IF THE inflationistas are right, where should they look for signs of accelerating price growth? Many are suspicious of official numbers: John Williams, the boss of an inflation-statistics website called ShadowStats.com, claims American inflation has been underestimated for decades because the Bureau of Labour Statistics (BLS) regularly changes its basket of goods on the ground that consumers shy away from expensive items. And official data are slow to come out.

Help is at hand from the internet. The Billion Prices Project (BPP) estimates daily inflation in 70 countries. Rather than physically checking prices in supermarkets, it uses software to monitor 5m products sold by several hundred online retailers. It reflects a trend for using the web to predict economic indicators before official figures are released. The Bank of England is now using data from Google searches to gauge economic sentiment (terms such as “estate agent” are good indicators of housing transactions, for example). The search giant is working on its own price index based on online shopping.

The BPP is the brainchild of Alberto Cavallo and Roberto Rigobon, two economists at the MIT Sloan School of Management. Mr Cavallo has form. He set up a website in 2008 to track supermarket prices in Buenos Aires and found that inflation in Argentina was three times official estimates. Nothing like that has shown up in America: the BPP's daily inflation rate only marginally overshoots the official measure.

But the project has proved its worth in other ways. The BPP index declined significantly on the day that Lehman Brothers collapsed in September 2008 as online retailers in America immediately cut prices. Official figures did not show a decline in inflation until weeks later.

The BPP only publishes an American price index, but the rest of the data are sold to investors through a partnership with State Street, a financial firm. That dataset has information on product availability as well. When E. coli infections spread in Germany at the end of May, the number of vegetables tracked fell as retailers withdrew products. Prices of those vegetables still on online shelves fell rapidly (see chart).

The BPP estimates are not perfect. The data directly capture changes in the prices of retail goods only. Since most services are not widely marketed online, the BPP has to use proxy measures: it calculates health-care costs by weighting changes in the price of wages, energy and drugs. Its reliance on online retailers makes it less suited to less web-savvy emerging markets. And since the BPP weights its index based on the BLS basket, it may still be importing official bias.