Link to the Producer Price Index:
Text From Video:
The PPI shows the month to month changes in the average prices paid by producers and manufacturers of goods and services during different stages of production.
Similar to the CPI, which uses a basket of goods to measure the prices paid by consumers, the PPI uses a benchmark basket of goods to measure the changes in wholesale prices.
The PPI is the first economic report on inflation released each month. It is is considered a leading indicator for inflation. When production costs increase, it is only logical to assume that it will cause retail prices to increase down the line.
The PPI is reported monthly by the BLS; I’ll post a link for the report in the text next to the video.
Each month, more than 9000 indexes containing over 100,000 price quotations are grouped into 3 major indexes.
The first category is the commodity index, or simply the crude index. This measures the prices of raw materials which are used in the first stages of production.
For example….
Any changes in costs at this stage may be passed onto the next stages.
The 2nd category is the Stage of Processing Index, or simply the Intermediate index.
This measures goods that have had some manufacturing or other processes done to them, yet are still sold to other manufacturers and producers to create finished goods.
For example….
Any changes in costs at this stage may be passed onto the final stage.
The last category is the Industry Index, or simply the Finished Goods category.
This measures the costs of goods used in the final stages of production.
For example….
Any changes in costs at this stage may be passed onto the consumer.
——
The report has 2 main tables, A and B, and then 5 follow up tables that break down the data from the first 2 tables into more detail.
Table A shows the total percentage change in prices from each of the previous 12 months for finished goods. This is the most significant part of the report, and is the main statistic reported in the media each month. The finished goods section is the final production stage for goods that are being made ready for sale to the consumer.
While the data shows mixed results for the short term, on a longer time frame there is a strong correlation between increases in costs in the finished goods section, and increases in nationwide inflation.
Next to the total changes in costs for finished goods are sections for Foods, Energy, and a section called Except Food and Energy.
The Except Food and Energy section is also known as the core PPI.
Because the prices on food and energy are very volatile and fluctuate a lot, the core PPI section leaves these two categories out. Some economists feel this section gives a more accurate picture of the economy.
Food and Energy are also listed as separate categories because changes in cost for these two categories have such a large impact in so many areas.
Next to the Core PPI numbers is the the total percentage change in yearly prices for each of the previous 12 months. This allows one to view short term changes in price from month to month, and longer term changes from a year earlier.
Next to that is the month changes in total prices for Intermediate and Crude Goods.
—————
Table B gives Intermediate and Crude goods categories.
You can see the changes in monthly costs for food and energy, the changes in core costs for Crude and Intermediate Goods, and the yearly change in total costs.
________________
Similar to the CPI, which uses a basket of goods to measure the prices paid by consumers, the PPI uses a benchmark basket of goods to measure the changes in wholesale prices.
The PPI is the first economic report on inflation released each month. It is is considered a leading indicator for inflation. When production costs increase, it is only logical to assume that it will cause retail prices to increase down the line.
The PPI is reported monthly by the BLS; I’ll post a link for the report in the text next to the video.
Each month, more than 9000 indexes containing over 100,000 price quotations are grouped into 3 major indexes.
The first category is the commodity index, or simply the crude index. This measures the prices of raw materials which are used in the first stages of production.
For example….
Any changes in costs at this stage may be passed onto the next stages.
The 2nd category is the Stage of Processing Index, or simply the Intermediate index.
This measures goods that have had some manufacturing or other processes done to them, yet are still sold to other manufacturers and producers to create finished goods.
For example….
Any changes in costs at this stage may be passed onto the final stage.
The last category is the Industry Index, or simply the Finished Goods category.
This measures the costs of goods used in the final stages of production.
For example….
Any changes in costs at this stage may be passed onto the consumer.
——
The report has 2 main tables, A and B, and then 5 follow up tables that break down the data from the first 2 tables into more detail.
Table A shows the total percentage change in prices from each of the previous 12 months for finished goods. This is the most significant part of the report, and is the main statistic reported in the media each month. The finished goods section is the final production stage for goods that are being made ready for sale to the consumer.
