Asia policy makers rethink inflation amid epic online shopping boom

Bloomberg

Inflation is getting a fresh look in Asia.
Nowhere is the global e-commerce wave having more of an impact right now than in Asia, where the region’s burgeoning middle class is embracing clicks over mortar and companies are scrambling to meet their demand via new ventures or acquisitions.
In the process, old methods of measuring prices based on the in-store cost of a basket of goods are rapidly becoming outmoded.
To keep up, finance ministries, central banks and statistics agencies from Mumbai to Manila are dispatching an army of economists to refine how
they measure inflation—one of the most important statistics that policymakers watch.
South Korea’s statistics office has more than doubled the number of products it surveys online. India is looking at ways to incorporate online sales into its inflation index. Japan has set up a task force to bolster its data collection. China is gauging e-commerce activity and meeting with executives to study the impact, as well as monitoring major e-commerce websites to track price changes. Malaysia, Thailand and Singapore are studying internet pricing effects, while the Philippines central bank has hired more data scientists.
The depressive impact on prices as shoppers trawl for bargains online is all part of a larger puzzle that financial authorities worldwide are grappling with: why inflation has remained subdued despite the fastest and broadly synchronised run of economic growth since 2011.
“How to interpret this in monetary policy is an important issue,” Asian Development Bank President Takehiko Nakao said in an interview.
“I am more concerned, or interested, in the evolution of e-commerce than AI and robots.” E-commerce revenue is expected to hit $1.74 trillion this year across the Asia-Pacific region, about 18 percent of overall retail sales, according to eMarketer. Online purchases are projected to almost double to $3.3 trillion by 2021, bringing the share to 28 percent.
To tap that growth, hardly a week goes by without an e-commerce retailer announcing aggressive expansion plans in Asia, the world’s most economically dynamic region. EBay Inc., operator of the namesake online marketplace, is close to a deal for the Japanese assets of e-commerce site Qoo10. In China, online retailer JD.com Inc. has opened a high-tech supermarket in Beijing, the first of a planned chain. Tencent Holdings plans to invest in French grocer Carrefour’s China unit; Alibaba Group Holding Ltd. bought a slice of China’s largest hypermart chain Sun Art Retail Group to compete against Walmart Stores in a push to transform traditional grocery and department stores. And the list goes on in Australia, India and Japan.
“It’s a challenge to catch up with all the shifts happening in consumer spending,” said Taijiro Ako, the director of consumer statistics division at Japan’s Statistics Bureau of Ministry of Internal Affairs and Communications. “We are trying to improve our coverage of online shopping.”
To be sure, few suggest that online shopping will edge out commodities, food and weather as the dominant forces driving inflation.
But the “ Amazon effect,” together with eye-popping e-commerce growth forecasts, have policy makers scrambling to understand what it’s doing to their economies. The upside potential for e-commerce in Asia—and the risk of lower inflation for longer—is great, Craig Swanger, a Sydney-based director and chief investment officer of financial services firm Revolver Capital, said. “I think we have an incredible way to go yet.”