Adobe Digital Economy Project August 2016 Update: UK and US Results

© 2016 Adobe Systems Incorporated. All Rights Reserved.
ADOBE DIGITAL ECONOMY PROJECT
AUGUST 2016 UPDATE

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved.
Main takeaways: August
2
 This month we’ve expanded the DPI to include the United Kingdom, featuring a subset of the categories already covered in the U.S.
Including categories such as groceries, computers and televisions, the U.K. DPI shows that, despite a weaker pound post-Brexit
announcement, prices have remained stable relative to their historical trends.
 The DPI also shows a strongly connected global economy, with a 60% correlation between the DPI in the U.K. and in the U.S. for import-
heavy categories such as televisions and computers. For less import-heavy categories such as groceries, the correlation is much smaller,
at 20%.
 For the three categories we analyzed, the U.K. shows more deflation than the U.S.
 After declining for two consecutive months, prices for air travel to the U.K. show signs of stabilization.
 U.S. results signal continuing economic health and low inflation:
 In the U.S. DPI, we see seasonal increases in August for Appliances and Furniture, likely due to higher demand during the back-to-
school season and preparation for Labor Day sales. Grocery prices remain stable after 5 months of consecutive declines.
 Toy prices increased in August, partly driven by Pokémon-related merchandise, which had price increases of 4.4% in August.
 Our U.S. Job Seeking Index shows that online job seeking activity declined by 14.9% YoY, signaling continuing health in the job market.
 Our U.S. Digital Housing Index shows that online housing seeking activity increased by 14.2% YoY, which is not as strong as results we
saw early in the year, but still shows a strong housing market

Adobe Digital Insights Background
Based on analysis of aggregated and anonymous data fromAdobe Marketing Cloud:
• Adobe Analytics and Adobe Mobile Services
Thousands of brands worldwide including two thirds of Fortune 50 companies rely on
Adobe Marketing Cloud:
• $7.50of every $10spent online with top 500 U.S. retailers go through Adobe Marketing Cloud **
• Adobe Marketing Cloud powers:
• 20 of the top 30 U.S. employers
• 9 of 10largest hotel groups
• 7of 10largest airlines
**Latest IR Top 500 Report 2015
3
Adobe
Analytics
Adobe
Mobile
Services

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

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 5
Digital Price
Index
(DPI)
JobSeeking
Index
(JSI)
Digital Housing
Index
(DHI)

Digital Price
Index
(DPI)

Adobe Digital Economy Project for the United Kingdom
• Pages 8 through 12 relate to the
Digital Economy Project for the
United Kingdom
• Comparisons to the CPI in those pages
refer to the Consumer Price Index
published monthly by the Organization for
National Statistics (ONS)

Methodology – U.K.
8
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 3 billion website visits and 150 k products sold online
ONS: Consumer Price Index Adobe: Digital Price Index
Quantities Sold No Yes
Products/quantities updated Annually Daily
Number of Products
180 k
(all categories)
150 k
(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 Europe Top 500 Report 2015

Quotes: August Update
9
“New data sources such as those being used by Adobe provide innovative ways
to understand our increasingly digital economy in real time. Many of these
opportunities will be realised by bringing together independent, official
statisticians and those using these new data sources and techniques in the
private sector. Adobe's work is really interesting and developing trusted statistics
using digital data could add significant value to official statistics.”
Jonathan Athow, Deputy National Statistician, U.K. Office for National Statistics

Adobe DPI in the United Kingdom
10
• Our Digital Price Index in the U.K. for groceries shows that grocery prices have
deflated by 2.7% YoY in August, with very small price increases of .02% and .37%
in July and August, respectively, with the August price increase likely due to
seasonality.
• For computers, we see YoY deflation of 13.4%. The post-Brexit announcement
price decreases in July (-1%) and August (-.7%) are normal relative to previous
months
• The only area where we saw prices hint at an increase was televisions, where in
July prices decreased only by .5% (compared to the average monthly decrease of
2.5%), but in August television prices seem to be back at their normal pace

