CPI vs PPI
The Producer Price Index (PPI) measures prices received by domestic producers. Changes in PPI often show up in CPI several months later — making PPI a leading indicator of consumer inflation.
- CPI
- PPI (All Commodities)
When producer costs rise — raw materials, intermediate goods, wholesale prices — businesses usually pass at least part of the increase through to consumers over the following months. PPI therefore moves before CPI in most inflation cycles, though the size and speed of the pass-through vary with pricing power and demand conditions.
The 2021–22 inflation surge made this visible in real time. All-commodity PPI peaked above 20% year-over-year in mid-2022; CPI peaked at 9.1% a month or two later. As goods inflation cooled in late 2022, PPI turned negative year-over-year before CPI did. In demand-driven cycles the lead can be short; in supply-driven cycles it tends to be longer.
PPI is published monthly by the BLS. The headline index covers final-demand goods and services; sub-indexes break out intermediate and crude goods, which tend to move first and offer the earliest read on cost pressure in the pipeline.
Frequently asked questions
Why does PPI often run higher than CPI during inflation surges?
PPI measures wholesale prices for goods and commodities, which swing more sharply than the broad consumer basket. In 2021–22 all-commodity PPI peaked above 20% year-over-year while CPI peaked at 9.1% — businesses absorb part of the producer-cost increase rather than passing all of it through, and CPI's large services and shelter weights move more slowly.
Does PPI always predict CPI?
PPI usually leads CPI but not always. The pass-through from wholesale to retail depends on producer pricing power and demand conditions, and PPI doesn't cover services as thoroughly as CPI does. It's most reliable as a leading indicator for goods inflation rather than a precise forecast of the headline consumer number.
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