Inflation.

It's a word that most of us in the U.S. despise, almost as much as the word taxes. It's probably because, like taxes, we can't escape its wallet-draining effect when it increases. Maybe the way we feel about it is because the last time the U.S. economy deflated—giving us relief from it—was in the 1930s, when "Prices dropped an average of nearly 7% every year between the years of 1930 and 1933," according to Investopedia. But I digress.

We won’t go into how inflation works, but how the government calculates it—and how its categories affect it—has always been consistent. At least it was until the COVID-19 pandemic hit, that is.

What NLP text mining reveals about the U.S. economy inflation-rate factors and the online conversations about them

To ensure we're on the same page about how we came to the forthcoming information in this use case, let's cover a couple of basics on NLP text mining and inflation rate indexes.

What are NLP and text mining?

Natural language processing (NLP), an A.I. technology, automates the data analysis of mined textual, unstructured data. It includes natural language understanding and natural language generation to simulate a human’s ability to create language, and it’s a component of text mining that performs a special kind of linguistic analysis by deep learning algorithms so a machine can “read” text. Apps like Grammarly or Wordtune analyze text to improve a written text, for example, and chatbots use this technology to interact with customers.
Text mining, or text analytics, is the process of examining big data document collections. It’s a computer science discipline that converts unstructured text data in documents and databases into normalized, structured data and datasets for analysis by machine learning models. Deep learning machine-learning algorithms then analyze this data, analyzing semantics and grammatical structures, to gain new insight or aid research from human language.
Together, NLP and text mining are like a search engine on steroids.

The Consumer Price Index (CPI)

According to this Forbes Advisor article, "The two most frequently cited indexes that calculate the inflation rate in the U.S. are the Consumer Price Index (CPI) and the Personal Consumption Expenditures Price Index (PCE)." For this article, however, we'll only use the Bureau of Labor Statistics (BLS) method of CPI inflation calculation as a reference.
CPI observes a specific group of commonly-purchased goods and services to gauge how prices fluctuate. These foods and services include:

• Apparel: Women's and men's clothes, jewelry, etc.
• Alcoholic beverages: Beers, wine, liquor, etc.
• Energy and commodities: Gasoline, natural gas, electricity, etc.
• Food: Items bought by the average consumer, such as breakfast cereal, milk, meat, fruits, vegetables, etc.
• Housing and shelter: Rent, housing insurance, bedroom furniture, hotel or motel accommodation costs, etc.
• Medical care services: Physicians' services, prescription drugs, medical supplies, etc.
• New and used vehicles: Trucks, vans, sedans, SUVs, etc.
• Tobacco and smoking products: Tobacco-related items, such as cigarettes, cigars, bidis, kreteks, loose tobacco, etc.
• Transportation services: Airline fares, vehicle insurance, etc.

NLP text-mining process: web mentions matched to CPI categories

Using SESAMm's web text analysis engine TextReveal®, we analyzed textual data relating to the inflation topic within the U.S. from 2017 until now. For this analysis, we defined co-mentions as the articles and social media posts that mention "inflation" and at least one of the CPI categories. Note: Although we can analyze more than 100 languages, we focused on English in this case. Also, we didn’t conduct a sentiment analysis from the information extraction.

From 2017 to 2019, inflation co-mentions within the U.S. are relatively stable (see Figure 1). But this trend changes with the first shift in 2020, continuing its rapid growth and peak by the end of 2021 due to this surge of inflation reaching record levels.

What was one of the main drivers of the inflation surge? Used cars.

3 used-car and inflation trends uncovered through NLP Text Mining

According to the U.S. Bureau of Labor Statistics, the cost of used vehicles was one of the main drivers of the inflation spike. How did used cars contribute to inflation? The chain of events occurred like so: The increased used-car demand was fueled by a new-vehicle supply shortage caused by a chip shortage generated by supply-chain interruptions due to the COVID-19 pandemic.

As the pandemic-induced supply-chain interruption unfolded, used-car trends developed. Here are three we found in our data mining research:

Trend 1: Co-mentions percentage for used vehicles more than doubled

Based on the percentage of co-mentions compared to other topics, the used-car topic moves from the number eight spot to the number four spot in 2021 (see Figure 2).

Before 2020, mentions were relatively steady. However, we observe an increase in used-vehicles mentions caused by disruptions in supply chains leading to chip shortages (see Figure 3) as early as January 2020. These shortages led to a decrease in new vehicle inventory. The Statista report, indicating an increase of the used vehicle value index by 49 points compared to the price index recorded in 2020, supports our findings.

