PPI (Producer Price Index)
How much the prices companies receive when they make and sell goods (producer-stage prices) rose — the stage before consumer prices (CPI).
In plain terms
PPI measures how much the prices companies receive when they make goods and pass them on wholesale rose. It is not the price we pay in stores (CPI) but the earlier stage, "factory-gate" prices.
When prices rise at the producer stage, they often spread with a lag to consumer prices (CPI) too. So PPI is also used as a clue to "where consumer prices are headed."
What it tells you
PPI shows whether price pressure is building higher up the supply chain. When PPI rises first, it can signal CPI will follow before long.
For a company, a PPI rise is a cost burden. Passing that burden onto its price holds the margin; not passing it cuts the margin.
Formula
PPI = an index of the prices producers receive at the shipping stage (US Labor Department) a stage earlier in the supply chain than CPI (consumer prices)
What high or low means
When PPI rises, production-stage price pressure is building, affecting the CPI and rate outlook. Moving in the same direction as CPI makes the price signal clearer.
But PPI does not always carry straight through to CPI. It depends on how far companies pass cost increases onto consumers.
A PPI rise does not always mean CPI rises too. With fierce competition, companies sometimes cannot pass costs on and absorb them, so producer and consumer prices can diverge.
Look at core PPI, with volatile items like energy and food stripped out, to see the trend more clearly.
PPI is a macro indicator. This term is background for understanding market news. (※ Our screen handles individual companies' SEC-filed financials.)
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see PPI and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.