Producer Price IndexPPI
The Producer Price Index (PPI) measures changes in the prices producers receive for their output, and is sometimes an early signal of consumer inflation.
The Producer Price Index tracks the prices businesses receive for what they sell. Because these costs can pass through to shops later, PPI is sometimes an early signal for consumer inflation. Each country publishes its own producer price data with its own methods.
- Category
- Fundamentals and Macroeconomics
- Reading time
- 3 min
- Also called
- Producer prices, Wholesale price index, PPI final demand
- Updated
PPI in plain words
Producer price indexes track price changes from the seller's side.1
That's the opposite of measures like the CPI, which look at prices from the buyer's side.1
For many goods and some services, PPI prices come from the first commercial sale.2
How to read a PPI release
Find final demand
Start with the headline from the final demand–intermediate demand system, which sits among more than 600 aggregate indexes.3
Check month and year changes
Look at both monthly and 12-month rates.
Strip out food and energy
Core measures show underlying trends.
Look upstream
Intermediate demand shows pressure earlier in the chain.
Compare with CPI
PPI is the seller's view; CPI is the purchaser's.1
Use the data series
For charts, FRED republishes the headline final-demand series.4
Worked examples
Example 1 — Cost pass-through
Inflation pressureHypothetical producer prices rise 0.8% in a month, led by materials.
| PPI m/m | +0.8% |
This is a seller-side measure, so higher producer prices may only reach shoppers later.1
Example 2 — PPI vs CPI gap
Different viewsHypothetical PPI rises 4% a year while CPI rises 3%.
| PPI y/y | 4% |
| CPI y/y | 3% |
Subsidies, sales taxes and distribution costs mean seller and buyer prices can differ, so the two indexes needn't match.1
Example 3 — Easing pipeline
Pressure easingHypothetical intermediate-demand prices fall 1% over three months.
| Intermediate demand | −1% |
Falling prices upstream in the FD–ID system can point to cooler consumer inflation ahead.3
PPI vs CPI
| Aspect | PPI | CPI |
|---|---|---|
| Perspective | Seller | Purchaser |
| Includes sales taxes | No | Yes |
| Coverage | Goods, services, construction | Consumer basket |
| Typical use | Pipeline pressure | Cost of living |
Where PPI is used
Inflation forecasting
An early hint for Consumer Price Index and Inflation.
Rate expectations
Feeds views on the Federal Reserve and Interest Rate path.
Margin analysis
Rising input costs squeeze company Earnings.
Bond trading
Surprises move Breakeven Inflation and yields.
Advantages and disadvantages
Advantages
- Shows price pressure early in the chain.
- Detailed industry and product breakdowns.
- Monthly and timely.
- Covers services and construction too.
Disadvantages
- Pass-through to consumers is uncertain.
- Volatile food and energy swings.
- Service coverage is incomplete.
- Methods differ by country.
Going deeper
Read as far as you need. Each level builds on the one before it.
Seller vs buyer prices
Beginner
PPI looks at prices from the seller's side.1 CPI measures it from the purchaser's perspective.
Why the two differ
Intermediate
Taxes, subsidies and distribution costs open a gap between what sellers receive and what buyers pay.1
The FD-ID system
Advanced
The US programme publishes more than 600 aggregate indexes, organised by stage from intermediate to final demand.3 Intermediate stages can lead final demand, but the link is loose.
Common mistakes
Assuming PPI always leads CPI
Pass-through varies.
Ignoring food and energy swings
Check core measures.
Confusing final and intermediate demand
They measure different stages.
Comparing countries' PPIs directly
Methods differ by country.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- PPI tracks prices producers receive.
- It is the seller's view; CPI is the buyer's.
- Taxes and distribution costs separate the two.
- Upstream prices can hint at future inflation.
- Methods differ by country.
Frequently asked questions
Is PPI the same as wholesale prices?
Does a PPI jump mean CPI will rise?
Do other countries publish a PPI?
Further learning
- Consumer Price Index
The consumer side of inflation.
- Inflation
The bigger picture.
- Breakeven Inflation
How markets price inflation.
- Economic Indicator
Reading releases.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- U.S. Bureau of Labor Statistics (BLS). Producer Price Index: Overview (opens in a new tab) Checked .
- U.S. Bureau of Labor Statistics (BLS). Producer Price Index Home (opens in a new tab) Checked .
- U.S. Bureau of Labor Statistics (BLS). Handbook of Methods: Producer Price Indexes (opens in a new tab) Checked .
- Federal Reserve Bank of St. Louis (FRED). Producer Price Index by Commodity: Final Demand (PPIFIS) (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.