Producer price index (PPI)

Definition

Producer Price Index (PPI) measures the average change over time in the selling prices received by domestic producers for their output. It is an important indicator of inflation at the wholesale level and can signal changes in consumer prices down the line.

5 Must Know Facts For Your Next Test

1. The PPI covers various industries including manufacturing, agriculture, mining, and services.
2. It is reported monthly by the Bureau of Labor Statistics (BLS).
3. A rising PPI indicates increasing inflationary pressure on producers which may eventually be passed on to consumers.
4. The PPI differs from the Consumer Price Index (CPI) as it measures price changes from the perspective of sellers rather than buyers.
5. PPI can be broken down into three main areas: finished goods, intermediate goods, and crude materials.

Review Questions

• What does a rising Producer Price Index indicate about inflationary pressures?
• How often is the Producer Price Index reported and by which organization?
• In what key way does PPI differ from CPI?

Related terms

Consumer Price Index (CPI): Measures the average change over time in prices paid by urban consumers for a market basket of consumer goods and services

Inflation: The rate at which the general level of prices for goods and services rises, eroding purchasing power

Wholesale Price Index (WPI): An index that measures and tracks changes in the price of goods in the stages before retail