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Adobe Digital Economy Project -- May 2017

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The Adobe DEP releases new estimates for pricing and online shopping behavior for apparel at the national level in the U.S. this month. In May, the DEP finds the following: Novelty fashion thrives online: revenue in apparel from new products makes up the largest share of spending (80.5%) among all categories tracked by the DPI. Novelty fashion targets the female economy: women’s clothes account for over half of spending in apparel online (53.9%) but only a third of apparel spending offline (36.3%). The DPI finds apparel prices show deflation YoY (-4.3%).

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Adobe Digital Economy Project -- May 2017

  1. 1. © 2017 Adobe Systems Incorporated. All Rights Reserved. ADOBE DIGITAL ECONOMY PROJECT MAY 2017 UPDATE
  2. 2. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Main Takeaways: May 2  The Adobe DEP releases new estimates for pricing and online shopping behavior for apparel at the national level in the U.S. this month. In May, the DEP finds the following:  Fashion thrives online: revenue in apparel from new products makes up the largest share of spending (80.5%) among all categories tracked by the DPI  Online apparel targets the female economy: women’s clothes account for over half of spending in apparel online (53.9%) but only a third of apparel spending offline (36.3%)  The DPI finds apparel prices show deflation YoY (-4.3%). Lowest priced apparel shows the highest level of deflation (-7.5%) while the most expensive apparel shows the second-largest level of deflation (-5.5%).  Items of men’s clothing tend to cost more than items of women’s apparel, and women’s clothes are purchased roughly equally in the highest- and lowest-priced categories, while spending on men’s clothing is concentrated more at the highest level  In the U.S., topline inflation is down across DPI categories for the second time in a row (-0.3% in the all-items index and flat but very slightly negative in the all- items less grocery index). This is the second month of deflation in the DPI following four straight months of inflation. Prices remain down year-over-year in the all-items index (-0.8%) and down for the all-items less grocery index (-1.2%)  Deflation is driven in May by a drop in prices for furniture and bedding (down -2.0% MoM), declines in grocery (-0.5% MoM), and deflation in several durables categories including appliances (-1.5% MoM), computers (-0.8% MoM), and electronics (-0.8%). Deflation in appliances and furniture and bedding is typical of Memorial Day Holiday sales in the U.S.  In grocery, deflation in May was driven primarily by dairy products: ice cream and related products (-4.5% MoM), eggs (-2.1%), other dairy (-1.9%), and cheese (-1.7%) saw steep deflation during the month. This bodes well for consumers who were experiencing several months of rising food prices in the U.S.  The DPI also shows that meanwhile consumers in the U.K. are facing higher prices for food, where grocery prices have been rising since last September and are up 1.7% YoY. The DPI for groceries in the U.K. reveals that inflation in the category is on the rise again after a one-month reprieve following six straight months of inflation in the category  For the fourth month in a row the Adobe DPI features state-level estimates for inflation. 31 out of the 50 states and D.C. show deflation in May, while 20 show inflation MoM
  3. 3. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Digital Insights Background Based on analysis ofaggregated and anonymous data from Adobe Experience Cloud: • Adobe Analytics and Adobe Mobile Services Thousands of brands worldwide including two thirds of Fortune 50 companies rely on Adobe Experience Cloud: • $7.50ofevery $10spent online with top 500 U.S.retailers go through Adobe Experience Cloud ** • Adobe Experience Cloud powers: • 20 ofthe top 30 U.S.employers • 9 of10largest hotel groups • 7of10largest airlines **Latest IR Top 500 Report 2015 3 Adobe Analytics Adobe Mobile Services
  4. 4. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 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  Served as the youngest member of President Obama’s cabinet 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
  5. 5. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. 5 Digital Price Index (DPI) Job Seeking Index (JSI) Digital Housing Index (DHI)
  6. 6. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 6 Digital Price Index Methodology (DPI)
  7. 7. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 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 Experience 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. 8. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 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 Experience 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. 9. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 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. 10. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 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. 11. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 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. 12. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 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)
  13. 13. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. State-by-state inflation: examples of sources of variance 13 1. Different baskets across states • Consumers in western states buy more on organic fruits and vegetables than other regions • Consumers in southern states buy more meats, poultry and fish than other regions 2. Different shopping attitudes, preferences across states • Consumers in states with lower median incomes tend to shop more on heavy-promotion days 3. Different prices for same products across states • Price-only variances across states tend to be bigger in groceries and smaller in consumer electronics
  14. 14. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 14 Digital Price Index Findings, U.K. (DPI)
  15. 15. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. U.K. Food Prices Up Nearly Two Percent Year-Over-Year 15 • U.K. grocery prices show inflation again in May after a one month reprieve in April following six straight months of inflation. Adobe DPI for the U.K. shows cumulative inflation for groceries of 1.7% YoY (May 2016 to May 2017). Prices are up 0.1% MoM. Prices have been on the rise since September 2016 • U.K. computers show YoY inflation while televisions show YoY deflation, but both categories show deflation in May 2017. • Computers in the U.K. saw a -0.1% deflation in April but the category is showing 0.7% inflation YoY. This is in contrast to the U.S. where prices are down 3.9% YoY in computers. • Televisions continue to deflate in May, TVs in the U.K. saw a ----2.8% deflation in April, bringing the category to -16.5% YoY. These price declines are similar to the U.S. where prices are down 14.9% YoY.