Decline in U.K. online orders for televisions and computers
11
Our data indicates a decrease in online sales in the two
durable goods categories we analyzed: computers and
televisions. While in May and June gross online sales in
those categories were up by 33 and 28% year-over-year
(as people naturally shift more of their spend online), in
July they only grew by 16%, and in August they actually
decreased by 10% YoY.
Using the U.S. as a control, we see that the growth rate in
online shopping has remained relatively flat in this same
period: growth of 40.7% May YoY, 43.7% June YoY, 33.7%
YoY in July and 30.2% YoY in August.

60% correlation in computers and televisions
12
• For computers and televisions, 60% correlation on average between
the DPI results in the US and in the UK in the last 12 months, showing
how much of a global economy we really live in. For groceries, not as
import-heavy, the correlation is only of 20%
• The U.K. shows more year-over-year deflation than the U.S. in all
categories we analyzed: 1.2% more for computers, 4.4% more for
televisions and 1.8% more for groceries
• It shows the value of the DPI in measuring inflation using prices and
quantities across countries using a single, standardized methodology

Travel prices to the U.K. show signs of upward pressures
13
• Travel prices to the U.K. seem to be stabilizing –
flight prices are up 3.1% relative to July and are
down by only 1% year-over-year while hotel
prices only declined by .8% since July and are
down 16% year-over-year

Adobe Digital Economy Project for the United States
• Pages 14 through 43 relate to the
Digital Economy Project for the
United States
• Comparisons to the CPI in those pages
refer to the Consumer Price Index
published monthly by the Bureau of Labor
Statistics (BLS)

Methodology – U.S.
15
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 **
• $7.5 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 Adobe: Digital Price Index
Quantities Sold No Yes
Products/quantities updated Every 4 years Daily
Number of Products
83 thousand
(all categories)
2.2 million
(currently covered categories)
Data Collection Frequency Bi-Monthly Daily
Data Availability Monthly Daily
Offline Prices Yes No
Long history Yes No
All categories of spending Yes No
** Latest IR Top 500 Report 2015

Quotes: August Update
16
“If you look at the growth rate of the US economy, it's only moderate -- there are
a lot of international risks and there is no sign of inflation. While our long-run
prospects are excellent, the next 12-18 months are likely to continue to have
some significant bumps.”
“There has been little good, micro-level data on the real economy in the UK to
help us understand the impact of the Brexit vote. The Adobe DPI data suggest
that prices for groceries and electronics did not change significantly. It will be
important to keep monitoring the data in the months ahead.”

Special topics: Pokémon Go
17
• Online sales of Pokémon-related merchandise in the
U.S. have increased 227% between July 6th-Aug 31st
when compared to the same period last year
• Prices for Pokémon-related merchandise in the U.S.,
which had declined by 2.9% in July, increased by 4.4%
in August

Special topics: Louisiana Floods
18
• While domestic flight prices decreased by 3.6% in
August relative to July, flight prices to Louisiana saw no
price decreases
• While domestic hotel prices decreased by 2.1% in
August relative to July, hotel prices in Louisiana
increased by 2%
• For product categories such as OTC medications,
medical equipment and supplies, tools & building
materials we see no significant price increases relative
to other regionsDisasters have little impact on inflation in advanced
economies (…) In emerging and developing
economies the impact of disasters can be large and
persist for a number of years.
Reserve Bank of New Zealand, April 2016

Big data in DPI decreases uncertainty
19
DPI BLS 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 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%

Inflation rates by price ranges
20
• 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).

