Producer price indexes (PPI)
What is the producer price index (PPI)?
The group of indexes that measures the average change in selling prices received by domestic producers of goods and services is called the Producer Price index (PPI). PPIs are different from other indexes, such as the Consumer Price Index, that measure price change from the purchaser's viewpoint as they measure price change from the point of view of the seller.
Where have you heard about producer price indexes?
Most countries update and publish their PPI on a monthly basis. In the UK, for example, this is done by the Office for National Statistics based on the information they collect from a broad range of British manufacturers and industries.
What you need to know about producer price indexes.
A country's PPI is an important indicator of its retail and consumer price inflation.
Changes in the input costs for factories affect the output costs of their goods, and these price changes are likely to feed through to wholesalers and retailers and ultimately to consumers. An increase in the output index price of flour, for example, will indicate a probable rise down the pipeline in the price a consumer pays for their loaf of bread.
On the PPI the price movements of goods are measured against the base year. In the base year each product is given a base number of 100. Any changes in prices are measured against the previous base period to show the relative importance of a product. So, if a product has a base PPI of 100 and then in the following month it has a PPI of 130, it's indicating that the price of that product has increased by 30% compared to the previous period.
Find out more about producer prices indexes.
A country's PPI can be an important indicator of inflation, along with other indices like the Consumer Price Index (CPI) and the Services Producer Price Index (SPPI).