  16. 16. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 16 Digital Price Index Findings, U.S. (DPI)
  17. 17. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Apparel Methodology 17 The Adobe Digital Economy Project relies on a new methodology to calculate inflation in apparel in the U.S. Calculating inflation in apparel is a challenge for economists in the public and private sector because of the steep discounts and strong fashion cycle in the category. • Standard DPI Methodology: match products and retailers month over month, calculate inflation via Fisher price index using only matched products. • Using a matched-product method results in extremely steep deflation YoY because apparel has such significant product turnover and deep discounting. Using a matched model, we show sometimes upwards of 30% or 40% deflation year-over-year. • New Method: line up products by subcategory grouping and price bin (e.g. men’s sportscoats between $0-$100, $100-$200, $200-300, $400 and above) • 684 detailed categories that roll up to 6 subcategories (men’s, women’s, boy’s, girl’s, baby, and footwear – matches the CPI subcategories)
  18. 18. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. DPI vs. CPI: Online Shopping Leads to More Deflation 18 • CPI shows relatively flat YoY inflation (0.5%) in apparel • Adobe DPI shows -4.3% YoY deflation in May • Women’s apparel shows -4.7% deflation in May • Men’s apparel shows -2.9% YoY deflation in May • Deflation in the Adobe DPI likely reflects preference of online shoppers to buy on sale and purchase discounted clothes-4.3% 0.5% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 5/1/2016 6/1/2016 7/1/2016 8/1/2016 9/1/2016 10/1/2016 11/1/2016 12/1/2016 1/1/2017 2/1/2017 3/1/2017 4/1/2017 5/1/2017 Apparel Inflation, YoY (May 2016 - May 2017) Apparel - DPI Apparel - CPI
  19. 19. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Novelty Fashion: Cheap Apparel, High-End Discounts Driving Deflation 19 • The least expensive clothes have the largest levels of deflation (-7.5% YoY) • The most expensive clothes have the second largest levels of deflation (-5.5% YoY) -5.5% -2.4% -1.7% -7.5% -14.0% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 5/1/2016 6/1/2016 7/1/2016 8/1/2016 9/1/2016 10/1/2016 11/1/2016 12/1/2016 1/1/2017 2/1/2017 3/1/2017 4/1/2017 5/1/2017 May 2015 - May 2016 YoY Cumulative Inflation by Price Bin $110 and Above $70-$110 $30-$70 $0-$30
  20. 20. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Online vs. Offline: Women’s Clothes Purchased More Online 20 53.9% 36.3% 18.6% 21.1% 13.4% 24.5% 5.5% 5.3% 4.5% 7.3% 4.1% 5.5% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Share of Online Revenue in Apparel Share of Offline Revenue in Apparel Womens Mens Footwear Infants and Toddlers Girls Boys • Online revenue from women’s clothes makes up over half of all spending (53.9%) in the apparel category • Men’s clothes are purchased as a share of apparel spending at a lower rate online (18.6%) than offline (21.1%) • Footwear has the largest gap between share of offline (24.5%) and online spending (13.4%) *Analysis of online spending for apparel spending in 2015-2016
  21. 21. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Novelty Fashion: Online Shoppers Need Newest Fashion 21 • Among online shopping categories, consumers spend on new products (products available for 12 months or less) in apparel (80.5%) more than anywhere else • Nearly a third (30.8%) of all spending on women’s clothes goes towards products that are one month old or less, while that figure is only 18.0% for men’s clothing PERCENT OF SPEND ON NEW PRODUCTS BY CATEGORY OF APPAREL** CLOTHES AVAILABLE FOR ONE MONTH OR LESS PERCENT OF SPEND ON NEW PRODUCTS* CLOTHES AVAILABLE FOR TWELEVE MONTHS OR LESS 18.0% 23.6% 30.8% 82.0% 76.4% 69.2% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Mens Footwear Womens One Month or Less More than One Month *Analysis of online spending between 2015-2016 *Analysis of online spending in apparel between 2015-2016