The Importance of detail: Black Friday
21
• 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 were
Thanksgiving and Black Friday
• Data demonstrates retailers trying to start
sales earlier – the Sunday and Monday before
Thanksgiving saw low prices

Measuring rapidly shifting consumer preferences
22
• Electronics see an average of 80% of
online spend on new* products**
• 16% 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

July 2016 Recap
23
MoM: July vs June MoM: July vs June Difference (percentage) Same Sign? YoY: Cumulative July 2015-2016 YoY: Cumulative July 2015-2016 Difference (percentage) Same Sign?
DPI CPI DPI vs. CPI DPI vs. CPI DPI CPI DPI vs. CPI DPI vs. CPI
Appliances -2.4% -0.8% -1.6% Yes -6.6% -2.6% -4.0% Yes
Computers -1.2% -0.7% -0.5% Yes -12.8% -7.7% -5.1% Yes
Domestic Hotels 2.3% -1.5% 3.8% No 2.2% 0.0% 2.2% Yes
Flights -3.6% -8.5% 4.9% Yes -4.4% -4.8% 0.4% Yes
Furniture and bedding -0.2% -0.5% 0.3% Yes -3.4% -3.0% -0.4% Yes
Grocery -0.2% -0.1% -0.1% Yes -0.8% -1.6% 0.8% Yes
Medical equipment and supplies 0.6% 0.3% 0.3% Yes -1.0% 0.0% -1.0% Yes
Nonprescription Drugs 0.3% -0.5% 0.8% No 0.1% -1.6% 1.7% No
Sporting Goods -0.5% 0.2% -0.7% No -5.4% -1.7% -3.7% Yes
Televisions -2.1% -3.8% 1.7% Yes -20.2% -20.0% -0.2% Yes
Toys -1.2% -1.5% 0.3% Yes -6.0% -9.3% 3.3% Yes

August 2016 Summary
24
• Main deflation in August:
• Intl’ flights, Flights, Televisions
• Main inflation in August:
• Appliances, toys, furniture and bedding
YoY MoM
Appliances -5.7% 1.8%
Computers -12.2% -0.4%
Electronics -11.0% -0.5%
Flights -3.2% -3.6%
Domestic Flights -6.2% -3.4%
Intl Flights 1.2% -4.3%
Furniture and bedding -3.3% 0.2%
Grocery -0.9% 0.0%
Domestic Hotels 2.3% -2.1%
Intl Hotels -2.8% -0.2%
Medical equipment and
supplies -1.3% -1.0%
Nonprescription Drugs -0.3% -0.8%
Sporting Goods -5.7% -0.5%
Tablet -20.9% -1.3%
Televisions -20.9% -2.9%
Toys -5.6% 0.3%

Appliances
25
• Adobe DPI shows cumulative deflation of -5.7% YoY
(August 2015 to August 2016)
• Main YoY price decreases for Appliances
priced between $600 and $1000
• For August 2016, prices increased 1.8% vs July
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.

Airfare
26
• Adobe DPI shows cumulative deflation of -3.2%
YoY (August 2015 to August 2016)
• For August 2016, prices decreased -3.6% vs July
2016 MoM
METHODOLOGY:
• The data used contains transactions for ~370 K flight routes
• Includes associated fees, where applicable

Airfare: domestic
27
• Main YoY deflation for flights Oregon, Illinois
and Colorado
• Main YoY inflation for Florida
2016 MoM
METHODOLOGY:

Airfare: international
28
• Adobe DPI shows cumulative inflation of 1.2% YoY
• Main YoY deflation for flights to Europe and Africa
• Main YoY inflation for flights to South America
• For August 2016, prices decreased -4.3% vs July 2016
MoM
METHODOLOGY:

Electronics
29
• Main YoY price decreases for Electronics
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..

