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Adobe Digital Economy Project – November 2016

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The Adobe Digital Economy Project finds that overall U.S. results signal a slight uptick in inflation, a strong labor market, and a stable housing market. Holiday season discounts resulted in steep deflation in November for categories such as televisions (-12.9% Month over Month), appliances (-6.7%), tablets (-6.2%), toys (-4.5%) and domestic hotels (-4.5%) . International flights saw a 1.9% MoM increase in November while flights to Europe saw 5.1% deflation driven by double-digit MoM deflation for flights to Madrid’s MAD (-10.3%) and Rome’s FCO (-11.6%). Groceries, a category that represents the largest share of consumer spending in the DPI showed 0.5% deflation MoM. In the U.K., the DPI shows the first MoM increase in the price index for computers (1.0%), an increase in the price of groceries (0.5%), and a slowing of deflation for TVs (-0.7%), suggesting that Brexit impacts on durable imports coupled with a strong U.S. dollar could be pushing prices upward.

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Adobe Digital Economy Project – November 2016

  1. 1. © 2016 Adobe Systems Incorporated. All Rights Reserved. ADOBE DIGITAL ECONOMY PROJECT NOVEMBER 2016 UPDATE
  2. 2. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Main takeaways: November 2  Holiday season discounts resulted in steep deflation in November for categories such as televisions (-12.9% MoM), appliances (-6.7%), tablets (-6.2%), toys (-4.5%) and domestic hotels (-4.5%)  While international flights saw a 1.9% MoM increase in November, flights to Europe saw 5.1% deflation driven by double-digit MoM deflation for flights to Madrid’s MAD (-10.3%) and Rome’s FCO (-11.6%)  In a reversal from October’s DPI, several DPI categories show MoM deflation in November as a result of deep discounts from holiday sales over the Thanksgiving holiday  Holiday discounts in 2016 were higher for televisions, tablets, and toys, compared to the holiday season in 2015  Groceries, a category that represents the largest share of consumer spending in the DPI showed 0.5% deflation MoM  Sugar and sweets (-0.6%), flour (-0.6%), fruits and vegetables (-0.6%), and meats (-0.4%) saw the largest MoM deflation, while eggs (1.6%), ice cream (1.2%), and juice (0.7%) saw MoM inflation  In the U.K., the DPI shows the first MoM increase in the price index for computers (1.0%), an increase in the price of groceries (0.5%), and a slowing of deflation for TVs (-0.7%), suggesting that Brexit impacts on durable imports coupled with a strong U.S. dollar could be pushing prices upward  Overall U.S. results signal a slight uptick in inflation, a strong labor market, and a stable housing market:  The U.S. Job Seeking Index finds that online job searches are down sharply YoY for another month in a row, with November searches down -17.5% YoY, suggesting continued strength in the U.S. labor market, though momentum maybe slowing  Our U.S. Digital Housing Index an increase of 11.5% YoY in online housing searches. While a strong increase over the prior year, November’s rise is the the second lowest YoY increase over the past 6 months
  3. 3. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Digital Insights Background Based on analysis ofaggregated and anonymous data from Adobe Marketing Cloud: • Adobe Analytics and Adobe Mobile Services Thousands of brands worldwide including two thirds of Fortune 50 companies rely on Adobe Marketing Cloud: • $7.50ofevery $10spent online with top 500 U.S.retailers go through Adobe Marketing Cloud ** • Adobe Marketing Cloud powers: • 20 ofthe top 30 U.S.employers • 9 of10largest hotel groups • 7of10largest airlines **Latest IR Top 500 Report 2015 3 Adobe Analytics Adobe Mobile Services
