The Producer Price Index (PPI) is a measure of the average change over time in the selling prices received by domestic producers for their output. It tracks the price changes of goods and services at various stages of production, before they reach the final consumer.
Unlike the Consumer Price Index (CPI), which measures changes in prices from the perspective of the consumer, the PPI focuses on the perspective of producers. It includes prices received by producers for goods, services, and construction, covering various industries such as manufacturing, mining, agriculture, and services.
The PPI is calculated by taking a weighted average of price changes for a selected basket of goods and services at different stages of production, such as raw materials, intermediate goods, and finished goods. It provides valuable insights into inflationary pressures within the production process and can serve as an early indicator of potential changes in consumer prices.
Overall, the Producer Price Index is an important tool for businesses, policymakers, and economists to monitor inflationary trends in the economy and make informed decisions regarding pricing, production, and monetary policy.
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