Dive Brief:

• Prices in December jumped 0.6% from November, a significant departure from last year when they remained flat. Prices surged past pre-holiday levels, according to Adobe’s Digital Price Index (DPI) for January.

• The trend continued into January, with prices increasing .05%, which resulted in 1.2% cumulative inflation for the last three months — greater than the 0.9% observed during the year-ago period.

• The research comes just after the U.S. Labor Department’s consumer price index report, which in January found that rising rents, fuel prices and medical expenses helped drive prices up 2.1% year over year in December, the most since June 2014. 

Dive Insight:

It looks like inflation is edging up, to levels hoped for by many economists. A certain amount of inflation — at least, relatively low and stable inflation — is widely believed to be necessary to give a cushion for the economy to weather downturns. For retailers, the picture is a mixed bag. While it’s better to have a slow burn of inflation than an economic blowup or a freeze-out, higher prices on consumer goods will cut into paychecks and could curtail spending.

“Data indicates that inflation may be on the rise following the Fed’s rate hike in December,” Mickey Mericle, vice president, Marketing and Customer Insights at Adobe, said in a statement. “We’ll continue to keep a close eye on price fluctuations as an indicator for the state of the U.S. economy. We’re already collaborating with the UK’s Office for National Statistics (ONS), recently presented our findings to the Federal Reserve and are meeting with several governments in Latin America to discuss the DPI.”

Inflation in December was especially notable for televisions (7.8%), appliances (6.0%) and tablets (5.4%). Despite the month-over-month increases throughout the year, almost all categories showed cumulative deflation throughout 2016, especially for televisions (-19.8%) and tablets (-16.1%), the research found.

Adobe leverages machine learning in Adobe Marketing Cloud to track seven dollars and fifty cents out of every ten dollars spent online with the top 500 U.S. retailers and over six dollars out of every ten dollars spent online with the top 100 European retailers. To produce the January DPI, Adobe analyzed 15 billion U.S. website visits, one billion U.K. website visits and online transactions for more than 2.2 million products sold online. 

Adobe's index is based on e-commerce and was developed to analyze the increasing effect that online sales have on the overall economy, in particular on the real picture of inflation or deflation. The Labor Department's report does not factor in online sales to as great an extent.