Glamor Economics

Chapter 148

Chapter 19 Section 3 Indicators of Price Changes in the Production Sector——PPI
The main purpose of the Producer Price Index (PPI) is to measure the price changes of various commodities in different stages of production. PPI is an index to measure the trend and degree of ex-factory price changes of industrial enterprises. It is an important economic indicator reflecting the price changes in the production field in a certain period, and it is also an important basis for formulating relevant economic policies and national economic accounting.At present, there are more than 4000 kinds of PPI survey products in my country (including more than 9500 kinds of standardized products), covering all 39 industries and involving 186 survey categories.

PPI is usually used as an important indicator to observe the level of inflation.Since food prices increase due to seasonal changes, and energy prices often fluctuate unexpectedly, in order to more clearly reflect changes in overall commodity prices, changes in food and energy prices are generally removed to form the "core producer price index". "(core PPI), to further observe the trend of inflation rate changes.

The data collection of the U.S. Producer Price Index is conducted by the U.S. Bureau of Labor Affairs.They collected data from major manufacturers in the form of questionnaires. The basis of the collection was the quotations of 13 kinds of commodities in the week including the 2300th of each month, and then weighted and converted into hundreds. For the convenience of comparison, the base period was set at 1967. Year.Generally speaking, when the producer price index increases greatly and continues to accelerate, the central bank responds by raising interest rates to prevent rapid inflation, and the possibility of currency appreciation increases; and vice versa.

Real economists focus on PPI while the media focuses on core PPI. This is because food and energy prices are always affected by seasons and supply and demand, and fluctuate violently. Rising PPI is not a good thing. If producers transfer costs, the price of final consumer goods will rise and inflation will rise.If it is not transferred, corporate profits will decline, and the economy will face downside risks.

美国劳工部2009年12月15日公布，美国11月生产者物价指数月率上升1.8%，预期为上升0.8%；年率上升2.4%，预期为上升1.6%。此数据表明美国通胀压力上升，增强了美联储将提早升息的预期。

On January 2010, 1, the Bank of Korea released data showing that South Korea’s producer price index in December rose by 10% month-on-month and 12% year-on-year, slightly higher than the 0.5% increase in November. main cause.South Korea's producer price index rose 1.8% year-on-year in December, the first year-on-year increase in eight months, as South Korea's oil import prices rose 11% year-on-year in December, and South Korea's producer price index fell 0.4% year-on-year in November.South Korea's producer price index fell by 12% year-on-year in 1.8, the first drop in seven years, mainly due to the decline in oil prices and other commodity prices.

From the above we can also see the relationship between the expected inflation rate and PPI.Of course, since CPI includes not only consumer goods prices, but also service prices, CPI and PPI are not strictly corresponding in statistical terms, so it is possible that the changes in CPI and PPI are inconsistent. CPI and PPI continue to be in a state of deviation, which does not conform to the law of price transmission.The main reason for the break in price transmission is that the industrial product market is in a buyer's market and the government artificially controls the price of public products.

[links to related words]

Core producer price index The core producer price index is an index after excluding food and energy prices, called the "core PPI" (Core PPI) index, because food and energy prices are always affected by seasons and supply and demand, and fluctuate violently reflect the authenticity of the data.According to the actual situation, the core commodities formulated by each country are different.

Consumer Price Index, abbreviated as CPI, is an indicator of price changes that reflects the prices of products and services related to residents' lives, and is usually used as an important indicator for observing inflation levels.

(End of this chapter)