What Does the Producer Price Index (PPI) Measure?

You might be familiar with the common inflation-tracking metric called the Consumer Price Index (CPI), but are you aware of its lesser-known counterpart, the Producer Price Index (PPI)?

The PPI, which is also used to track changes in prices over time, combines around 10,000 more specific indexes to summarize prices for goods and services received by US producers.

In other words, changes in PPI reflect inflation as manufacturers or suppliers experience it rather than from the consumer’s perspective.

Producers may pass these costs on to consumers through higher prices if they face higher costs. Hence, an increase in the PPI can be a leading indicator of an increase in the CPI.

Learn more about PPI here.