Producer Prices (PPI)
Published:
PPI measures the change in prices that producers receive for their output, so it captures inflation earlier in the supply chain than CPI. Rising producer costs often feed through to consumer prices later, which is why traders treat PPI as a leading inflation signal. It moves markets less than CPI, but a large surprise still shifts interest-rate expectations.
Full explanation
The producer price index measures the change in prices that domestic producers receive for their output, before goods reach the consumer. It captures cost pressure earlier in the supply chain than consumer price inflation. The month-on-month (MoM) reading compares the latest month with the previous one, while the year-on-year (YoY) reading compares it with the same month a year earlier. Producer prices are heavily influenced by energy and raw material costs, so they typically swing more sharply than consumer prices and do not pass through one-for-one.
Why traders watch it
Traders treat producer prices as a leading indicator of consumer inflation. Sustained increases suggest firms will eventually raise prices or absorb thinner margins, which feeds into interest rate expectations. The reaction is usually smaller than for a consumer inflation release, unless the surprise is large.
Stronger vs weaker outcomes
Focus on the trend and on whether the move is energy-driven, since energy-led swings often reverse. A producer price surprise is more meaningful when it is confirmed by the consumer price release.
Typical volatility
Moderate.
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