  4. 4. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Economist Advisors 4 Austan Goolsbee, University of Chicago  Robert P. Gwinn Professor of Economics at The University of Chicago's Booth School of Business  Formerly served as President Obama’s Chairman of the Council of Economic Advisers  The youngest member of the cabinet of President Obama Pete Klenow, Stanford University  Professor, Department of Economics, Stanford University  Currently Visiting Scholar, Federal Reserve Bank of San Francisco  Member of editorial boards for Econometrica, American Economic Review, Quarterly Journal of Economics and others
  5. 5. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 5 Digital Price Index (DPI) Job Seeking Index (JSI) Digital Housing Index (DHI)
  6. 6. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 6 Digital Price Index (DPI)
  7. 7. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Methodology – U.K. 7 Based on analysis of aggregated and anonymous data • Fisher Ideal Price Index • $6 of every $10 spent online with top 100 European retailers go through Adobe Marketing Cloud ** • Based on analysis 1 billion website visits and 100k products sold online ONS: Consumer Price Index Adobe: Digital Price Index Quantities Sold No Yes Products/quantities updated Annually Daily Number of Products 180,000 100k (currently covered categories) Data Collection Frequency Monthly Daily Data Availability Monthly Daily Offline Prices Yes No Long history Yes No All categories of spending Yes No ** Latest IR U.K. Top 500 Report 2015
  8. 8. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe DPI in the United Kingdom 8 • Our Digital Price Index in the U.K. for groceries shows that grocery prices have deflated by 1.6% YoY in October. Prices increased 0.5% between October and November, the largest MoM increase in food prices in the U.K over the past 12 months • For computers, the DPI reveals a YoY deflation of 8.9% while MoM prices increased by 1.0%, the first time in the past 12 months that prices have increased MoM • Similarly TV prices in the UK continue to fall YoY; the DPI shows YoY deflation of 19.3% between November 2015 to November 2016. Prices are declining slower this month (down 0.7% in November) than they were between September and October (down 1.7%) suggesting that Brexit impacts on durables imports might be beginning to put upward pressure on prices
  9. 9. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Methodology – U.S. 9 Based on analysis of aggregated and anonymous data • Fisher Ideal Price Index • Adobe measures 80% of all online transactions from top 100 U.S. retailers ** • $7.50 of every $10 spent online with top 500 U.S. retailers go through Adobe Marketing Cloud ** • Based on analysis of 15 billion website visits and 2.2 million products sold online BLS: Consumer Price Index BEA: Personal Consumption Expenditures Adobe: Digital Price Index Quantities Sold No No Yes Products/quantities updated Every 2 years Monthly Daily Number of Products 83 thousand (all categories) 83 thousand (all categories) 2.2 million (currently covered categories) Data Collection Frequency Bi-Monthly Monthly Daily Data Availability Monthly Monthly Daily Offline Prices Yes Yes No Long history Yes Yes No All categories of spending Yes Yes No Index Type Laspeyeres Fisher Ideal Fisher Ideal ** Latest IR Top 500 Report 2015
  10. 10. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Big data in DPI decreases uncertainty 10 DPI CPI Appliances 0.15% 0.46% Airfare 0.08% 0.51% Computers 0.28% 0.49% Furniture and bedding 0.07% 0.31% Grocery 0.10% 0.12% Hotels: domestic 0.04% 2.30% Medical equipment and supplies 0.20% 0.39% Nonprescription Drugs 0.18% 0.47% Sporting Goods 0.12% 0.31% Televisions 0.24% 0.60% Toys 0.25% 0.59%
  11. 11. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Inflation rates by price ranges 11 • Televisions have seen higher-ticket items deflate faster than lower-ticket items • In computers, models priced above $1,200 showing the least deflation in the category *Price bins are determined based on the price the product had when originally launched (first price).
