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Producer prices (PPI)
What businesses get paid, why it runs a step ahead of what shoppers pay, and why forecasters use it to guess the Fed's favorite inflation number.
What it is
The Producer Price Index, from the Bureau of Labor Statistics, measures the prices American producers receive for what they sell. Since 2014 the headline has been final demand: goods, services and construction sold to their final buyer, whether that is a household, a business investing, the government or a customer abroad. It lands at 8:30 AM Eastern in the middle of the month, usually a day or two either side of CPI, and covers the month before.
How to read the numbers
The headline is the month-over-month change, seasonally adjusted, to one decimal. Core PPI drops food and energy, the two most volatile pieces. Services are most of final demand, and one slice of services, the margins wholesalers and retailers earn, swings a lot from month to month. That makes PPI noisier than CPI, so a single hot or cold month says less than it seems.
Why markets care
Some PPI prices feed straight into PCE inflation, the Fed's preferred gauge: airfares, doctor and hospital services, and the fees on investment accounts among them. Economists combine CPI and PPI to estimate core PCE weeks before the Bureau of Economic Analysis publishes it, which is why a PPI surprise can move the bond market on a day with no other news.