Estimating Inflation in Real Time Using Big Data: Fruit and Vegetable Prices
Selected Research and Policy Analysis Notes contains five short articles, of which four have been published in recent weeks:
1) The COVID-19 crisis and the labor market in Israel;
2) Characteristics of the residential gas market in Israel;
3) Student vacations in Israel and their ramifications on the labor market;
4) Is the low level of public transit service a barrier to going to work – findings of a survey among Arab women.
The fifth article, written by David Goldenberg and Yonatan Rozen is entitled “Estimating inflation in real time using big data: fruit and vegetable prices”. The article presents how the Bank of Israel uses daily data on fruit and vegetable prices from the large grocery chains in order to forecast the change in the fruit and vegetables component of the Consumer Price Index published by the Central Bureau of Statistics. This is part of the Bank of Israel’s increasing use of real-time data to assess the state of the economy at a high frequency, inline with the global trend of using new data sources, particularly big data, which has intensified during the COVID-19 crisis. Forecasting the fruit and vegetables component is very important, since its contribution to CPI forecasting errors far outweighs the component’s share of the overall CPI. The article examines the quality of the initial forecast that can be generated from grocery chain data, and shows that the use of these data improves the precision of the existing forecasting of the fruit and vegetable index by about 25 percent.