PPI

PPI, the Producer Price Index, measures the average change in prices that producers and sellers receive for their output, capturing inflation at the wholesale and input level rather than what consumers pay directly. It is published monthly by the Bureau of Labor Statistics.

Because businesses that face higher input costs, raw materials, components, or wholesale goods, often pass at least some of that increase along to consumers eventually, PPI is watched as an early signal for where consumer inflation might be headed. A pickup in producer prices does not guarantee that CPI will follow, since companies can choose to absorb some of the cost in their margins instead, but persistent increases in PPI tend to raise concern about future consumer inflation.

Investors and the Federal Reserve both watch PPI alongside CPI, since a difference between the two can reveal whether inflation pressure is building up in the pipeline before it shows up in what households pay.