  22. 22. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Novelty Fashion: Newness Leads to Influx of Fresh Products 22 7,000 new apparel products added daily* 3,150 1,750 1,400 700 • Thousands of apparel products are added to eCommerce sites every day • The largest share of those clothes items are in women’s clothing • Daily new products represent between 1-3% turnover of all products in the category. New products on average account for 4.6% of all footwear products, 3.4% of all men’s clothes products, 2.6% of all women’s clothes products** *Average daily products added in 2015-2016 **Women’s clothes have the largest number of unique items in our sample, so even though women’s clothes get the most new products added it’s a smaller share of the overall category than footwear or men’s clothes
  23. 23. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Novelty Fashion: Men Pay More for Clothing, Women Purchase More 23 31.49% 26.5% 22.32% 20.6% 17.89% 26.4% 28.30% 26.5% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% Men's Women's Top 25% Middle 25% Middle 25% Lowest 25% Men's Apparel Women's Apparel Top 25% $230.58 $154.03 Top 50-75% $105.85 $70.79 Lowest 25- 50% $63.97 $44.63 Lowest 25% $39.63 $21.52 SHARE OF SPENDING BY CATEGORY BY PRICE BIN APPAREL PURCHASED IN MAY 2017 AVERAGE PRICE PAID BY CATEGORY BY PRICE BIN APPAREL PURCHASED IN MAY 2017
  24. 24. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 24 Digital Price Index Findings, Apparel (DPI)
  25. 25. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Consistent Inflation across the U.S., but prices down YoY 25 • Price changes lean towards deflation in May: 31 out of 50 states plus D.C. are showing price declines, while 20 states are showing price declines • State deflation in May driven by changes in grocery prices: States that show deflation in May tend to also have deflation in groceries as well as deflation in goods typically on sale during the Memorial Day weekend, including furniture
  26. 26. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Travel driving price changes across states 26 Highest inflation by state Lowest inflation by state State April MoM Inflation Major Inflation Drivers Alaska 1.1% Hotels**, Flights* Colorado 0.9% Flights*, Hotels** Hawaii 0.8% Flights*, Hotels** Rhode Island 0.7% Hotels**, Flights* South Dakota 0.7% Hotels**, Auto Parts State April MoM Deflation Major Deflation Drivers Arizona -0.6% Hotels**, Furniture and Bedding D.C. -0.7% Hotels**, Furniture and Bedding* West Virginia -0.7% Furniture and Bedding, Sporting Goods Kentucky -0.7% Hotels**, Toys Utah -1.2% Groceries * Flight prices are determined by the state of flight origin ** Hotel prices reflect hotel properties in a given state *** New categories introduced in this month’s Adobe DPI
  27. 27. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. April 2017 U.S. Recap 27 MoM: March to April MoM: March to April Difference (percentage) Same Sign? YoY: Cumulative April 2016-2017 YoY: Cumulative April 2016-2017 Difference (percentage) Same Sign? DPI CPI DPI vs. CPI DPI vs. CPI DPI CPI DPI vs. CPI DPI vs. CPI Alcohol 0.0% 0.3% -0.3% No -0.9% 0.8% -0.8% No Appliances -0.5% -0.4% -0.1% Yes -3.9% -2.9% -1.0% Yes Apparel -0.9% 0.0% -0.9% No -1.2% 0.5% -1.7% No Auto Parts 0.0% 0.1% -0.1% No -1.2% -0.4% -0.8% Yes Computers -0.7% 0.2% -0.9% No -3.5% -5.3% 1.8% Yes Flights 0.3% 3.7% -3.4% Yes 6.2% -0.8% 7.0% No Furniture and bedding -0.2% -0.3% 0.1% Yes -3.8% -1.9% -1.9% Yes Grocery 0.0% 0.2% -0.2% Yes -0.2% -0.8% 0.6% Yes Hotels 0.1% 2.0% -1.9% Yes 2.2% 2.8% -0.7% Yes Medical equipment and supplies -1.2% -0.1% -1.1% Yes -2.5% 1.2% -3.7% No Nonprescription drugs -0.1% 0.0% -0.1% No -0.1% 0.7% -0.8% No Personal care products 0.2% 0.2% 0.0% Yes -1.7% -1.0% -0.7% Yes Pet Products 0.1% 0.1% 0.0% Yes 0.8% -0.6% 1.4% No Sporting goods -1.3% 0.1% -1.4% No -5.8% -3.1% -2.8% Yes Televisions 0.5% -0.6% 1.1% No -15.8% -17.9% 2.1% Yes Tools & Home Improvement -0.5% 0.0% -0.5% No -2.5% -0.4% -2.1% Yes Toys -1.5% -1.0% -0.5% Yes -4.7% -8.9% 4.1% Yes Weighted Average Inflation* -0.1% 0.4% -0.4% No -0.6% -1.0% 0.4% Yes Weighted Aggregate Inflation, Less Grocery** -0.2% 0.4% -0.6% No -1.5% -1.0% -0.5% Yes * Weighted average inflation is calculated using CPI-U relative component weights (2014-2015) across the shared categories in the DPI and the CPI, less apparel ** 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
