Adobe Digital Price Index: Online Inflation Hits Record High

Adobe (Nasdaq:ADBE) today announced the latest online inflation data for the month of November 2021. Online prices hit a record highat a 3.5%year-over-year (YoY) increase while prices are down 2% month-over-month (MoM) due to holiday discounts. This is the highest YoY increase since Adobe first began tracking the digital economy in 2014, and it marks the 18th consecutive month of YoY online inflation. Apparel was a standout category with prices up 17.3% YoY and down just 0.4% MoM, reaching a record high of inflation. One dollar out of every four dollars* is now spent online in the U.S., making the digital economy a significant component of the overall economy.

The Adobe Digital Price Index (DPI) provides the most comprehensive view into how much consumers are paying for goods online. The DPI covers more than 100 million products in the U.S. and is modeled after the Consumer Price Index issued by the U.S. Bureau of Labor Statistics. The DPI is updated monthly and covers 18 product categories: electronics, apparel, appliances, books, toys, computers, groceries, furniture/bedding, tools/home improvement, home/garden, pet products, jewelry, medical equipment/supplies, sporting goods, personal care products, flowers/related gifts, nonprescription drugs and office supplies.

“Census Bureau data shows that the e-commerce share of non-fuel retail spending has tripled over the last decade as more expenditures like groceries and home improvement move online,” said economist Marshall Reinsdorf, former senior economist at International Monetary Fund. "Measures of digital economy prices have a growing role to play in how we understand inflation, and the Adobe Digital Price Index provides a timely pulse on this important part of the cost-of-living picture that complements indicators like the Consumer Price Index.”

“Ongoing supply chain constraints and durable consumer demand have underpinned the record high inflation in e-commerce, with apparel seeing high volumes of out-of-stock messages online compared to other categories,” said Patrick Brown, vice president of growth marketing and insights, Adobe. “With offline prices surging in the Consumer Price Index, however, it is still cheaper to shop online for categories such as toys, computers and sporting goods.”

In November 2021, 11 of the 18 categories tracked by the Adobe Digital Price Index saw YoY price increases. Apparel prices rose faster than any other category, while price drops were observed in seven categories: electronics, personal care products, office supplies, jewelry, books, toys and computers. On a MoM basis, all but four categories (groceries, pet products, tools/home improvement and medical equipment/supplies) saw prices decrease as holiday discounts kicked in.

The DPI is modeled after the Consumer Price Index, published by the U.S. Bureau of Labor Statistics, and uses the Fisher Price Index to track online prices. The Fisher Ideal Price Index uses quantities of matched products purchased in the current period (month) and a previous period (previous month) to calculate the price changes by category. Adobe’s analysis is weighted by the real quantities of the products purchased in the two adjacent months.

Powered by Adobe Analytics, the DPI analyzes 1 trillion visits to retail sites and over 100 million SKUs in 18 product categories. Adobe uses a combination of Adobe Sensei, Adobe’s AI and machine learning framework, and manual effort to segment the products into the categories defined by the CPI manual. The methodology was first developed alongside renowned economists Austan Goolsbee and Pete Klenow.

* Adobe expects $1 in $4 will be spent online during the 2021 holiday shopping season (Nov. 1 to Dec. 31), indexed to the National Retail Federation’s (NRF) total retail forecast that includes in-store sales.

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