What is PPI — Producer Price Index?
The Producer Price Index (PPI) measures the average change in the selling prices domestic producers receive for their output. Published monthly by the Bureau of Labor Statistics, PPI is a leading indicator for consumer inflation — cost pressures at the wholesale level often show up later in CPI.
Live data: PPIACO
FRED · —
Understanding PPI
PPI measures prices at the wholesale level — what producers charge for their output before it reaches consumers. Rising PPI often signals rising CPI several months later, though the pass-through is imperfect and depends on producer pricing power and demand conditions.
BLS publishes PPI for several stages of production: final demand (the headline), intermediate demand, and crude materials. The crude and intermediate indexes often move first at turning points, offering the earliest read on cost pressures in the pipeline. Final-demand PPI is the one most cited in news coverage.
PPI doesn't cover services as thoroughly as CPI does, so the two indexes aren't directly comparable on a like-for-like basis. PPI is most useful as a leading indicator for goods inflation and a confirmation signal for inflation cycles.
How PPI is calculated
BLS collects roughly 100,000 prices per month directly from producers, aggregated into industry and commodity indexes. Weights are based on gross output from the Census Bureau's economic census. PPI uses a modified Laspeyres formula similar to CPI's.
Historical context
PPI has been published since 1902, the oldest continuous price index in the U.S. It was called the Wholesale Price Index until 1978. The 2021–22 PPI surge peaked at over 20% year-over-year for all commodities in mid-2022, leading the CPI surge by a few months.
Frequently asked questions
Does PPI always predict CPI?
PPI usually leads CPI but not always — the pass-through from wholesale to retail depends on competition, demand, and labor-market conditions. In services-heavy economies like the modern U.S., PPI's predictive value has weakened somewhat but remains meaningful for goods inflation.