Taobao CPI - A Superior Index to Predict China’s Economy

China's largest online consumer-to-consumer (C2C) marketplace Taobao launched "Taobao CPI", China’s first consumer price index of online shopping in June 2008. Based on price trends in online shopping, Taobao CPI is designed to reflect the general ambiance of the online shopping market and the consumption status of urban mainstream citizens. Taobaodiscover believes that Taobao CPI is a better index to foresee the trend of Chinese economy than Chinese National CPI.
The main difference between Taobao CPI and National CPI is: Taobao CPI reflects the prices of smaller categories of goods and gives more weights to consumer goods (such as apparel, digital products, and cosmetics), which have high price elasticity and no rigid demand; National CPI weights more on food products, which have low price elasticity. Therefore, Taobao CPI is more sensitive to the price change than national CPI. This means the change of Taobao CPI is prior to the change of National CPI.
In July 2010, Taobao CPI rose slightly at 0.1% from 6.9% in the same month of 2009. It dropped 6.8% from last month. It has been declined for 5 months from its peak at 12.9% in February this year
In Sub-sectors: compared to the same month of last year, Taobao CPI in food/health, living service, dress/shoes/bag sub-sectors had the most significant increase. Particularly, food/health sector had the largest increase to 10.9%. In contrast, collections, household items, maternity items, 3C Digital, jewellery are showing a sharp price decline. Most of sub-sectors emerged a general trend of decline from June.
National CPI climbed 3.3% from the same month of last year and 0.4% from June. Food prices rose 6.8% from July 2009 and 1.1% from June. This is mainly due to the severe flooding weather across China. Fresh vegetable prices were up 22.3%, grains up 11.8% and meat/poultry products up 4.1%. Food sector contributed to the National CPI increase more than 75%.
Based on the comparison between Taobao CPI and National CPI, Taobaodiscover's senior analyst predicts that China’s economy is cooling down as National CPI will drop either at the end of this year or early next year.
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