  28. 28. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. May 2017 U.S. Summary 28 • Main MoM inflation in May: • Flights, hotels, nonprescription drugs, tools & home improvements • Main MoM deflation in May: • Tablets, furniture and bedding, appliances, YoY MoM Alcohol -1.1% 0.0% Apparel*** -4.3% 0.0% Appliances -4.3% -1.5% Auto Parts -1.1% -0.1% Computers -3.9% -0.8% Electronics -8.4% -0.8% Flights 4.7% 2.6% Domestic Flights 4.2% 2.8% Intl Flights 6.3% 2.0% Furniture and bedding -5.0% -2.0% Grocery -0.5% -0.5% Domestic Hotels 3.1% 1.6% Intl Hotels 0.4% 2.4% Medical Equipment and Supplies -1.5% -0.3% Nonprescription Drugs 0.9% 0.1% Personal Care Products -1.5% -0.4% Pet Products 0.2% -0.4% Sporting Goods -5.8% -0.3% Tablet -15.0% -3.1% Televisions -14.9% -1.0% Tools & Home Improvement -1.9% 0.1% Toys -5.7% -0.6% Weighted Average Inflation* -0.8% -0.3% Weighted Aggregate Inflation, Less Grocery** -1.2% 0.0% * Weighted average inflation is calculated using CPI-U relative component weights (2014-2015) across the shared categories in the DPI and the CPI, less apparel ** 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
  29. 29. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Alcohol 29 • Adobe DPI shows cumulative deflation of -1.1% YoY (May 2016 to May 2017) • Prices for Beer show cumulative inflation of 3.0% YoY • Prices for Spirits show cumulative inflation of 1.2% YoY • Prices for Wine show cumulative deflation of -3.6% YoY • For May 2017, prices increased 0.0% vs April 2017 MoM METHODOLOGY: • The data used reflect transactions for ~120 K products
  30. 30. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Appliances 30 • Adobe DPI shows cumulative deflation of -4.3% YoY (May 2016 to May 2017) • Main YoY price decreases for Appliances priced between $200 and $400 • For May 2017, prices decreased -1.5% vs April 2017 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
  31. 31. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Auto Parts 31 • Adobe DPI shows cumulative deflation of -1.1% YoY (May 2016 to May 2017) • Main YoY price decreases for Auto Parts priced greater than $200 • For May 2017, prices decreased -0.1% vs April 2017 MoM METHODOLOGY: • The data used reflect transactions for ~300 K products
  32. 32. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Airfare 32 • Adobe DPI shows cumulative inflation of 4.7% YoY (May 2016 to May 2017) • For May 2017, prices increased 2.6% vs April 2017 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable
  33. 33. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Airfare: domestic 33 • Adobe DPI shows cumulative inflation of 4.2% YoY (May 2016 to May 2017) • Largest monthly inflation to South Dakota (14.1% MoM), North Dakota (12.7% YoY), and West Virginia (8.8% YoY) • Largest monthly deflation to Colorado (-3.9% MoM), Arizona (-3.1%) and Oregon (-.3.0%) • For May 2017, prices increased 2.8% vs April 2017 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable
  34. 34. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Airfare: international 34 • Adobe DPI shows cumulative inflation of 6.3% YoY (May 2016 to May 2017) • Largest price increases for airfare were to South America, with inflation of 21.6% YoY • Largest price decreases are for airfare to Europe with deflation of -3.4% YoY • For May 2017, prices increased 2.0% vs April 2017 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable
