Producer Price Index (PPI)
- Posted by admin
- Categories Fundamenatal Analysis
- Date April 16, 2024
- Comments 0 comment
The Producer Price Index (PPI) is a measure of average changes in selling prices received by domestic producers of goods and services over time. It is a key economic indicator used to track inflationary pressures at the producer level before they reach consumers. The PPI is published by the Bureau of Labor Statistics (BLS) in the United States on a monthly basis.
The index is calculated based on surveys of prices received by domestic producers for their output at various stages of production, including raw materials, intermediate goods, and finished goods. It covers a wide range of industries and products, providing a comprehensive view of price trends across the economy.
The PPI is often divided into three main subcategories:
- Final Demand Goods: This includes the prices of finished goods sold to consumers, such as cars, appliances, and clothing.
- Final Demand Services: This includes the prices of services sold to consumers, such as healthcare, transportation, and financial services.
- Intermediate Demand Goods and Services: This includes the prices of goods and services purchased by businesses for further processing or resale.
Changes in the PPI can indicate trends in production costs and inflationary pressures within the economy. Rising PPI can signal potential future increases in consumer prices, while falling PPI may suggest weakening inflationary pressures. Central banks and policymakers use PPI data, along with other economic indicators, to make decisions regarding monetary policy and to assess overall economic health.
It is a leading indicator of consumer price inflation, which accounts for the majority of overall inflation.
A higher than expected reading should be taken as positive/bullish for the Currency, while a lower than expected reading should be taken as negative/bearish for the Currency.
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