  12. 12. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. The Importance of detail: Black Friday 12 • DPI captures the effect of major discount holidays like Black Friday and Cyber Monday because it measures quantities and does so in real-time • Lowest prices for TVs in 2015 & 2016 were Thanksgiving and Black Friday • Data demonstrates retailers trying to start sales earlier – the Sunday and Monday before Thanksgiving see low prices
  13. 13. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Measuring rapidly shifting consumer preferences 13 • Electronics see an average of 77% of online spend on new* products** • 17% of monthly online spend for groceries on new products * Products that have been available for 1 year or less ** A product is defined as an item for purchase which has an unique identifier (such as a SKU)
  14. 14. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. October 2016 Recap 14 MoM: September to October MoM: September to October Difference (percentage) Same Sign? YoY: Cumulative October 2015-2016 YoY: Cumulative October 2015-2016 Difference (percentage) Same Sign? DPI CPI DPI vs. CPI DPI vs. CPI DPI CPI DPI vs. CPI DPI vs. CPI Appliances 1.4% -0.8% 2.2% No -6.2% -4.0% -2.2% Yes Computers 0.5% -0.1% 0.6% No -9.9% -7.2% -2.8% Yes Domestic Hotels -0.7% -1.1% 0.4% Yes 2.9% 3.9% -1.0% Yes Flights 1.5% 1.3% 0.2% Yes -2.9% -5.4% 2.5% Yes Furniture and bedding 0.2% 1.2% -1.0% Yes -3.1% -2.0% -1.1% Yes Grocery 0.0% 0.0% 0.0% No -0.9% -2.3% 1.4% Yes Medical equipment and supplies 0.8% -0.1% 0.9% No -1.0% -0.8% -0.2% Yes Nonprescription Drugs 0.3% -0.8% 1.1% No -0.1% -1.4% 1.3% Yes Sporting Goods -0.1% 0.2% -0.3% No -4.9% -1.4% -3.5% Yes Televisions -1.8% -0.5% -1.3% Yes -21.9% -21.6% -0.3% Yes Toys -1.2% -1.4% 0.2% Yes -6.0% -9.8% 3.8% Yes Weighted Average Inflation* 0.1% 0.0% 0.1% Yes -1.7% -2.6% 0.9% Yes Weighted Aggregate Inflation, Less Grocery** 0.1% 0.0% 0.0% Yes -1.1% -1.0% -0.1% Yes * Weighted average inflation is calculated using CPI-U relative component weights (2014- 2015) across the shared categories in the DPI and the CPI ** Grocery is a large component of the CPI weights, so changes in grocery prices drive the majority of weighted average inflation.
  15. 15. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. November 2016 Summary 15 • Main deflation in November: • Televisions, appliances, tablets, sporting goods, domestic hotels, toys • Main inflation in November: • International flights, domestic flights, medical equipment and supplies YoY MoM Appliances -6.0% -6.7% Computers -8.1% -2.1% Electronics -11.4% -5.4% Flights -1.6% 1.6% Domestic Flights -3.9% 1.6% Intl Flights 1.1% 1.9% Furniture and bedding -3.3% -2.4% Grocery -1.3% -0.5% Domestic Hotels 4.3% -4.5% Intl Hotels -2.4% -1.4% Medical equipment and supplies 0.7% 0.8% Nonprescription Drugs 0.5% 0.0% Sporting Goods -5.6% -4.5% Tablet -21.8% -6.2% Televisions -23.0% -12.9% Toys -7.0% -4.5%
  16. 16. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 2016-2015 Holiday Season* Comparison 16 • Larger discounts in 2016: • Televisions, tablets, toys • Larger discounts in 2015: • Domestic hotels, computers, domestic flights Holiday 2015 Holiday 2016 Percentage Point Differential Appliances -5.59% -5.40% 0.19% Computers -3.87% -1.59% 2.28% Electronics -5.51% -6.31% -0.80% Flights 1.64% 3.21% 1.57% Domestic Flights 1.23% 3.21% 1.98% Intl Flights 2.15% 3.28% 1.14% Furniture and bedding -2.32% -2.21% 0.11% Grocery -0.13% -0.48% -0.35% Domestic Hotels -8.11% -5.15% 2.95% Intl Hotels -5.01% -3.65% 1.35% Medical equipment and supplies 0.01% 1.57% 1.56% Nonprescription Drugs 0.04% 0.32% 0.28% Sporting Goods -4.45% -4.56% -0.10% Tablet -7.94% -9.58% -1.63% Televisions -11.95% -14.43% -2.48% Toys -4.61% -5.64% -1.03% * October and November for 2015 and 2016
  17. 17. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Appliances 17 • Adobe DPI shows cumulative deflation of -6.0% YoY (November 2015 to November 2016) • Main YoY price decreases for Appliances priced between $600 and $1000 • For November 2016, prices decreased -6.7% vs October 2016 MoM between $600 and $1000:-7.2%, between $0 and $200: -3.6% METHODOLOGY: • The data used contains transactions for ~110 K products • Products include large appliances such as fridges, ovens, washers, dryers as well as smaller appliances such as vacuums, mixers, blenders etc.