  35. 35. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Electronics 35 • Adobe DPI shows cumulative deflation of -8.4% YoY (May 2016 to May 2017) • Main YoY price decreases for Electronics priced greater than $1500 • For May 2017, prices decreased -0.8% vs April 2017 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..
  36. 36. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Electronics: computers 36 • Adobe DPI shows cumulative deflation of -3.9% YoY (May 2016 to May 2017) • Main YoY price decreases for Computers priced between $1200 and $1600 • Main YoY price increases for Computers priced between $0 and $300 • For May 2017, prices decreased -0.8% vs April 2017 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..
  37. 37. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Electronics: televisions 37 • Adobe DPI shows cumulative deflation of -14.9% YoY (May 2016 to May 2017) • Main YoY price decreases for Televisions priced greater than $2000 • For May 2017, prices decreased -1.0% vs April 2017 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..
  38. 38. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Electronics: tablets 38 • Adobe DPI shows cumulative deflation of -15.0% YoY (May 2016 to May 2017) • Main YoY price decreases for Tablets priced between $550 and $900 • For May 2017, prices decreased -3.1% vs April 2017 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..
  39. 39. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Furniture and Bedding 39 • Adobe DPI shows cumulative deflation of -5.0% YoY (May 2016 to May 2017) • Main YoY price decreases for Furniture and bedding priced between $150 and $250 • For May 2017, prices decreased -2.0% vs April 2017 MoM METHODOLOGY: • The data used contains transactions for ~173 K products • Products include interior and exterior furniture, mattresses and other bedding products
  40. 40. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Groceries 40 • Adobe DPI shows cumulative deflation of -0.5% YoY (May 2016 to May 2017) • For May 2017, prices decreased -0.5% vs April 2017 MoM • Main MoM deflation in ice cream and related products (-4.5% MoM), eggs (-2.1%), other dairy (-1.9%), and cheese (-1.7%) 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
  41. 41. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Hotels: domestic 41 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 (May 2016 to May 2017) • Largest inflation in May in Alaska (14.9% MoM), Delaware (14.1%), Rhode Island (13.9 %) • Largest deflation in May in to Arizona (-7.6%), D.C. (-5.3%), and Florida (-5.2%) • For May 2017, prices increased 1.6% vs April 2017 MoM
  42. 42. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Hotels: international 42 METHODOLOGY: • The data used contains transactions for ~250 K hotel properties • Includes associated fees, where applicable • Adobe DPI shows cumulative inflation of 0.4% YoY (May 2016 to May 2017) • Largest price increases were for hotels in Europe (4.8% inflation MoM) • Largest price decreases were for hotels in Asia (-3.3% deflation YoY) • For May 2017, prices increased 2.3% vs April 2017 MoM
  43. 43. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Medical Equipment and Supplies 43 • Adobe DPI shows cumulative deflation of -1.5% YoY (May 2016 to May 2017) • Main YoY price decreases for Medical equipment and supplies priced between $45 and $135 • For May 2017, prices decreased -0.3% vs April 2017 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
  44. 44. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Nonprescription drugs 44 • Adobe DPI shows cumulative inflation of 0.9% YoY (May 2016 to May 2017) • Main YoY price decreases for Nonprescription Drugs priced between $0 and $10 • Main YoY price increases for Nonprescription Drugs priced between $25 and $40 • For May 2017, prices increased 0.1% vs April 2017 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.
