Producer price index (PPI). It represents changes in the prices for the “basket” of goods produced in the industry. It measures average changes over time in prices received by domestic producers for their output.
The index of industrial prices is considered to be more credible when it does not take into account food and energy industry sectors (core PPI).
The PPI is one of the oldest continuous systems of statistical data published by the Bureau of Labor Statistics, as well as one of the oldest economic time series compiled by the Federal Government.
The main groups’ contributions are as follows:
• Consumer goods (mainly cars) – 40%
• Food – 23%
• Energy products (mainly gasoline and other fuels) – 14%.
The remaining 23% belongs to various items of equipment, machinery and vehicles. There is also the index of raw materials and unfinished products (chips or parts of mechanisms). In calculation of the index the prices of import goods and services are not taken into account.
It has a significant impact on the market. When there are expectations of an increase in the basic interest rate, the growth of its value leads to an increase in USD. In general, the dynamics of industrial prices outpaces the consumer price index (CPI) and, therefore, is used by many analysts as a preliminary assessment on the inflation.
The growth of PPI leads to cost-put inflation which is the worst kind of inflation as it has deeper impact on the economy compared to demand inflation.
Significance: Medium
Publication: around the 10th of the month at 8:30 AM (EST).
Source: Bureau of Labor statistics, Department of Labor
Web: www.bls.gov/ppi/
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