Adobe Digital Economy Project - January 2017

2. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Main takeaways: January 2  The Adobe DPI adds two new categories this month:  Personal care products (cosmetics, lotion, hair, nail care and more): 1.1% MoM inflation, -3.0% YoY deflation  Pet products (pet food & treats, kitty litter, accessories like leashes and pet beds, and more) 1.1% MoM inflation, 0.2% YoY inflation  Early signals from 2017 suggests that inflation is on the rise. Weighted average inflation across the Adobe DPI categories shows 0.5% MoM inflation  Many categories show strong MoM inflation after the holiday season, including tablets (6.4% MoM inflation), toys (3.4% MoM), and alcohol (2.6% MoM)  The Adobe DPI generally shows MoM increases in January after holiday sales end, though 2017 increases were higher on average. While the same number of categories showed MoM inflation in January for 2016 and 2017, the DPI categories that had price increases showed more inflation MoM on average in January 2017 (1.74%) compared to January 2016 (1.57%)  Tablets (6.4% MoM inflation in January 2017), televisions (1.1%), auto parts (0.8%), furniture and bedding (0.6%), sporting goods (1.2%), pet products (1.2%), and toys (3.4%) have higher MoM inflation rates this year than last year  The DPI shows international travel is more affordable in January: international flight prices are down -5.0% MoM (though up 1.5% YoY), and international hotels show near-zero inflation (0.1% MoM and down -1.4% YoY)  Trade from and travel to Mexico shows signs of inflation YoY, but prices for travel are down steeply since November  Auto parts, a category that is significantly made up of imports from Mexico, shows a 0.8% MoM inflation but -1.4% YoY deflation  Travel into Mexico’s largest airport, Mexico City International (MEX) shows 4.0% YoY inflation (compared to 1.5% YoY inflation for international flights) but prices are down significantly since November 2016. Flight prices to MEX show deflation of -19.0% between November 2016 and January 2017.  In the U.K. prices are rising but still showing deflation YoY: grocery prices are up for the 4th month in a row (0.2% MoM inflation, -0.8% YoY deflation). Computers are up 1.6% in January (-2.5% deflation YoY), while televisions in the U.K. saw 0.6% MoM inflation (-21.1% YoY deflation)

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: • $7.50 ofevery $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 **LatestIR Top 500 Report 2015 3 Adobe Analytics Adobe Mobile Services

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

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. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Methodology – U.S. 8 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) 2.5 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

9. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Big data in DPI decreases uncertainty 9 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%

10. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Inflation rates by price ranges 10 • Televisions have seen higher-ticket items deflate faster than lower-ticket items in 2015 • For computers, mid-range models priced between $700 and $1,200 showed the highest deflation last year *Price bins are determined based on the price the product had when originally launched (first price).

11. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. The Importance of detail: Black Friday discount comparisons 11 • DPI captures the effect of major discount holidays like Black Friday and Cyber Monday because it measures quantities and does so in real-time • Prices online for Televisions dropped later in November 2016 than in 2015, with more discounts during the Black Friday week (Monday 11/21 through Cyber Monday), which accounted for more than half of all Televisions units purchased between November and December • Television prices then increased more in December 2016 than they did in December 2015, a sign that retailers were able to capitalize on later shopping

12. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Measuring rapidly shifting consumer preferences 12 • 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. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe DPI Findings in the United Kingdom 14 • Adobe DPI for the U.K. shows cumulative deflation for groceries of -0.8% YoY (January 2016 to January 2017), with a fourth-straight month of inflation (0.2% MoM inflation) • U.K. computers and television inflation have diverged in recent months, though both saw MoM inflation in January • Computers in the U.K. saw a 1.6% inflation in January; the category is still showing -2.5% deflation YoY • Televisions in the U.K. saw 0.6% MoM inflation; the category is still showing -21.1% deflation YoY

15. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. December 2016 U.S. Recap 15 MoM: November to December MoM: November to December Difference (percentage) Same Sign? YoY: Cumulative December 2015-2016 YoY: Cumulative December 2015-2016 Difference (percentage) Same Sign? DPI CPI DPI vs. CPI DPI vs. CPI DPI CPI DPI vs. CPI DPI vs. CPI Alcohol -2.1% -0.1% -2.0% Yes 0.5% 0.9% -0.4% Yes Appliances 6.0% -0.4% 6.4% No -4.6% -4.5% -0.1% Yes Auto Parts -0.1% 0.6% -0.7% No -1.8% -1.0% -0.8% Yes Computers 1.2% -0.5% 1.7% No -6.5% -5.8% -0.8% Yes Flights -0.7% -3.4% 2.7% Yes 3.3% -4.9% 8.2% No Furniture and bedding 1.7% -0.1% 1.8% No -3.8% -2.9% -0.9% Yes Grocery 0.5% -0.2% 0.7% No -0.7% -2.0% 1.2% Yes Hotels -1.6% -2.3% 0.7% Yes 4.1% 3.3% 0.8% Yes Medical equipment and supplies -0.2% 0.1% -0.3% No -1.4% 0.3% -1.7% No Nonprescription Drugs 0.4% 0.1% 0.3% Yes -0.2% -0.7% 0.5% Yes Personal Care Products*** 1.1% 0.2% 0.9% Yes -2.3% -0.4% -1.9% Yes Pet Products*** 2.0% 0.0% 2.1% No 0.0% 0.6% -0.6% Yes Sporting Goods 2.1% -0.2% 2.3% No -5.7% -1.5% -4.1% Yes Televisions 7.8% -3.5% 11.3% No -19.8% -24.5% 4.7% Yes Tools & Home Improvement 0.7% 0.1% 0.6% Yes -2.1% -0.5% -1.6% Yes Toys 2.7% -1.4% 4.1% No -6.9% -8.9% 1.9% Yes Weighted Average Inflation* 0.6% -0.4% 1.0% No -1.2% -1.9% 0.7% Yes Weighted Aggregate Inflation, Less Grocery** 0.8% -0.7% 1.5% No -1.7% -1.8% 0.2% 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 current CPI weights, so changes in grocery prices drive the majority of weighted average inflation. As we add more categories (like housing, auto etc.), these aggregate numbers will change. *** New categories introduced in this month’s Adobe DPI

16. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. January 2017 U.S. Summary 16 • Main MoM deflation in January: • International flights, domestic flights, Computers • Main MoM inflation in January: • Tablets, toys, domestic hotels, alcohol, YoY MoM Alcohol -0.1% 2.6% Appliances -5.1% 1.7% Auto Parts -1.4% 0.8% Computers -8.0% -0.5% Electronics -9.8% 1.0% Flights 1.1% -3.5% Domestic Flights -0.7% -2.9% Intl Flights 1.5% -5.0% Furniture and bedding -3.5% 0.6% Grocery -1.2% 0.1% Domestic Hotels 3.1% 4.3% Intl Hotels -1.4% 0.1% Medical Equipment and Supplies -1.5% 0.1% Nonprescription Drugs 0.0% -0.1% Personal Care Products -3.0% 1.1% Pet Products 0.2% 1.1% Sporting Goods -5.4% 1.2% Tablet -13.0% 6.4% Televisions -19.5% 1.1% Tools & Home Improvement -1.9% 0.6% Toys -6.7% 3.4% Weighted Average Inflation* -1.5% 0.5% Weighted Aggregate Inflation, Less Grocery** -1.9% 0.9% * 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 current CPI weights, so changes in grocery prices drive the majority of weighted average inflation. As we add more categories (like housing, auto etc.), these aggregate numbers will change. *** New categories introduced in this month’s Adobe DPI

17. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Alcohol 17 • Adobe DPI shows cumulative deflation of -0.1% YoY (January 2016 to January 2017) • Prices for Beer show cumulative inflation of 2.5% YoY • Prices for Spirits show cumulative inflation of 1.0% YoY • Prices for Wine show cumulative deflation of -1.7% YoY • For January 2017, prices increased 2.6% vs December 2016 MoM METHODOLOGY: • The data used reflect transactions for ~120 K products

18. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Appliances 18 • Adobe DPI shows cumulative deflation of -5.1% YoY (January 2016 to January 2017) • Main YoY price decreases for Appliances priced between $200 and $400 • For January 2017, prices increased 1.7% vs December 2016 MoM 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

19. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Auto Parts 19 • Adobe DPI shows cumulative deflation of -1.4% YoY (January 2016 to January 2017) • Main YoY price decreases for Auto Parts priced greater than $200 • For January 2017, prices increased 0.8% vs December 2016 MoM METHODOLOGY: • The data used reflect transactions for ~300 K products

20. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare 20 • Adobe DPI shows cumulative inflation of 1.1% YoY (January 2016 to January 2017) • For January 2017, prices decreased -3.5% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable

21. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare: domestic 21 • Adobe DPI shows cumulative deflation of -0.7% YoY (January 2016 to January 2017) • Largest price increases in airfare were to Kansas, with YoY inflation of 9.1% • Other large price increases for airfare were to Ohio, with YoY inflation of 6.1% • Other significant price decreases for airfare are to Colorado, with YoY deflation of -4.4% • Largest price decreases are to airfare to Minnesota, with YoY deflation of -5.2% • For January 2017, prices decreased -2.9% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable

22. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare: international 22 • Adobe DPI shows cumulative inflation of 1.5% YoY (January 2016 to January 2017) • Largest price increases for airfare were to South America, with inflation of 17.6% YoY • Other price inflation for airfare include Oceania, with inflation of 2.2% YoY • For January 2017, prices decreased -5.0% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable

23. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics 23 • Adobe DPI shows cumulative deflation of -9.8% YoY (January 2016 to January 2017) • Main YoY price decreases for Electronics priced greater than $1500 • For January 2017, prices increased 1.0% vs December 2016 MoM 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. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: computers 24 • Adobe DPI shows cumulative deflation of -8.0% YoY (January 2016 to January 2017) • Main YoY price decreases for Computers priced between $1200 and $1600 • Main YoY price increases for Computers priced between $0 and $300 • For January 2017, prices decreased -0.5% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~63 K products • Products span across dozens of diﬀerent categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games,printersetc..

25. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: televisions 25 • Adobe DPI shows cumulative deflation of -19.5% YoY (January 2016 to January 2017) • Main YoY price decreases for Televisions priced greater than $2000 • For January 2017, prices increased 1.1% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~33 K products • Products span across dozens of diﬀerent categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games,printersetc..

26. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: tablets 26 • Adobe DPI shows cumulative deflation of -13.0% YoY (January 2016 to January 2017) • Main YoY price decreases for Tablets priced between $550 and $900 • For January 2017, prices increased 6.4% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~13 K products • Products span across dozens of diﬀerent categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games,printersetc..

27. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Furniture and Bedding 27 • Adobe DPI shows cumulative deflation of -3.5% YoY (January 2016 to January 2017) • Main YoY price decreases for Furniture and bedding priced between $100 and $150 • For January 2017, prices increased 0.6% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~173 K products • Products include interior and exterior furniture, mattresses and other bedding products

28. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Groceries 28 • Adobe DPI shows cumulative deflation of -1.2% YoY (January 2016 to January 2017) • Main YoY deflation for eggs (-21.4%), beverages (-3.2%) and cheese (-2.6%) • For January 2017, prices increased 0.1% vs December 2016 MoM • Main price increases for bakery products (+2.1%) 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

29. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Hotels: domestic 29 METHODOLOGY: • The data used contains transactions for ~250 K hotel properties • Includes associated fees, where applicable • Adobe DPI shows cumulative inflation of 3.1% YoY (January 2016 to January 2017) • Prices for hotels in Nevada show the highest inflation among states measured at 14.1% YoY • Prices for hotels in North Dakota show the highest deflation among states measured at -4.4% YoY • For January 2017, prices increased 4.3% vs December 2016 MoM

30. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Hotels: international 30 METHODOLOGY: • The data used contains transactions for ~250 K hotel properties • Includes associated fees, where applicable • Adobe DPI shows cumulative deflation of -1.4% YoY (January 2016 to January 2017) • Largest prices increases are for hotels in Oceania, with 7.5% YoY inflation • Largest price decreases are for hotels in Asia, with YoY deflation of -1.9% • For January 2017, prices increased 0.1% vs December 2016 MoM

31. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Medical Equipment and Supplies 31 • Adobe DPI shows cumulative deflation of -1.5% YoY (January 2016 to January 2017) • Main YoY price decreases for Medical equipment and supplies priced between $45 and $135 • For January 2017, prices increased 0.1% vs December 2016 MoM 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

32. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Nonprescription drugs 32 • Adobe DPI shows cumulative inflation of 0.0% YoY (January 2016 to January 2017) • Main YoY price decreases for Nonprescription Drugs priced between $0 and $10 • Main YoY price increases for Nonprescription Drugs priced between $15 and $25 • For January 2017, prices decreased -0.1% vs December 2016 MoM 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.

33. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Personal care products 33 • Adobe DPI shows cumulative deflation of -3.0% YoY (January 2016 to January 2017) • Main YoY price decreases for Personal care products priced between $10 and $30 • For January 2017, prices increased 1.1% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~110 K products • Includes cosmetics, lotion, hair (shampoo, conditioner) and nail care

34. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Pet products 34 • Adobe DPI shows cumulative inflation of 0.2% YoY (January 2016 to January 2017) • Main YoY price increases for Pet products priced between $0 and $10 • Main YoY price decreases for Pet products priced between $10 and $20 • For January 2017, prices increased 1.1% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~70 K products • Includes pet food & treats, kitty litter and accessories (leashes, pet beds)

35. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Sporting Goods 35 • Adobe DPI shows cumulative deflation of -5.4% YoY (January 2016 to January 2017) • Main YoY price decreases for Sporting Goods priced between $40 and $100 • For January 2017, prices increased 1.2% vs December 2016 MoM 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.

36. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Tools & Home Improvement 36 • Adobe DPI shows cumulative deflation of -1.9% YoY (January 2016 to January 2017) • Main YoY price decreases for Tools & Home Improvement priced greater than $600 • For January 2017, prices increased 0.6% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~225 K products

37. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Toys 37 • Adobe DPI shows cumulative deflation of -6.7% YoY (January 2016 to January 2017) • Main YoY price decreases for Toys priced between $200 and $300 • For January 2017, prices increased 3.4% vs December 2016 MoM METHODOLOGY: • The data used contains transactions for ~249 K products • Products include toys, games as well as playground equipment

39. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Online job seeking continues YoY declines 39 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 14.5% YoY in January

41. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Online housing search grows YoY 41 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 9.6% YoY in January.

43. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Inflation rates by price ranges, cont’d (tablets) 43 • Tablets have seen higher-ticket items deflate faster than lower-ticket items • The greatest price decrease and increase in November and December were for tablets priced between $350 and $600 *Price bins are determined based on the price the product had when originally launched (first price).

44. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Inflation rates by price ranges, cont’d (televisions) 44 • The highest priced televisions have have seen faster deflation than lower priced items • The greatest price decrease in November and increase in December were for TVs priced between $600 and $1,000 *Price bins are determined based on the price the product had when originally launched (first price).

45. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Inflation rates by price ranges, cont’d (televisions) 45 • Mid-range computers have seen faster deflation than lower and higher priced models • The greatest price decrease in November were for mid range computers between $700 and $1,200 while the greatest price increase in December were for lower priced models between $300 and $700 *Price bins are determined based on the price the product had when originally launched (first price).

46. © 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 =