What is the Producer Price Index (PPI)?
PPI (Producer Price Index)
Forex Trading Glossary
Quick Answer: The Producer Price Index tracks price changes received by domestic producers, offering an early look at inflation pressures before they reach consumers.
What is the Producer Price Index (PPI)?
The Producer Price Index measures average price changes received by domestic producers for their output. Because it captures upstream inflation, PPI can foreshadow moves in consumer prices and central bank policy.
PPI Components
- Headline PPI: Tracks overall producer price changes across goods and services.
- Core PPI: Excludes food and energy to highlight underlying trends.
- Industry breakdowns: Sub-indexes reveal where cost pressures are building.
Lead Indicator
Rising PPI often precedes higher CPI, giving traders advance warning of inflation surprises.
Using PPI in Forex
- Compare PPI trends between trading partners to spot relative inflation momentum.
- Monitor how short-term yields react immediately after the release.
- Blend PPI with other data like PMI and wages to build macro context.
- Document surprise magnitudes to understand each currency’s sensitivity to producer prices.
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