Premise Data Corp, a startup firm backed by Google, has deployed 700 smartphone-equipped workers across 25 cities to capture images of products as their prices change daily.

The Wall Street Journal claims Real-Time Economic Data Could Be a Game Changer.

Software automatically tags the location of the products down to the individual store and analyzes the images—items such as meat and produce—to gauge quality differences. A user viewing the information can zoom in on images of the products at each retail location, making it a store-shelf version of Google Street View.

Premise’s computers also scroll through websites to automatically grab prices from Internet stores, a process that still provides about 80% of the data the firm uses to create real-time inflation gauges.

In contrast, the Labor Department collects price data by dispatching its staff to collect product prices once a month. The information is then compiled into a monthly inflation report.

Outsiders have questioned Argentina’s inflation data for years. That inspired Alberto Cavallo, an economist at the Massachusetts Institute of Technology, to create his own measures starting in 2007.

The effort eventually became the academic initiative called the Billion Prices Project, collecting data from online retailers around the world to create daily inflation measures. In 2010 it led to PriceStats, which distributes inflation gauges through the financial-services firm State Street Corp. STT -0.36% to about 7,500 clients.

Premise’s goal is to provide even deeper information—down to the product level rather than just categories of products—and provide the technology platform for a wide range of other economic indicators beyond inflation.

Hal Varian, Google Inc.’s chief economist and a Premise adviser, said the data could give government officials insight into developments that can stir up their populations. Prices for popular food items—bread in the Middle East, corn in Mexico or pork in China—could be tracked well ahead of popular unrest.

“All these things are sensitive from a political point of view,” Mr. Varian said. “Having up-to-date information is quite valuable.”

Fatal Flaws in Inflation Tracking Methodology

Let’s not pretend any of these companies will be tracking “inflation” because consumer prices are a symptom of inflation rather than inflation itself.

Inflation, the expansion of money supply and credit, frequently manifests itself in the form of asset bubbles, rather than price hikes in consumer goods. For example, the dot-com bubble and the housing bubble (and the subsequent crashes), are the direct result of Fed inflationary practices.

Currently, the stock market and bond market are both in bubble territory because of the Fed’s inflationary practices. Unfortunately, there is no way to prove that thesis until the next crash.

Nonetheless, there is a benefit to price tracking.

The Benefit

Instead of bringing back laid off BEA and BLS workers let’s get rid of them. Gallup can easily track unemployment and this firm can better track consumer  prices.

Any technology with a capability of eliminating government workers is fine by me, but unless that actually happens, “game changer” is a bit of a stretch.

Mike “Mish” Shedlock