Producer Price Index

The release

How it is measured.

Statistical agencies collect selling prices from a sample of producers each month and weight them by the value of what each industry sells. The United States index is organised by who buys the output: final demand, and the intermediate stages that feed it. Core versions leave out food and energy.

Why markets watch it.

Producers’ prices are one of the costs that can later reach consumers, so the release is read for pressure further up the supply chain. Several of its components are also used to estimate the inflation measure the Federal Reserve follows, which gives it a second audience.

How it is commonly misread.

It is not next month’s consumer price index. The two cover different things: producer prices include goods sold to other businesses, to government and for export, and leave out imports and sales taxes. A rise in producers’ prices may be absorbed in margins and never reach the shelf, and the two indices can move apart for long periods.

An explanation of why the release is followed, not a view on what any market will do when it is published. Educational information, not investment advice or a recommendation to trade.