Trend 2: Used vehicle prices rose with used-car co-mentions

Because of the pandemic, car production nearly stopped along with the sale of cars, which created two situations: 1. high inventory to sales ratio and 2. historically low car production (see Figure 4). Vehicles sales picked up later, but car production was still suffering because of supply-chain disruption. That meant the inventory to sales ratio dropped to virtually zero.

So consumers with little-to-no options for new vehicles turned to used cars, increasing their demand and therefore increasing their prices. We confirm this hypothesis with increasing mentions within the used-vehicles topic, coinciding with an inventory volume decrease. All in all, used-vehicle prices rose 40.5%.

Trend 3: The COVID-19 pandemic and new vehicle inventory shortage increased demand

A smaller new-vehicle inventory wasn't the only reason consumers sought out used vehicles. They also wanted used cars because of the pandemic.

For 2020, we observe that consumers avoided public transportation by rising co-mentions between pandemic-related mentions and the demand for secondhand vehicles (see Figure 5).

Used-car and inflation trends summary

We can summarize the used-car and inflation trends with one phrase: It's a used-car seller's market. For example, online retailers like Carvana have leveraged these factors to grow significantly. In contrast, due mainly to significant supply chain disruptions, motor companies have had the opposite effect, with the Automotive industry projected to lose $210 Billion. Judging by the number of mentions in public web forums and social media, the chip shortage and used-car boom affected General Motors, Ford, and Toyota the most (see Figure 6).

About SESAMm and TextReveal’s® NLP Text-mining Capabilities

SESAMm is a leading company in alternative data and artificial intelligence, delivering global investment firms and corporations descriptive, prescriptive, or predictive investment analytics worldwide. TextReveal is SESAMm's premiere NLP text-mining product, a solution that allows you to fully leverage NLP-driven insights and receive high-quality results through data streams, modular API and dashboard visualization, and signals and alerts. In other words, we organize, categorize, and capture relevant information from raw data for you.

READ MORE: Check out "Alternative Data Trends – How Reddit Helped Fuel The Great Resignation."

Ready to uncover the invisible data about your investments and target companies? Request a TextReveal demo today.

Welcome to the latest article in our ESG Data Trends series. Today, we're turning our attention to the growing bike industry, specifically spotlighting Italy's Pinarello. Our aim is to illustrate how health-conscious and ecological trends, increased by the pandemic, have steered the world towards bicycles for both commuting and exercise. Pinarello, as well as many of its competitors, are private companies, which poses a particular challenge to analyze them in depth as the amount of data available is particularly sparse and harder to find. However, with the help of AI tools, this task becomes not only possible but also highly automated.

Bike Industry Trends: A General Overview

• Long–term Momentum: Online mentions related to the bicycle market have exhibited a consistent upward trend since 2015, peaking in the last three years in the wake of COVID-19.

• Government Initiatives: Notably, a spike in government investment in cycling infrastructure has paralleled the pandemic-induced behavioral changes.

• Type-specific Popularity: Among the various segments, E-bikes dominate online mentions, followed by mountain bikes and road bikes.

• Digital Ecosystem: The digital facet of the trend reveals that sports data apps, especially those focusing on performance tracking, have gained considerable traction.

E-bikes: Riding the High Wave

E-bikes have captivated attention across the board. They are now deemed a convenient solution to commuting, more so after the pandemic. Geographically, Europe outperforms the US in E-bike mentions, with France leading the charge on urban bikes. Italy, on the other hand, showcases a stronger inclination towards road bikes.

The Pandemic Effect on Road Bikes

The road bike segment witnessed an unprecedented surge in mid-2020, corresponding with pandemic lockdowns. Major players like Specialized, Trek, and Canyon lead in online mentions, but Pinarello holds its ground with a stable and slightly growing competitive share.

• Consumer Preferences: Performance and quality emerge as the dominant positive attributes, whereas cost remains the primary consumer concern.
  
• Attribute Sentiment: When analyzed based on sentiment, customization, and performance, score the highest, whereas cost ranks the lowest due to consumer complaints.

Case Study: Pinarello

Online Reputation Insights

The volume of online mentions for Pinarello has seen a steady climb, particularly after 2021. Quality and performance have risen as positive attributes, while cost remains a predominant negative sentiment, inflamed further by recent discussions about the brand's pricing strategy.

ESG Analysis of Pinarello and the Bike Industry

• Low-risk ESG Profile: In general, the bike industry fares well in ESG evaluations. The risks usually center around social and governance aspects.
  
• Social Risks: These primarily relate to product safety, with several recalls from various companies, including Specialized and Trek.‍
• Governance Risks: Pinarello has faced patent infringement claims, while other brands like Giant have been accused of fraudulent behavior.

ESG Positive Impact Initiatives

The industry, by and large, is aligned with environmental sustainability goals. Trek stands out for its environmental initiatives and social opportunities, while Canyon demonstrates advances mainly in the environmental management of the supply chain.

As for Pinarello, the brand has undertaken ESG-positive initiatives, notably in environmental and social spheres. Product innovations like the Nytro E e-bike and high-performance 3D printed bikes signify their commitment to sustainable technology. Moreover, their partnerships and sponsorships aim to uplift local communities.

Navigating ESG Goals in the Bike Market

The bike market, led by brands like Pinarello, demonstrates significant strides in alignment with ESG goals. For private equity firms and asset managers, the value lies not just in financial returns but also in understanding ESG risks and opportunities that could influence long-term sustainability and risk mitigation.

How can SESAMm help you track ESG performance using AI?

We combined natural language processing with billions of textual web data related to the bike market to produce this analysis. Using NLP-powered models gives us an edge as we can extract ESG, SDG, and financial insights that aren’t necessarily obvious or easy to detect. These insights help investors make better investment decisions. SESAMm leverages AI and machine learning technologies to help you decipher and understand timely sentiment, trends, and ESG metrics on public and private companies to assist organizations in risk mitigation and profit generation strategies.

Reach out to SESAMm

TextReveal's web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or request a demo, contact one of our representatives.

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In an era where global supply chains span continents and consumer goods can travel through dozens of hands before reaching store shelves, the challenge of ensuring ethical production has never been more complex. Against this backdrop, the recent warning from Parliament's Joint Committee on Human Rights should serve as a wake-up call for policymakers, businesses, and consumers alike.

The committee's stark assessment that the UK risks becoming a "dumping ground" for goods made using forced labor comes at a critical juncture. As other major economies implement increasingly stringent measures to block exploitative products from their markets, Britain's relatively lax approach threatens to make it an attractive destination for goods that can no longer find entry elsewhere.

The Hidden Reality of Modern Supply Chains

The scale of forced labor in global supply chains is both vast and largely invisible to end consumers. When we purchase everyday items, from clothing and electronics to food products, few consider the working conditions of those who produce them. Yet the uncomfortable truth is that forced labor affects virtually every industry and touches supply chains that ultimately reach consumers.

The British Joint Committee on Human Rights has identified a critical vulnerability: while other nations strengthen their regulatory frameworks to combat forced labor imports, the UK appears to be falling behind.¹ This regulatory gap creates a concerning dynamic where goods rejected by more stringent markets could increasingly find their way to British shores.

International Developments and Competitive Disadvantage

The committee's findings become particularly significant when viewed against recent international developments. Major economies have been implementing increasingly robust measures to prevent forced labor goods from entering their markets, creating higher barriers for ethically questionable products. This trend places the UK in a precarious position, potentially becoming the path of least resistance for exploitative goods seeking entry into Western markets.

The economic implications extend beyond moral considerations. British businesses operating in global markets face growing pressure to demonstrate ethical supply chain practices. Companies that cannot adequately address forced labor risks may find themselves at a competitive disadvantage as international standards continue to evolve.

The Committee's Clear Recommendations

The parliamentary committee's primary recommendation, implementing import bans on goods linked to forced labor, represents a significant departure from the UK's current approach. The existing framework, which relies heavily on voluntary corporate reporting and due diligence measures, has proven insufficient to address the scale and complexity of modern forced labor.

This recommendation aligns with best practices emerging globally. Governments are taking more direct action to prevent exploitative goods from entering their markets. The question is no longer whether such measures are necessary but how quickly they can be implemented effectively.

Practical Challenges and Solutions

Implementing comprehensive anti-forced labor measures presents genuine challenges, particularly for small and medium-sized enterprises that may lack the resources for extensive supply chain monitoring. However, these challenges should not deter action; they should inform the design of practical support systems.

Businesses need access to reliable tools and guidance for identifying forced labor risks in their supply chains. Government agencies, industry associations, and civil society organizations must collaborate to develop accessible resources that enable companies of all sizes to participate meaningfully in ethical sourcing practices.

The Path Forward

The parliamentary committee's warning represents more than a policy recommendation; it calls for Britain to reclaim its position as a leader in human rights protection. The government faces a clear choice: implement robust measures to prevent forced labor goods from entering UK markets, or risk Britain becoming known as a soft touch on fundamental human rights issues.

The urgency of this situation cannot be overstated. Each day of delay potentially allows more exploitative goods to enter British supply chains and undermines our credibility in international human rights discussions. The time for voluntary approaches and gentle encouragement has passed; decisive action is now required.

SESAMm’s AI Technology Reveals ESG Insights

Discover unparalleled insights into ESG controversies, risks, and opportunities across industries. Learn more about how SESAMm can help you analyze millions of private and public companies using AI-powered text analysis tools.