Core Producer Price Index (PPI) y/y shows changes in selling prices received by domestic producers of goods and services in the specified month compared to the same month of the previous year. PPI shows price changes from the manufacturer perspective. Food and energy are excluded from the core index calculation due to their high volatility.
Index calculation includes all sectors of US industry, which produce physical goods, including commodity markets. In the production sector, the calculation takes into account producers' prices in the mining and manufacturing industries, agriculture, construction, etc. In the services sector, the PPI calculation program covers approximately 72% of data from trade, health, transportation, warehousing, media, financial and insurance sectors, etc. Unlike the Consumer Price Index, PPI does not include prices for imported goods.
Data for the index is collected based on a survey of more than 25,000 companies of different types and sizes across the nation, which are included in a statistically representative sample.
The producer price index is calculated in relation to the base year (today it is 1982), in which the index is equal to 100. All subsequent changes in prices are calculated in relation to this benchmark. Different weights for different industries are used in calculation. Weights are adjusted every few years.
PPI is considered a leading indicator of consumer prices and of inflation. It is a more accurate preliminary indicator, if compared to CPI (Consumer Price Index): if producer prices grow, consumer prices are expected to grow accordingly. These two indicators are closely correlated. The Fed closely monitors CPI to prepare its inflationary forecasts.
Some of PPI components are used for the calculation of the GDP Price Index.
PPI growth almost always indicates inflation growth, which is usually seen as positive for the US dollar.
The chart of the entire available history of the "United States Core Producer Price Index (PPI) y/y" macroeconomic indicator. The dashed line shows the forecast values of the economic indicator for the specified dates.
A significant deviation of a real value from a forecast one may cause a short-term strengthening or weakening of a national currency in the Forex market. The threshold values of the indicators signaling the approach of the critical state of the national (local) economy occupy a special place.
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