PPI (Producer Price Index)
Inflation one step upstream of the consumer -- what producers and wholesalers are paid for their output.
What it is
PPI measures the average change in prices producers and wholesalers receive for their goods, before those costs reach the consumer. It's watched as a leading indicator for CPI -- rising input costs tend to get passed through to consumer prices with a lag of a month or more.
How to read it
Read PPI the same way as CPI: YoY for the trend, MoM for the most recent move, and against consensus forecast for the market reaction. A PPI beat that isn't yet showing up in CPI is sometimes read as an early warning that consumer inflation is about to pick up.
Worked example
If PPI YoY comes in at 4.2% against a forecast of 3.6%, that's a meaningful upside surprise. Even with CPI still looking tame that same month, traders may start pricing in a hotter CPI print next cycle, nudging rate expectations -- and the currency -- ahead of the actual consumer data confirming it.
See PPI (Producer Price Index) live
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