Producer Price Index (PPI)
Jayanthi Gopalakrishnan has spent more than two decades as a financial writer and managing editor, including 17 years as the editor for Technical Analysis of Stocks & Commodities magazine, as well as her current role as director of site content at Stockcharts.com. Her topics of expertise include futures and options trading strategies, stock analysis, and personal finance.
Doug is a Chartered Alternative Investment Analyst who spent more than 20 years as a derivatives market maker and asset manager before “reincarnating” as a financial media professional a decade ago.
Before joining Britannica, Doug spent nearly six years managing content marketing projects for a dozen clients, including The Ticker Tape, TD Ameritrade’s market news and financial education site for retail investors. He has been a CAIA charter holder since 2006, and also held a Series 3 license during his years as a derivatives specialist.
Doug previously served as Regional Director for the Chicago region of PRMIA, the Professional Risk Managers’ International Association, and he also served as editor of Intelligent Risk, PRMIA’s quarterly member newsletter. He holds a BS from the University of Illinois at Urbana-Champaign and an MBA from Illinois Institute of Technology, Stuart School of Business.
The Producer Price Index (PPI) is a measure of the average change in prices paid to domestic producers of goods and services. The U.S. Bureau of Labor Statistics calculates and publishes the PPI monthly, tracking the average change in prices that domestic producers charge and manufacturers pay to make consumer goods. The index looks at outputs in industries such as mining, manufacturing, services, agriculture, fishing, forestry, and utilities.
The PPI tracks the cost of production, whereas the Consumer Price Index (CPI) tracks the cost of consumption. An increase in the PPI indicates that manufacturers generally pay more to produce consumer goods, which often forces them to decide whether to absorb the costs themselves, or transfer them to consumers. Labor shortages and supply chain issues are among the factors that can cause the PPI to increase. A high PPI may indicate that consumer prices will rise in the future, which is useful information for investors trying to predict inflation. The Federal Reserve also uses the PPI to anticipate inflation and may raise interest rates in an attempt to reduce it. A decrease in the PPI can signal that inflation is slowing down, which may benefit consumers in the form of lower prices.
PPI, CPI, PCE: There’s more than one way to measure inflation. Learn the differences here.