of inflation

HOW WILL VAT HIKE AFFECT INFLATION?

Jim Leaviss, head of retail fixed interest at M&G, looks at how the VAT hike will filter into inflation.

I came across this daily CPI estimate in a Bloomberg article last week. Called the Billion Prices Project (BPP), it's run by two MIT academics and aggregates 5m online prices on a daily basis. Whilst the basket of goods is always going to be somewhat different to that used in the official data, the trends that the BPP model picks up can give a real-time guide to the direction of inflation. For example in 2008, following the collapse of Lehman, the BPP started showing price falls within a week - the official US CPI data didn't reflect that prices were falling for another two months. ...