What Is the Producer Price Index (PPI)?

The producer price index (PPI), published by the Bureau of Labor Statistics (BLS), is a group of indexes that calculates and represents the average movement in selling prices from domestic production over time.

It is a measure of inflation based on input costs to producers.

KEY TAKEAWAYS

The PPI is different from the CPI in that it measures costs from the viewpoint of industries that make the products, whereas the CPI measures prices from the perspective of consumers.

The BLS separates PPI data into three main areas of classification: industry, commodity, and commodity-based final and intermediate demand (FD-ID).1

The PPI is considered an objective tool for adjusting prices in long-term purchasing agreements.

Understanding the Producer Price Index (PPI)

The PPI measures price movements from the seller's point of view. Conversely, the consumer price index (CPI) measures cost changes from the viewpoint of the consumer. In other words, this index tracks changes to the cost of production. There are three areas of PPI classification that use the same pool of data from the Bureau of Labor Statistics: industry, commodity, and commodity-based final and intermediate demand (FD-ID)

The Bureau of Labor Statistics (BLS) releases monthly information that includes the measurement of nearly 10,000 individual products and product groups. This data contains almost all industries that produce goods in the United States. Some of the sectors covered include construction, agriculture, manufacturing, and mining