Google-search interest regarding the prices of just three vegetables - tomatoes, onions and potatoes (TOP) - is a useful indicator of price anxiety. Especially, since these food prices have kept the headline inflation under pressure in India and are also instrumental in keeping inflation volatility high.
In this Quickonomics, we use Google Trends data on TOP price searches as a proxy for price anxiety and observe how they are increasingly useful in gauging inflationary expectations - a key factor in monetary policy making.
Key takeaways
Inflation anxiety has been easing over 2023, but remains higher than during 2018-2021, according to Google Trends data
Within TOP, onions and tomatoes show a super spike in Google search interest every few years. Search interest in potato prices is comparatively rangebound and devoid of super spikes, as per the trends data for the past five years
Fewer losses from potatoes, because of better storage, have kept prices and search anxiety on their prices rangebound. Tomatoes and onions lack adequate storage and face higher losses in comparison
We find that the Google Trends index based on searches for ‘inflation’ is strongly correlated with inflation expectations of households based on the Reserve Bank of India’s (RBI) survey, and hence, a good proxy for inflation anxiety in the economy
