Economy & context
Producer-price indices measure price changes at specified stages of production, such as inputs bought or outputs sold by businesses. They differ from consumer prices in coverage and timing.
Make it click
Before a product reaches a shop, materials and factory output have their own prices. Changes upstream may pass through, be absorbed or be offset before the consumer sees them.
Now put that into markets
PPI releases can indicate cost pressure and pricing power. The link to CPI depends on margins, contracts, imports and sector mix.
Input and output indices use different baskets and weights. Commodity and currency moves can make them volatile.
Identify stage, domestic or import coverage, seasonal adjustment and revisions. Compare levels and contributions with relevant industries.
Producer-price growth does not mechanically predict consumer inflation. Services and distribution can dominate final prices.
Takeaway
