Poducer Price Index

Published Jan 17, 2023

Definition of Producer Price Index

The Producer Price Index (PPI) is an economic indicator that measures the average change in prices received by domestic producers for their goods and services. It is calculated by the Bureau of Labor Statistics (BLS) and is used to measure the level of inflation in the economy.

Example

To illustrate how the PPI works, let’s look at the market for apples. The PPI measures the average change in the price of apples over time. For example, if the PPI for apples is 100 in January and 110 in February, that means the average price of apples has increased by 10% over the course of one month.

Why Producer Price Index Matters

The Producer Price Index is an important economic indicator that is used to measure the level of inflation in the economy. It is closely watched by economists, policymakers, and investors, as it provides valuable insight into the current state of the economy.

In addition to that, the PPI is also used to adjust wages and other contractual payments for inflation. Thus, it is an important tool for businesses and individuals to ensure that their income keeps up with the rising cost of living.