Brexit Continues to impact London travel prices

Adobe on August 11 announced the release of its monthly Digital Price Index (DPI) for July, which identifies new trends in online grocery shopping and the continued impact of Brexit on London flight and hotel prices.

Online grocery shopping and in-store pickup were at a record high, while sales of Pokémon branded items grew significantly as well, the Financial reports.

Prices across nearly all other categories the DPI tracks continued to decline. Leveraging big data, the DPI looks at inflation rates by analyzing actual transactions in real-time to account for changes in consumer behaviors, filling a void in traditional, survey-based economic reporting.

For July, the DPI reports substantial growth in online grocery sales with 66 percent Year-over-Year (YoY). The share of groceries purchased online and picked up in-store rose from 18 percent in January 2015 to a record 45 percent in July 2016, whereas 55 percent accounted for in-home deliveries. The rise in online grocery shopping reflects people’s desire for convenience and time savings while delivery cost and availability beyond metropolitan areas contributed to the increase of in-store pickups. Online grocery shopping grew beyond major tech centers, with Oregon, Kentucky, Washington, Colorado and Indiana seeing the highest increase with up to 350 percent YoY. While prices for a majority of online groceries continued to fall (0.8 percent YoY), prices for fruits and vegetables increased – with prices for organic produce surging at twice the rate of non-organic, according to Adobe Report.

In the toys and electronics categories DPI data shows continued price deflation. Sales for Pokémon items, for example, fell 2.9 percent Month-over-Month (MoM) despite sales volume for Pokémon items increasing up to 170 percent YoY. Pokémon toys and electronics saw even more deflation than the overall categories (1.2 percent for toys and 1 percent for electronics). Additionally, Brexit continued to impact London travel prices. London airfares declined significantly at 13.3 percent since the Brexit referendum and are down 12.3 percent YoY. Hotel prices in London dropped 15.2 percent YoY.

“The Federal Reserve is looking for an uptick in inflation, yet we’re seeing further deflation, even for categories with significant increase in demand such as groceries and popular merchandise like Pokémon items,” said Mickey Mericle, vice president, Marketing and Customer Insights at Adobe.

“The lack of inflation in Pokémon-branded items reflected in the DPI, despite their explosion in popularity, is fascinating. Among other factors, it could be that the new buyers are more price sensitive, which hints at some of the difficulties the economy is facing in raising prices, or that they have been able to ramp up production without increasing per unit costs,” said Pete Klenow, professor, Department of Economics at Stanford University.

“If you look at the growth rate of the US economy, it's only moderate – there are a lot of international risks and there is no sign of inflation,” said Austan Goolsbee, professor of economics, The University of Chicago's Booth School of Business and former chairman of the Council of Economic Advisers for President Obama. “While our long-run prospects are excellent, the next 12-18 months are likely to continue to have some significant bumps.”