Electronics: computers
30
• Main YoY price decreases for Computers priced
between $1200 and $1600
2016 MoM
METHODOLOGY:

Electronics: televisions
31
• Main YoY price decreases for Televisions priced
greater than $2000
2016 MoM
METHODOLOGY:

Electronics: tablets
32
• Main YoY price decreases for Tablets priced
2016 MoM
METHODOLOGY:

Furniture and Bedding
33
• Main YoY price decreases for Furniture and bedding
2016 MoM
METHODOLOGY:
• Products include interior and exterior furniture, mattresses and other bedding products

Groceries
34
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

Hotels: domestic
35
METHODOLOGY:
• The data used contains transactions for ~250 K hotel properties
• Adobe DPI shows cumulative inflation of 2.3% YoY
• Main YoY inflation for Nevada, Hawaii,
Colorado and Tennessee
• Only state showing YoY deflation is New York
2016 MoM

Hotels: international
36
METHODOLOGY:
• The data used contains transactions for ~250 K hotel properties
• Main YoY inflation for Oceania and North
America destinations
• Main YoY deflation for African and European
destinations
2016 MoM

Medical Equipment and Supplies
37
• Main YoY price decreases for Medical
equipment and supplies priced greater than
$135
• Main YoY price increases for Medical
equipment and supplies priced between $0
and $10
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

Nonprescription drugs
38
• Main YoY price decreases for Nonprescription
Drugs priced greater than $40
• Main YoY price increases for Nonprescription
Drugs priced between $0 and $10
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.

Sporting Goods
39
• Main YoY price decreases for Sporting Goods
2016 MoM
METHODOLOGY:
• Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.

Toys
40
• Main YoY price decreases for Toys priced
2016 MoM
METHODOLOGY:
• Products include toys, games as well as playground equipment

JobSeeking
Index
(JSI)

Online Job Seeking declines
42
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 14.9 % YoY in
August
• This is indicative of a strong labor market, with
fewer people looking for jobs, which coincides
with the government numbers

Digital Housing
Index
(DHI)

Online housing search growth slows
44
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 up
14.2% YoY in August, which is not as strong as
March-April, but is still a sign that search for
housing remains healthy

Appendix
45

June-July Official Government Statistics
46
• GDP growth: 1.2% (Q2)
• Wages growth: 2.6% (YoY)
• Consumer spending: +0.4% (June)
• Unemployment: 4.9% (June)
• Housing Sales: +1.1% (June)
• CPI inflation rates (YoY):
• All items: 1%
• Housing: 3.5%
• Medical Care: 3.8%
• Gas: -15.4%
• Commodities: -2% If you look at the growth rate of the US economy, it's
only moderate -- there are a lot of international risks
and there is no sign of inflation. While our long-run
prospects are excellent, the next 12-18 months are
likely to continue to have some significant bumps.
- Austan Goolsbee

Digital Price Index: Fisher Ideal Price Index
𝑖=1
𝑛
𝑃𝑖𝑡 𝑈𝑖𝑡−1
𝑖=1
𝑛
𝑃𝑖𝑡−1 𝑈𝑖𝑡−1
∗ 𝑖=1
𝑛
𝑃𝑖𝑡 𝑈𝑖𝑡
𝑖=1
𝑛
𝑃𝑖𝑡−1 𝑈𝑖𝑡
• 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.
𝐹𝑖𝑠ℎ𝑒𝑟 𝜋 𝑡 =

Methodology Comparison: Fisher, Laspeyres and Paasche

Annual Cumulative Inflation Rates

Electronics Deflation in Detail
• The average price paid for an iPad mini (all models)
has decreased by about 40% since the iPad mini 1
was introduced in November 2012.
• Although the initial price tag of new models remains
constant at around $400, the automatic discount of
previous models causes the average price to
consistently fall: when the iPad mini 3 was introduced
at an average price of $450, the price for the iPad Mini
2 was reduced by 25% to $300.
• This data only includes iPad minis sold in retail
websites

Inflation Rates by Price Bins, May (MoM)

Inflation Rates by Price Bins, May (MoM) – Cont’d

Job Seeking Online: Traffic Sources
• Direct traffic to employment-listing websites is
higher than search traffic
• Search ranks second

Adobe Digital Economy Project August 2016 Update: UK and US Results

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Editor's Notes