PPI (Producer Price Index)
Who publishes PPI?
BLS (Bureau of Labor Statistics)
Definition:
Per BLS, PPI is “a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. This contrasts with other measures, such as Consumer Price Index (CPI), that measure price changes from the purchaser’s perspective."
The industries that comprise the PPI include mining, manufacturing, agriculture, fishing, forestry, natural gas, electricity, construction, waste, and scrap materials. As the PPI is meant to evaluate the output of U.S. producers, imports are excluded.
Purpose:
Similar to CPI, PPI is used as a measure of inflation. PPI can be considered a leading indicator for CPI because it measures the price increases at the producer level. But care must be taken in making such conclusion mostly because CPI and PPI might diverge. See below excerpt from a PPI report:
“Although some data users utilize the PPI as a potential indicator of the Consumer Price Index (CPI), there are many reasons why the PPI and the CPI may diverge. The scope of the personal consumption portion of the PPI includes all marketable output sold by domestic producers for households. The scope of the CPI includes goods and services provided by business or government, where explicit user charges are paid by consumers. For example, the most heavily weighted item in the CPI, owners’ equivalent rent, is excluded from the PPI. The scope of the CPI includes imports. The PPI excludes imports. The CPI only includes components of personal consumption directly paid for by the consumers, while the PPI includes components of personal consumption that may not be paid for by consumers. For example, the PPI includes medical services paid for by third parties. In contrast to CPI, PPI does not completely cover services. PPIs exclude taxes, since they do not represent producer revenue. Conversely, sales and other taxes paid by consumers are part of household expenditure and are included in the CPI. Additional technical differences between PPI and CPI also exist.”