China Producer Price Index (PPI) y/y

China Producer Price Index (PPI) y/y shows changes in the value of manufactured goods from the producer perspective, in the specified month compared to the same month of the previous year. The index consists of two subindexes:

• The produce price index reflects a change in the price received by a manufacturer for their product during the first sale;
• The index of purchasing prices reflects a change in the prices for goods purchased by the manufacturer as intermediate inputs in the production process (such as fuels, energy, metal or chemical raw materials, wood, construction materials, fabric, etc.).

Thus, PPI reflects a net change in the value of goods manufactured in China from the producer perspective, adjusted for changes in the company's expenditures during production.

The producer price index calculation covers prices for more than 20,000 types of products from 1638 categories. The purchasing price index takes into account more than 10,000 kinds of goods, divided into 900 subclasses. The general index covers the whole national industry according to the single industrial classification of the country.

Prices for the index calculation are collected from a survey of large enterprises (with the annual operating income of 20 million yuan or more) and typical enterprises (with the annual operating income less than 20 million yuan). The statistical sample includes about 50,000 enterprises from more than 400 cities.

The producer price index is considered as a leading indicator of consumer prices, and hence of the inflation. It is a more accurate preliminary indicator, if compared to CPI: if producer prices grow, consumer prices are expected to grow accordingly. These two indicators are closely correlated. The People's Bank of China analyzes the producer price index when preparing inflation forecasts.

PPI growth can have a positive effect on yuan quotes, unless hyperinflation is developing in the country.