While the data shows mixed results for the short term, on a longer time frame there is a strong correlation between increases in costs in the finished goods section, and increases in nationwide inflation.
Next to the total changes in costs for finished goods are sections for Foods, Energy, and a section called Except Food and Energy.
The Except Food and Energy section is also known as the core PPI.
Because the prices on food and energy are very volatile and fluctuate a lot, the core PPI section leaves these two categories out. Some economists feel this section gives a more accurate picture of the economy.
Food and Energy are also listed as separate categories because changes in cost for these two categories have such a large impact in so many areas.
Next to the Core PPI numbers is the the total percentage change in yearly prices for each of the previous 12 months. This allows one to view short term changes in price from month to month, and longer term changes from a year earlier.
Next to that is the month changes in total prices for Intermediate and Crude Goods.
—————
Table B gives Intermediate and Crude goods categories.
You can see the changes in monthly costs for food and energy, the changes in core costs for Crude and Intermediate Goods, and the yearly change in total costs.
________________
At the end of the report are 5 more tables that group that data into different categories.
Table 1
Producer price indexes and percent changes by stage of processing
Table 2
Producer price indexes and percent changes for selected commodity groupings by stage of processing
Table 3
Producer price indexes for selected commodity groupings
Table 4
Producer price indexes for the net output pf selected industries and industry groups, not seasonally adjusted
Table 5
Producer price indexes by stage of processing, seasonally adjusted
Here, the data is
Grouped together by the different stages of production.
Grouped together by different commodities
Grouped together by different industries and sectors
Seasonally adjusted and not seasonally adjusted
These tables give more specific insight as to which areas are being effected the most from price changes.
___________
So that’s the PPI- In my view, the best available resource for estimating longer term inflation.
When you see changes in the trends for prices paid for raw goods, watch to see what effect it has on the processing stage.
When you see changes in the trends for costs during the processing stage, watch to see what effect it has on the finished goods section.
When you see changes in the trends for costs during the finished goods stage, most likely inflation will follow.
There is some debate on how long the lag time is between changes in costs during the finished goods stage, and changes in the level of inflation.
When attemptig gauge the lag time, economists will look at things like inventory levels, GDP growth, interest rates, the BOP, income levels and hours worked. In other words, when wholesale costs go up, economists will try and gauge how much demand is there and how much the demand will decline when inflation increases.
Table 1
Producer price indexes and percent changes by stage of processing
Table 2
Producer price indexes and percent changes for selected commodity groupings by stage of processing
Table 3
Producer price indexes for selected commodity groupings
Table 4
Producer price indexes for the net output pf selected industries and industry groups, not seasonally adjusted
Table 5
Producer price indexes by stage of processing, seasonally adjusted
Here, the data is
Grouped together by the different stages of production.
Grouped together by different commodities
Grouped together by different industries and sectors
Seasonally adjusted and not seasonally adjusted
These tables give more specific insight as to which areas are being effected the most from price changes.
___________
So that’s the PPI- In my view, the best available resource for estimating longer term inflation.
When you see changes in the trends for prices paid for raw goods, watch to see what effect it has on the processing stage.
When you see changes in the trends for costs during the processing stage, watch to see what effect it has on the finished goods section.
When you see changes in the trends for costs during the finished goods stage, most likely inflation will follow.
There is some debate on how long the lag time is between changes in costs during the finished goods stage, and changes in the level of inflation.
When attemptig gauge the lag time, economists will look at things like inventory levels, GDP growth, interest rates, the BOP, income levels and hours worked. In other words, when wholesale costs go up, economists will try and gauge how much demand is there and how much the demand will decline when inflation increases.
Music:
Danse Macabre – Low Strings Finale (Theme)
Exotic Battle
Impact Andante
Machinations
Kevin MacLeod
incompetech.com
Danse Macabre – Low Strings Finale (Theme)
Exotic Battle
Impact Andante
Machinations
Kevin MacLeod
incompetech.com
