Introducing the Gross Monthly Price Index!
Front running the ABS with GROMPI!
Gross National Product is proud to announce the creation of the “Gross Monthly Price Index” aka the GROMPI!
The GROMPI uses supermarket scanner data to calculate the rise in the price level as experienced by one (1) household (namely the eponymous Gross household), covering over 2400 individual transactions (!) and is measured on a daily basis!
It is currently limited to Melbourne (south-side only), but GNP has ambitions to go on holiday soon and potentially introduce inter-state estimates while shopping in Woolworths in other postcodes.
The GROMPI measures the actual prices paid by the consumer (singular) including sales and discounts - as opposed to measuring listed prices only. It also covers most household goods with the primary exception of fruit and veg which are purchased via a local grocer who doesn't provide digital receipts.
While some may dispute the statistical validity of a price index based solely on 2-4 neighbourhood Woollies, the current inflation surge means that timely, high frequency data on inflation is critically important for policy makers of all stripes.
Beggars can’t be choosers.
What explains the big swings in the GROMPI? Some of the 2021 spikes are driven by large one-off price increases in some individual items. For example “Mission White Strip Corn Chip 500G” were savily bought on sale in December 2020, which resulted in a 33% price increase when the discount ended the next month.
The September 2021 spike was driven by the great Obela Hommus price increase which has an unhealthily large share of the consumption basket. More recently the rise in monthly inflation has been more broad based among a range of households goods.
At this point you might be questioning whether n=1 is truly a large enough sample size for an accurate reading on the price level of the Australian economy. More interesting (I hope for my students sake!) are the lessons that can be drawn from breaking down the micro data.
Micro-GROMPI
Unpacking the unit level data for specific items yields some very interesting results. For example, some prices are extremely sticky. Woolworths Rice Crackers (Seaweed variety) have been priced at a very reasonable 90c per 100g packet no matter how much the RBA has attempted to debase the currency. The same is true of Woolworths Natural Greek Yoghurt.
Other goods have seen their prices rise as inflation has taken off. This seems particularly true of the non-yogurt dairy section which has seen a couple big ticket price rises in the past few months.
Most interestingly is how sales work, with prices often flipping back and forth between two rigid levels. Even when prices are regularly changed between being on sale and their normal rate, the two types of prices stay fixed for long stretches of time. This is a great example of the complexity that underlines the standard NK story about sticky prices.
GNP expects that future updates to the GROMPI will remain sporadic and infrequent - especially when the new Coles opens up slightly closer to home.