  18. 18. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare 18 • Adobe DPI shows cumulative deflation of -1.6% YoY (November 2015 to November 2016) • For November 2016, prices increased 1.6% vs October 2016 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable
  19. 19. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare: domestic 19 • Adobe DPI shows cumulative deflation of -3.9% YoY (November 2015 to November 2016) • For November 2016, prices increased 1.6% vs October 2016 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable
  20. 20. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare: international 20 • Adobe DPI shows cumulative inflation of 1.1% YoY (November 2015 to November 2016) • Flight prices showed continued decline to Europe (-5.1% MoM) and Africa (-1.1%) • Largest price increases continued the second month in a row to South America (5.6% MoM) • For November 2016, prices increased 1.9% vs October 2016 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable
  21. 21. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics 21 • Adobe DPI shows cumulative deflation of -11.4% YoY (November 2015 to November 2016) • Main YoY price decreases for Electronics priced greater than $1500 • For November 2016, prices decreased -5.4% vs October 2016 MoM greater than $1,500: -14.5%, between $0 and $200:-5.4% METHODOLOGY: • The data used contains transactions for ~1 M products • Products span across dozens of different categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games,printersetc..
  22. 22. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: computers 22 • Adobe DPI shows cumulative deflation of -8.1% YoY (November 2015 to November 2016) • Main YoY price decreases for Computers priced between $700 and $1200 • For November 2016, prices decreased -2.1% vs October 2016 MoM between $700 and $1200: -12.8%, between $0 and $300: -0.5% METHODOLOGY: • The data used contains transactions for ~1 M products • Products span across dozens of different categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games,printersetc..
  23. 23. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: televisions 23 • Adobe DPI shows cumulative deflation of -23.0% YoY (November 2015 to November 2016) • Main YoY price decreases for Televisions priced greater than $2000 • For November 2016, prices decreased -12.9% vs October 2016 MoM greater than $2000: -32.7%, between $0 and $300: -14.5% METHODOLOGY: • The data used contains transactions for ~1 M products • Products span across dozens of different categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games,printersetc..
  24. 24. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: tablets 24 • Adobe DPI shows cumulative deflation of -21.8% YoY (November 2015 to November 2016) • Main YoY price decreases for Tablets priced between $550 and $900 • For November 2016, prices decreased -6.2% vs October 2016 MoM between $550 and $900: -26.8%, between $0 and $250: -7.6% METHODOLOGY: • The data used contains transactions for ~1 M products • Products span across dozens of different categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games,printersetc..
  25. 25. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Furniture and Bedding 25 • Adobe DPI shows cumulative deflation of -3.3% YoY (November 2015 to November 2016) • Main YoY price decreases for Furniture and bedding priced between $150 and $250 • For November 2016, prices decreased -2.4% vs October 2016 MoM between $150 and $250: -4.8%, greater than $750: -2.2% METHODOLOGY: • The data used contains transactions for ~173 K products • Products include interior and exterior furniture, mattresses and other bedding products
  26. 26. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Groceries 26 • Adobe DPI shows cumulative deflation of -1.3% YoY (November 2015 to November 2016) • For November 2016, prices decreased -0.5% vs October 2016 MoM METHODOLOGY: • Our dataset covers an estimated 30-40% of all online grocery purchases. It contains transactions for ~195k products • The mix of grocery products bought online is not the same as offline – the top category for online shopping is drinks (nonalcoholic), while for offline shopping it is meat
  27. 27. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Hotels: domestic 27 METHODOLOGY: • The data used contains transactions for ~250 K hotel properties • Includes associated fees, where applicable • Adobe DPI shows cumulative inflation of 4.3% YoY (November 2015 to November 2016) • For November 2016, prices decreased -4.5% vs October 2016 MoM
