Producer Price Index (PPI)

The Producer Price Index (PPI) is a monthly measure of wholesale prices received by producers. Created in 1902 as the Wholesale Price Index, the PPI was renamed the Producer Price Index in 1978 and is the oldest continuous statistical series maintained by the federal government. The PPI is actually a series of PRICE INDEXES measuring the average changes in selling prices received by domestic producers. The BUREAU OF LABOR STATISTICS maintains over 500 industry-price indexes, over 10,000 product-line indexes, and 3,200 commodity-price indexes. New PPIs are introduced as new industry PRODUCTs are created. Unlike the CONSUMER PRICE INDEX (CPI), which measures INFLATION experienced by consumers, PPIs measure price change from the seller’s perspective. The most widely quoted PPI is the Finished Goods Price Index, which includes price changes for producers’ durable equipment. Unlike the CPI, which is calculated for specific areas of the country, the Finished Goods Index is calculated only on a national basis. Because the PPI measures changes in prices of domestic goods, it does not include changes in prices of IMPORTS. Price data collected for PPIs consist of the revenue received by producers and thus sales and excise taxes are not included in PPIs. Producer Price Index data are used by businesses and government as
• economic INDICATORS, signalling price changes prior to changes at the retail level
• a deflator of other economic series used to adjust other economic time series for price changes (adjusting for inflation)
• a basis for CONTRACT escalation, with data used to index and adjust purchase and sales contracts