This is what PPI is!
PPI (Producer Price Index) is an index for examining price fluctuations of products made by American companies.
It is an index that indexes prices traded between companies for raw materials and products shipped by producers, and is used as a yardstick to measure price movements.
Since it shows price trends upstream, it is attracting attention as a leading indicator for downstream CPI (Consumer Price Index) and corporate performance/stock prices.
Simply put, it is for investigating price fluctuations when a company purchases a product or service. (CPI is the price change when a consumer purchases a product or service)
In other words, it shows changes in the money that people who make products and grow crops can receive.
PPI is a clue to know whether prices will rise or fall, and price changes are expressed as a percentage by comparing sales items (approximately 0.01 million items) of US manufacturers with an index (1982 = 100) that measures prices.
For example, if the PPI is 102, it means that the price has increased by 2%.
Each of the 3 stages (raw materials, intermediate goods, finished goods) in the production process is measured, but in general, attention is paid to the final finished product numerical value.
Core figures excluding food and energy-related figures, which fluctuate drastically from month to month, were also announced, and used to grasp basic inflation.
Similar to the CPI, the US Office of Government Statistics regularly publishes PPI data.
By knowing price changes in different industries and commodities, it is possible to analyze the state of the economy.
The Federal Reserve uses this data to think about economic policies.
PPIs will be announced in the following 4 categories.
・Raw materials: Prices of crude oil, iron ore, etc. used by companies for manufacturing.
・Intermediate goods: Prices for parts, machines, etc. used by a company for manufacturing.
・Final goods: The price of a product made and sold by a company.
・Export Prices: Prices for goods exported overseas by American companies.
PPI and CPI are inextricably linked.
When PPI rises significantly, companies will increase the price of their products.
As a result, consumers will pay more money when buying products, and CPI will also increase.
Conversely, when PPI falls drastically, companies will lower the price of their products.
As a result, consumers pay less money when buying products, and CPI also falls.
This is why it is called the “leading index.”
Therefore, PPI movements are important information in predicting CPI movements.
Compared to the Consumer Price Index (CPI), the level of attention is slightly lower, but since it often comes out faster than CPI, it is used as a leading indicator
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