🏭 Producer Price Index (PPI) — The Inflation Signal That Comes Before CPI
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🏭 Producer Price Index (PPI) — The Inflation Signal That Comes Before CPI

5 December 2025, 14:29
Issam Kassas
Issam Kassas
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🏭 Producer Price Index (PPI) — The Inflation Signal That Comes Before CPI

💡 The Lesson

Most traders wait for CPI to understand inflation…
but professionals watch PPI first.
Why?
Because PPI measures inflation at the production level — long before prices reach consumers.

If PPI rises today, CPI is likely to rise later.
Which means currencies can move before the public sees the data.

📊 What Is PPI?

Producer Price Index (PPI) tracks the prices businesses pay for:

  • Raw materials

  • Components

  • Manufacturing inputs

  • Energy

  • Transportation

If it becomes more expensive to produce goods…
companies eventually pass the cost to consumers.

📈 When PPI Rises:

  • Producers face higher costs

  • Inflation pressures build

  • Central banks turn hawkish
    → Currency strengthens

📉 When PPI Falls:

  • Cost pressures ease

  • Future CPI drops

  • Central banks turn dovish
    → Currency weakens

🏦 Why Traders Care

PPI is one of the best leading indicators of inflation.
It often predicts CPI 1–3 months ahead.

Example:
If U.S. PPI jumps suddenly, traders expect the Fed to stay aggressive.
→ USD strengthens even before CPI confirms it.

Later, when CPI prints hot, the market simply reacts to what PPI already showed.

⚡ Example in Action:

If PPI expected: +0.2%
Actual: +0.9% → big surprise
→ Bond yields rise
→ USD jumps instantly

Even though consumer prices haven’t moved yet, traders know they will.

⚙️ Pro Tip — Watch Core PPI

Just like CPI, Core PPI removes volatile items (food and energy).
This gives a cleaner measure of persistent inflation.

Core PPI rising steadily = long-term bullish currency pressure.

🚀 Takeaway

PPI tells you where inflation is going — not where it is.
If you want to trade fundamentals early, not late, watch PPI.
It’s the inflation spark that ignites future CPI, rate hikes, and currency moves.

📢 Join my MQL5 channel for more forex fundamentals and real-world trading insights:
👉 https://www.mql5.com/en/channels/issam_kassas