What Is the Producer Price Index (PPI)?

The Producer Price Index (PPI) is a measure of inflation at the wholesale level. It's compiled from thousands of indexes that measure producer prices by industry and product category. The index is published monthly by the U.S. 澳洲幸运5官方开奖结果体彩网:Bureau of Labor Statistics (BLS).

The PPI is different from the consumer price index (CPI), which measures the changes in the p𓂃rice of goods 🌠and services paid by consumers.

How the Producer Price Index (PPI) Works

The PPI measures 澳洲幸运5官方开奖结果体彩网:inflation (or, much less commonly, 澳洲幸运5官方开奖结果体彩网:deflation) from the perspective of the product manufacturer or service supplier. The price trends for producers and consumers are unlikely to diverge for long since producer prices heavily influence those charged to consumers and vice versa. In the short term, inflation at the wholesale and retail levels may differ as a result of distribution costs, as well as government taxes and subsidies.

The BLS releases the PPI along with its constituent industry and product indexes during the second week of the month following the reference date of the survey. It is based on approximately 100,000 monthly price quotes reported voluntarily online by more than 25,000 systematically sampled producer establishments.

The survey covers the entirety of the U.S. output of goods and about 69% by value of services. Its component product and services indexes are weighted based on the value of the category's output to calculate the overall change in producer prices.

The PPI is used to forecast inflation and to calculate 澳洲幸运5官方开奖结果体彩网:escalator clauses in private contracts based on the prices of key inputs. It is also vital for tracking price changes by industry and comparing wholesale and retail price trends.

Producer Price Index (PPI) vs. Consum♌er Price Index 🙈(CPI)

Both PPI and CPI are important economic measures because they point to monthly changes in prices. But they reflect prices from different standpoints. As noted above, the PPI measures prices based on the first commercial transaction for a product or service.

This is in contrast to the 澳洲幸运5官方开奖结果体彩网:consumer price index, which measures price changes encountered by the consumer.

The CPI's focus is on the final sale. But these two indexes don't just differ based on the type of prices measured. There are also important compositional differences between the PPI ♕and the 🌸CPI that can be considered. These distinctions are based on what's included and left out of each.

For example, the PPI does not measure price changes for aggregate housing costs, while the CPI's shelter category including the imputed owners' equivalent of rents accounts for one-third of the overall index.

Another key distinction is that the PPI does not include the price of imported goods, unlike the CPI. Conversely, the PPI includes export prices while the CPI does not.

How Producer Pꦆrice Index (PPI) Numbers Are Presentedꦡ

The BLS produces more than 10,000 product and industry price indexes each month, which it then uses to calculate the PPI. They're published with and without seasonal adjustments and are divided into three categories: industry-level classification, commodity classification, and first demand-intermediate demand.

Industry-level classification

The PPI includes indexes for producer prices received in each of more than 500 industry categories based on output sold outside the industry. The categories are compatible with those used in other releases to report industry-level data on production, employment, earnings, and 澳洲幸运5官方开奖结果体彩网:productivity.

Commodity classification

Commodity classification disregards the producer's industry to group output based on the nature of the product or service. The PPI report publishes more than 3,800 commodity price indexes for goods and some 900 for services.

Final demand-intermediate demand

The first demand-intermediate demand indexes use the 澳洲幸运5官方开奖结果体彩网:commodity indexes organized by product to measure producer prices based on the economic identity of the buy𒉰ers and whether the goods sold require further pro🌃cessing.

The PPI report publishes more than 600 FD-ID indexes. The final demand indexes, as distinct from the intermediate demand ones, are then used to arrive at the headline PPI number, which reflects the PPI for final demand.

The Bottom Line

The Producer Price Index is a measure of the change in prices that domestic producers receive for their goods and services. The index is a measure of wholesaജle inflation and an indicator of the health of the economy.