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Producer Price Index & Core PPI

Economics and Currency

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Leading/Coincident/Lagging: Coincident Economic Indicator
Type: Survey, Index (Above/Below Index Number)

Summary: The Producer Price Index measures inflation by asking producers (businesses) about their costs. Like CPI Finished Goods, it includes goods impacted by global prices (Food and Energy). It is read the same way as CPI finished goods: increases hint at more inflation, especially above expectations. Decreases indicate either disinflation or deflation in the future. Producer Price Index measurements occur on a monthly basis. Note that several nations, including the United States, have stopped measuring the Producer Price Index and focus on CPI instead.

Core Producer Price Indexes are essentially the same concept as Producer Price Finished Goods, but Core Price Indexes exclude those goods whose prices are driven primarily by global markets (food and energy). It means the same thing as Producer Price Index Finished Goods but is more precise at isolating the nation’s inflationary or deflationary levels.

Producer Price Index (PPI)Change Versus Previous
As RGDP rises, PPI Rises.RGDP accelerates, PPI rises quicker.
As RGDP falls, PPI Falls.RGDP slows, PPI rises slower.
As PPI rises, Inflation Rises.PPI accelerates, Inflation rises quicker.
As PPI falls, Inflation Falls.PPI slows, Inflation rises slower.
If PPI is too High, Central Bank likely to…Hyperinflation Risks, so raise Interest Rate.
If PPI is too Low, Central Bank likely to…Deflation Risks, so lower Interest Rate.
All information is general, not absolute. Invest using total economy, not one indicator.
RGDP = Real Gross Domestic Product

Impact on Local Currency: Assuming all else is equal, a rise in the Producer Price Index level above expectations will harm a currency’s value, since this indicates inflation above expectations. A rise in the Producer Price Index level below market expectations will likely strengthen currency values since inflation is lower than expected. A decrease in the Producer Price Index level will likely strengthen currency values since it indicates disinflation

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