  28. 28. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Hotels: international 28 METHODOLOGY: • The data used contains transactions for ~250 K hotel properties • Includes associated fees, where applicable • Adobe DPI shows cumulative deflation of -2.4% YoY (November 2015 to November 2016) • For November 2016, prices decreased -1.4% vs October 2016 MoM
  29. 29. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Medical Equipment and Supplies 29 • Adobe DPI shows cumulative inflation of 0.7% YoY (November 2015 to November 2016) • Main YoY price decreases for Medical equipment and supplies priced between $45 and $135 • Main YoY price increases for Medical equipment and supplies priced between $0 and $10 • For November 2016, prices increased 0.8% vs October 2016 MoM between $45 and $135: -3.8%, between $0 and $10: 1.5% METHODOLOGY: • The data used contains transactions for 6,000 products • ” includes supportive and convalescent equipment, dressings and first aid kits, and medical equipment for general use
  30. 30. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Nonprescription drugs 30 • Adobe DPI shows cumulative inflation of 0.5% YoY (November 2015 to November 2016) • Main YoY price decreases for Nonprescription Drugs priced greater than $40 • Main YoY price increases for Nonprescription Drugs priced between $15 and $25 • For November 2016, prices increased 0.0% vs October 2016 MoM greater than $40:-0.2%, between $15 and $25: 1.3% METHODOLOGY: • The data used contains transactions for 16 K products • Includes all non-prescription medicines taken by swallowing, applying on your skin (such as topicals), inhaling, as suppositories, or enemas.
  31. 31. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Sporting Goods 31 • Adobe DPI shows cumulative deflation of -5.6% YoY (November 2015 to November 2016) • Main YoY price decreases for Sporting Goods priced between $40 and $100 • For November 2016, prices decreased -4.5% vs October 2016 MoM between $40 and $100: -7.0%, between $0 and $40: -4.4% METHODOLOGY: • The data used contains transactions for ~300 K products • Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.
  32. 32. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Toys 32 • Adobe DPI shows cumulative deflation of -7.0% YoY (November 2015 to November 2016) • Main YoY price decreases for Toys priced between $70 and $200 • For November 2016, prices decreased -4.5% vs October 2016 MoM between $70 and $200:-6.4%, greater than $300:-1.8% METHODOLOGY: • The data used contains transactions for ~249 K products • Products include toys, games as well as playground equipment
  33. 33. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 33 Job Seeking Index (JSI)
  34. 34. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Online job seeking continues YoY declines 34 METHODOLOGY: • Based on analysis of aggregated and anonymous data from more than 1 billion visits to U.S. employment-search websites and top employer career pages • Adobe Marketing Cloud powers 20 of the top 30 U.S. employers** • US online job seeking is down 17.5% YoY in November • Online job seeking sees another month of YoY decline, reflecting a tightening labor market. Declines were less steep YoY than the month previous, however, suggesting that momentum may be slowing.
  35. 35. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 35 Digital Housing Index (DHI)
  36. 36. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Online housing search grows YoY 36 METHODOLOGY: • Based on analysis of aggregated and anonymous data from more than 2 billion visits to U.S. housing search websites Online search for purchases and rentals is up 11.5% YoY in November. While higher than the same month last year, the figure is the 2nd lowest YoY increase in the last 6 months.
  37. 37. © 2016 Adobe Systems Incorporated. All Rights Reserved. Appendix 37
  38. 38. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Digital Price Index: Fisher Ideal Price Index ∑𝑖𝑖=1 𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖 𝑈𝑈𝑖𝑖𝑖𝑖−1 ∑𝑖𝑖=1 𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖−1 𝑈𝑈𝑖𝑖𝑖𝑖−1 ∗ ∑𝑖𝑖=1 𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖 𝑈𝑈𝑖𝑖𝑖𝑖 ∑𝑖𝑖=1 𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖−1 𝑈𝑈𝑖𝑖𝑖𝑖 • The Fisher Ideal Price Index uses quantities purchased on the current period (month) and a previous period (previous month) to determine actual consumer’s preferences. Instead of assuming that consumers preferences for what goods to buy are constant over a certain number of years, it is able to account for the fact that they are constantly changing what they buy. 𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹 𝜋𝜋𝑡𝑡 =
  39. 39. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Methodology Comparison: Fisher, Laspeyres and Paasche
  40. 40. © 2016 Adobe Systems Incorporated. All Rights Reserved.

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