Producer Price Index

The producer price index (PPI) measures wholesale prices reported at the producer level for consumer goods and capital equipment.  It provides the first hint of inflation each month. 

It differs from the CPI  in that it does not include services.  Price comparisons for some 3,450 commodities are measure against a base period that existed in 1982 (base measure 100). 

The PPI focuses on three stages of production including finished goods, intermediate (paritially processed) goods, and crude materials.   The intermediate and crude stages are most significant by forewarning of rising prices in the pipeline. 

The bond market reacts negatively at larger-than-expected increases in the PPI while decreases are viewed favorably by investors thereby pushing bond prices up and yields down.  The PPI can be somewhat volatile and is viewed with caution. 

PPI categories with their corresponding weightings are: