State Street To Provide Central Banks With PriceStats Inflation Indicators to Assess Economic Impact of COVID-19 Pandemic
April 14 2020 - 10:30AM
Business Wire
Indicators Derived From Unstructured Data Will Help Central
Banks Better Track Retail Pricing, Consumer Demand Shifts Driven by
COVID-19
State Street Corporation (NYSE:STT) today announced that it will
offer its State Street PriceStats Series, a comprehensive suite of
indicators to monitor trends in retailer pricing and consumer
demand in 22 countries, to central banks around the world at no
cost. The announcement comes following an influx of inquiries from
central banks as they seek to mitigate the negative economic
effects of the pandemic.
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Source: State Street Global Markets,
European Centre for Disease Prevention and Control
The indicators, which are created by Price Stats, LLC through
its exclusive partnership with State Street, track daily price
fluctuations in millions of consumer products sold by hundreds of
online retailers around the world. This information is synthesized
using econometric algorithms to produce high-frequency consumer
price indices that help our clients monitor trends in inflation.
Because many retailers adjust prices in real-time based on consumer
purchasing patterns, the data can also offer insights into consumer
demand in the real economy.
“While the COVID-19 pandemic has led to a sharp decline in
aggregate retail prices, the drop thus far has been smaller than
what we observed during the last downturn, following the default of
Lehman Brothers in September 2008,” said Will Kinlaw, head of State
Street Associates (SSA), an academic affiliate of State Street.
“State Street and PriceStats are pleased to make these indicators
available to central banks around the world as they grapple with
the economic fallout of the pandemic.”
Alberto Cavallo, the Edgerley Family Associate Professor of
Business Administration at the Harvard Business School and
co-founder of PriceStats, added that "Declining consumer demand has
certainly introduced downward pressure on prices overall, but this
effect has also been offset somewhat by supply chain disruptions in
certain sectors. These indices will provide central banks with more
up-to-date information to support decision making and policy
formulation as the situation evolves.”
Examining the drivers of this trend in the U.S. economy, State
Street Associates observes that:
- Prices in the energy and transport segment have been driven
lower by the dramatic decline in oil prices and the implosion of
demand for travel and airlines. This segment is down 4.5% during
February and March, the largest two-month decline since Jan 2015.
Fuel prices in emerging markets experienced a 5.6% month-over-month
decline in March, the largest ever observed since PriceStats began
publishing data in early 2009.
- These declines are counteracted somewhat by increases in food
and beverage prices, which are up 1% in the United States during
February and March, roughly four times the average historical
increase seen during this time of year.
- In our Eurozone and Global food indices, there are relatively
sharp increases for such a short period of time; these measures
have risen by 1.44% and 1.34%, respectively. This is the largest
two-month increase in global food prices since Jan/Feb 2011 and the
largest ever in the Eurozone since PriceStats began tracking there
in 2009.
- Since the virus first appeared in December, prices for
furnishings and household equipment (for example, furniture,
carpeting, and household appliances of all kinds) have also risen
sharply as supply chain disruptions have impacted certain
products.
- Other price categories such as health and beauty products as
well as recreation and electronics have been relatively stable thus
far.
The State Street PriceStats Series also tracks daily changes in
the proportion of products that are out of stock. A greater
proportion of certain items have been out of stock at major
retailers as quarantined citizens around the world stock up on
supplies:
- Since the end of January, the percentage of health care
products listed as out-of-stock has risen from 18.3% to 23.2% in
the US and from 17.6% to 23.8% in Germany. UK followed a similar
trend, going from 6.1% to 14.3%, and then spiking over 40% as some
retailers began listing all non-essential goods as out-of-stock in
an effort to prioritize delivery of essentials.
- Supermarket item shortage has been increasing as well, with
stockouts rising from 8.3% to 10.2% in the US and from 2.7% to 5.7%
in Germany. In the UK supermarkets have imposed per-customer
purchase limits which is keeping stockouts low, but still
rising.
- Stockouts are concentrated in specific categories (e.g. frozen
food, cans, and cleaning supplies) but are persistent and expanding
in some countries, indicating retailers are experiencing persistent
supply-side disruptions.
The timeline of stockouts and food price increases is consistent
with the contagion curve of the virus. Looking at these series on
the date of each country’s 100th case, the increase in stockouts
and acceleration of food price inflation is clear immediately
following the onset of community spread.
The State Street PriceStats indicators build on the capabilities
of State Street’s academic thinktank, State Street Associates
(SSA). SSA bridges the worlds of financial theory and practice,
develops proprietary investment indicators, differentiated
analytics applications and tailored investment strategies for
institutional investors around the world.
About State Street Corporation
State Street Corporation (NYSE: STT) is the world's leading
provider of financial services to institutional investors including
investment servicing, investment management and investment research
and trading. With $34.36 trillion in assets under custody and
administration and $3.12 trillion* in assets under management as of
December 31, 2019, State Street operates globally in more than 100
geographic markets and employs approximately 39,000 worldwide. For
more information, visit State Street's website at
www.statestreet.com.
*Assets under management as of December 31, 2019 includes
approximately $45 billion of assets with respect to which State
Street Global Advisors Funds Distributors, LLC (SSGA FD) serves as
marketing agent; SSGA FD and State Street Global Advisors are
affiliated.
1Statistics compiled using ETFGI’s ETF Monthly Insights as-of
December 2019 and State Street’s internal research
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Brendan Paul 401 664-9182 BPaul2@StateStreet.com
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