The Producer Price Index (PPI) measures the average change in selling prices received by domestic producers for their output. The PPI publishes over 600 industry price indexes and over 2,000 commodity price indexes. It differs from the Consumer Price Index in that it excludes services and uses prices received by producers rather than consumer expenditures. The March 2010 PPI report showed a 0.7% rise in finished goods and increases of 0.6% for intermediate goods and 3.2% for crude goods.

1. Producer Price Index MTH121

2. Producer Price Index (PPI) The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.

3. PPI Publication Structures Main publication structures ↓ industry-based, commodity-based stage-of-processing-based Other publication structures ↓ Producer price indexes by durability of product Special commodity groupings ↨ Fabricated metal products Construction materials Selected textile mill products

4. * Main PPI Publication Structures Industry-based The PPI publishes over 600 industry price indexes in combination with over 5,000 specific product line and product category sub-indexes.

5. * Main PPI Publication Structures Commodity-based The PPI publishes over 2,000 commodity price indexes organized by type of product and end use.

6. Main PPI Publication Structures Stage-of-processing based The PPI publishes aggregate price indexes organized by commodity-based processing stage. The three stages of processing include Finished Goods; Intermediate Materials, Supplies, and Components; and Crude Materials for Further Processing.

7. Consumer Price Index (CPI) The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.

8. Differences between PPI and CPI Differences in primary use Differences in composition Differences in the type Differences in timing of prices collected

9. * Differences in Primary Use A primary use of the PPI is to deflate revenue streams in order to measure real growth in output. A primary use of the CPI is to adjust income and expenditure streams for changes in the cost of living.

10. * Differences in Composition PPI The average change in prices over time of domestically produced and consumed commodities. The index is comprised of prices for both consumer goods and capital equipment, but excludes prices for services. Weights for the finished goods are currently based on the value of shipments of products CPI The average change in prices over time of goods and services purchased for personal consumption by urban U.S. households. The index is comprised solely of prices for consumer goods, thus it excludes prices for capital equipment. CPI weights correspond to the Consumer Expenditure Survey

11. * Differences in the Type PPI The price collected for an item included in the PPI is the revenue received by its producer. Sales and excise taxes are not included in the producer price because they do not represent revenue to the producer. CPI The price collected for an item included in the CPI is the out-of-pocket expenditure by a consumer for the item. Sales and excise taxes are included in the price because they are necessary expenditures by the consumer for the item.

12. * Differences in Timing of Collection PPI The PPI uses primarily a mail survey, which is sent to respondents on a monthly basis. Once revised, PPI indexes are considered final. A new model is priced when the producer stops selling the previous model. CPI The CPI collects price quotes by telephone or personal visits by BLS representatives. CPI does not routinely revise indexes. Most items in the CPI are priced at the outlet until they are no longer available for sale

13. Producer Price Index: All Commodities (PPIACO)

14. PRODUCER PRICE INDEXES – MARCH 2010

15. PRODUCER PRICE INDEXES – MARCH 2010 The Producer Price Index for Finished Goods rose 0.7 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed a 0.6-percent decline in February and a 1.4-percent increase in January. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 0.6 percent in March and the crude goods index rose 3.2 percent. On an unadjusted basis, prices for finished goods advanced 6.0 percent for the 12 months ended March 2010, their largest year-over-year gain since an 8.8-percent rise in September 2008. (See table A.)

16. Coverage of PPI The Producer Price Index is expected to rise for the fourth straight month to 0.8 percent in October from a 0.4 percent increase in September. Industrial production index is expected to show that activity improved to 0.30 percent in October, after falling for the first time in a year to 0.2 percent in September.

17. Coverage of PPI The PPI tracks price change for practically the entire output of domestic goods-producing sectors: agriculture, forestry, fisheries, mining, scrap, and manufacturing. In recent years, the PPI has extended coverage to many of the non-goods producing sectors of the economy, including transportation, retail trade, insurance, real estate, health, legal, and professional services. The PPI continues to increase coverage of several other non-goods producing sectors of the economy. New PPIs are gradually being introduced for the products of industries in the utilities, finance, business services, and construction sectors of the economy.

18. US Producer Price Index Product Past Present and Future Past Trend Present Value & Future Projection Price Index All Commodities. 1982 = 100. Not Seasonally Adjusted.

19. U.S. Producer Price Index PPI Forecast Price Index All Commodities. 1982 = 100. Not Seasonally Adjusted Month Date Forecast Value 50% Correct +/- 80% Correct +/- 0 Sep 2010 185.10 0.0 0.0 1 Oct 2010 185.7 1.2 2.7 2 Nov 2010 186.3 1.5 3.4 3 Dec 2010 187.1 1.7 3.9 4 Jan 2011 187.9 1.9 4.2 5 Feb 2011 188.6 2.0 4.6 6 Mar 2011 189.1 2.2 4.9 7 Apr 2011 189.4 2.3 5.1 8 May 2011 189.0 2.4 5.3

20. Web Project on Page 182 NO.46 http://www.bls.gov/ppi/ppiover.htm http://en.wikipedia.org/wiki/Producer_price_index http://www.forecasts.org/ppi.htm http://research.stlouisfed.org/fred2/series/PPIACO http://www.investopedia.com/university/releases/ppi.asp http://www.bls.gov/ppi/ppicpippi.htm http://www.bls.gov/dolfaq/bls_ques16.htm http://www.businessinsider.com/ppi-march-rise-2010-4

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