Glossary
Producer Price Index (PPI)
The BLS monthly measure of selling prices received by US producers, watched as an early signal of inflation pressure in the supply chain.
On this page
The Producer Price Index (PPI) tracks the average change in the prices that domestic producers receive for their goods and services. It is published monthly by the Bureau of Labor Statistics (BLS), the same agency behind the Consumer Price Index. Because it measures prices at the business level, PPI is often read as an early look at cost pressures that may later reach consumers.
How it works
The BLS surveys thousands of producers about the prices they actually charge, then builds indexes at many levels. The headline number is PPI for final demand, which covers goods, services and construction sold to final buyers, including consumers, businesses buying capital equipment, government and exports. Other indexes cover intermediate stages, such as processed materials and unprocessed commodities. "Core" PPI versions strip out volatile food and energy, and one also removes trade services.
Producer prices exclude sales and excise taxes, because those go to the government rather than to the producer.
How markets use it
- Pipeline signal. Rising input and wholesale prices can squeeze margins or be passed to consumers, so PPI can foreshadow CPI moves, though the link is loose.
- Inputs to PCE. Several PPI components, notably for medical care and airline fares, feed directly into the PCE price index, so economists use PPI to refine their PCE forecasts.
- Earnings context. Analysts compare PPI for an industry with a company's own price increases to judge pricing power.
Monthly PPI is noisy and frequently revised. Trade margins, which are counted as a "price" of trade services, can swing sharply, which is why the core measure excluding trade is often watched.