The Producer Price Index (“PPI”) is a leading indicator of consumer inflation.
PPI measures the change in the price of finished goods and services sold by producers.
Investors watch the PPI closely because of its ability to predict the Consumer Price Index (“CPI”).
Although prices being measured in the PPI are at the wholesale or producer level, the theory is that most cost increases experienced by retailers are passed onto the final consumer, which then determines the CPI.
The CPI and PPI are two main indices used to measure inflation.
