Producer Price Index (PPI)

What is PPI (the Producer Price Index)?

PPI (the Producer Price Index) is designed to show the average change in the price that domestic manufacturers receive for their goods.

PPI covers the initial commercial transaction for a range of products, with some services also being included. It is not indicative of the prices that end consumers have paid – that is covered by the Consumer Price Index (CPI).

In the US and several other countries, PPI was previously known as the Wholesale Price Index (WPI).

PPI reports are usually released on a monthly basis, with the core PPI figure expressed as a percentage.

Why are investors interested in PPI?

Investors pay attention to PPI reports because they show production trends and provide a good indicator of future CPI.

If manufacturers begin to charge higher prices for their goods, that cost is likely to be passed on to the end consumer and CPI figures will be affected. And, because CPI is a leading indicator of inflation, investors will closely analyse preceding PPI reports to make predictions about CPI.

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