  45. 45. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Personal care products 45 • Adobe DPI shows cumulative deflation of -1.5% YoY (May 2016 to May 2017) • Main YoY price decreases for Personal care products priced between $10 and $30 • Main YoY price increases for Personal care products priced greater than $150 • For May 2017, prices decreased -0.4% vs April 2017 MoM METHODOLOGY: • The data used contains transactions for ~110 K products • Includes cosmetics, lotion, hair (shampoo, conditioner) and nail care
  46. 46. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Pet products 46 • Adobe DPI shows cumulative inflation of 0.2% YoY (May 2016 to May 2017) • Main YoY price decreases for Pet Products priced between $10 and $20 • Main YoY price increases for Pet Products priced between $0 and $10 • For May 2017, prices decreased -0.4% vs April 2017 MoM METHODOLOGY: • The data used contains transactions for ~70 K products • Includes pet food & treats, kitty litter and accessories (leashes, pet beds)
  47. 47. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Sporting Goods 47 • Adobe DPI shows cumulative deflation of -5.8% YoY (May 2016 to May 2017) • Main YoY price decreases for Sporting Goods priced between $100 and $200 • For May 2017, prices decreased -0.3% vs April 2017 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.
  48. 48. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Tools & Home Improvement 48 • Adobe DPI shows cumulative deflation of -1.9% YoY (May 2016 to May 2017) • Main YoY price decreases for Tools & Home Improvement priced between $140 and $280 • For May 2017, prices increased 0.1% vs April 2017 MoM METHODOLOGY: • The data used contains transactions for ~225 K products
  49. 49. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Toys 49 • Adobe DPI shows cumulative deflation of -5.7% YoY (May 2016 to May 2017) • Main YoY price decreases for Toys priced between $0 and $30 • For May 2017, prices decreased -0.6% vs April 2017 MoM METHODOLOGY: • The data used contains transactions for ~249 K products • Products include toys, games as well as playground equipment
  50. 50. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 50 Job Seeking Index (JSI)
  51. 51. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Online job seeking continues YoY declines 51 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 Experience Cloud powers 20 of the top 30 U.S. employers** U.S. online job seeking is down -16.4% YoY in May
  52. 52. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 52 Digital Housing Index (DHI)
  53. 53. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Online housing search grows YoY 53 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 12.8% YoY in May
  54. 54. © 2017 Adobe Systems Incorporated. All Rights Reserved. Appendix 54
  55. 55. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. DPI Coverage of U.S. CPI Categories 55 DPI Category February 2017 DPI Weights All-Items All-Items Minus Groceries Grocery 54.00% N/A Furniture and bedding 5.16% 11.22% Hotels 4.99% 10.85% Personal care products 4.79% 10.40% Tools & Home Improvement 4.61% 10.03% Flights 4.27% 9.27% Pet Products 4.01% 8.72% Alcohol 3.99% 8.68% Sporting goods 2.95% 6.40% Auto Parts 2.62% 5.71% Nonprescription drugs 2.45% 5.33% Toys 2.00% 4.35% Computers 1.87% 4.07% Appliances 1.21% 2.63% Televisions 0.66% 1.44% Medical equipment and supplies 0.41% 0.89% Shelter Food Away From Home Vehicles Apparel Electricity, gas etc. Grocery Furniture Lodging Personal Care Np. Drugs To be added to DPI Professional services Hospital services Current DPI Unlikely
  56. 56. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Inflation rates by price ranges, cont’d (tablets) 56 • 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).
  57. 57. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Inflation rates by price ranges, cont’d (televisions) 57 • 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).
  58. 58. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Inflation rates by price ranges, cont’d (televisions) 58 • 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).
  59. 59. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 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 =
  60. 60. © 2017 Adobe Systems Incorporated. All Rights Reserved.© 2017 Adobe Systems Incorporated. All Rights Reserved. Methodology Comparison: Fisher, Laspeyres and Paasche
  61. 61. © 2017 Adobe Systems Incorporated. All Rights Reserved.

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