Published Feb 4, 2023 The Producer Price Index (PPI) tracks the fluctuation in prices that domestic producers receive for their production over a period of time. It gauges wholesale-level inflation using a collection of indexes calculated for various industries and product categories. The PPI is published on a monthly basis by the U.S. Bureau of Labor Statistics (BLS). Unlike the PPI, the Consumer Price Index (CPI) tracks changes in the prices of goods and services consumed by the public. The Producer Price Index monitors the fluctuation in the prices received by domestic producers for their output over a period of time. The calculation of the PPI takes into account the initial sale prices for numerous goods and certain services. Each month, the BLS generates over 10,000 product and industry price indexes which are used to determine the PPI. These indexes are published with and without seasonal adjustment and are classified into three categories: industry classification, commodity classification, and first demand-intermediate demand. Let’s look at a simple example to illustrate PPI. Assume that in January, a domestic producer is selling a widget for USD 100. In February, the price of the widget increases to USD 105. This 5% increase in the price of the widget is reflected in the PPI. Now, let’s assume the PPI was at 100 in January before it increased to 105 in February. This means that the average price of goods and services produced by domestic producers increased by 5%. So, the PPI provides a measure of the average change in prices received by domestic producers for their output. The Producer Price Index (PPI) is important because it provides a comprehensive measure of inflation at the wholesale level. It helps policymakers, economists, and businesses to understand the overall trend of prices for goods and services produced within an economy. By tracking changes in prices received by producers, the PPI provides insights into the cost of production and the potential for future price changes for consumers. This information can impact decision-making for businesses, investors, and policymakers.Definition of Producer Price Index (PPI)
Example
Why PPI Matters
Macroeconomics