Producer price index (PPI) is the index reflecting dynamic of prices for the "basket" of industrial goods. It was named as Wholesale price index till 1978. Along with Consumer price index, Producer price index tells about coming level of inflation (deflation).
Structure of the Producer price index consists of 2 parts:
Prices at the point of entry (component kits, semi-products).
Prices at the output (ready-made products).
Producer price index embraces all stages of production starting from commodities and ending with retail. To measure index, change in price for about 3450 kinds of goods at various stages of production is analyzed. The closest attention is paid to the price for final good, because it gives the most probable price for goods that are ready for sale. Wholesale prices are taken into account. Measurement does not take into account import goods and services, but accounts for the cost of import commodities and component kits.
As CPI, PPI has clear figure, or the core (Core PPI). “Net” figure does not account for prices for food products and energies because of their volatility and the possibility of distortion of the main figure. The main difference from CPI is that PPI only accounts for goods whereas CPI embraces goods and services. Also PPI is an anticipating figure, because consumer prices are changed with a delay in contrast to wholesale prices.
PPI is published every month by Bureau of Labor Statistics of Department of Labor at 08:30 a.m EST (New York). Date of publication: the next week following to Nonfarm payrolls publication, around the second business Friday.
Impact on the Forex market. PPI has a moderate effect on the interest rate movement. Growth of index value leads to inflation of costs, which in opinion of many experts is more wrecking than inflation of demand. Figures above expectations are taken as positive factor for dollar and figures below expectations – as a negative factor. It is also noteworthy that under expecting growth of interest rates, rise in PPI leads to dollar consolidation.