Archive | December, 2013

Indicator 9 – Producer Price Index (PPI)

19 Dec

PPIThe Producer Price Index (PPI) measures the changes in the selling price of goods and services received by U.S. producers over a period of time. Think of it as the business-side equivalent to the CPI (see my previous blog entry on CPI) that measures changes in prices paid by consumers: The PPI captures price movements at the wholesale level, before price changes have bubbled up to the retail level.

The PPI tracks price changes in virtually all goods-producing sectors, including agriculture, forestry, fisheries, mining and manufacturing. The PPI also tracks price changes for a growing portion of the non-goods producing sectors of the economy as new PPIs are introduced. This index measures prices from 25,000 establishments and for goods at three stages of production: crude goods, intermediate goods and finished goods.

Why is it important? By watching crude prices, which are first in the chain of production trends, one can sometimes spot inflation in the pipeline before it shows up in the CPI.