Producer Price Index

The Producer Price Index (PPI) measures average change in selling prices received by domestic producers for their output. The Bureau of Labor Statistics (BLS), a US Labor Department agency, builds it monthly from a national survey of businesses. It covers mining and manufacturing plus 71% of services and 31% of construction as of January 2018.

It uses over 100,000 quotes to publish over 10,000 indexes. Its three families are Final Demand-Intermediate Demand (FD-ID) for end use and inputs, commodity indexes by product, and industry net-output indexes by producer.

Prices are collected for transactions (actual sales, not list prices) effective on Tuesday of the week containing the 13th of the reference month. BLS publishes results mid-month after the reference month at 8:30 AM ET under embargo, on a Tuesday, Wednesday, or Thursday set by schedule. Each release brings summary and detailed tables and a Detailed Report, led by 1-month seasonally adjusted (seasonal patterns removed) and 12-month unadjusted final demand moves. Indexes can be revised for 4 months, and yearly rebuilds replace the last 5 years of adjusted data; a core trend measure is also shown.

December 2017 example shares split final demand across goods, services, and construction; shares move over time, and a rise means producers got higher prices.

• Final demand goods, 33%: tangible goods for end use, often swayed by energy like gasoline and diesel plus foods.
• Final demand services, 65.5%: largest block, including trade margins (wholesaler and retailer margins), transport, plus health, banking, and lodging.
• Final demand construction, 1.5%: new building plus maintenance and repair sold for end use.
• Intermediate demand by commodity type: inputs firms buy, from crude goods to parts, transport, and business services.
• Intermediate demand by production-flow stage: stages 1 to 4 track inputs moving forward toward final output.

In the June 2022 example, released July 14, 2022, final demand rose 1.1% for the month adjusted and 11.3% over 12 months unadjusted. It was the largest gain since the record 11.6% jump of March 2022.

Goods rose 2.4% and drove 75% of the gain, as energy jumped 10.0% on gasoline up 18.5%, while chicken eggs fell 30.2%. Services rose 0.4%, with trade margins up 0.8% driving 67% of the rise, while portfolio management fell 2.7%. Core final demand excluding foods, energy, and trade services rose only 0.3% and 6.4% over 12 months, well below the 11.3% headline. Read the headline with the core and name the driver.

1. Collect: Take transaction prices effective Tuesday of the week containing the 13th, from a probability sample of businesses. Collect them through the BLS Internet Data Collection Facility (IDCF).
2. Weight: Weight each price by shipment values (sales totals), now reflecting 2012 shipment levels after 2007 levels. Industry indexes use net output, or sales outside the industry, with end-use splits from BEA Use of Commodities data.
3. Index against base: Set each index against a base of 100.0: most commodity series use 1982 equals 100, FD-ID uses November 2009 equals 100. An FD-ID reading of 105.5 thus means prices stand 5.5% above November 2009 levels. A reading of 90.0 means prices sit 10% below November 2009 levels.
4. Change: Report moves as % changes, not point changes, using points divided by the prior index times 100. For example, 122.4 minus 120.0 equals 2.4 points, and 2.4 divided by 120.0 times 100 equals 2.0%. The release example reads 107.5 minus 104.0 as 3.5 points, and 3.5 divided by 104.0 times 100 as 3.4%.
5. Seasonal adjustment: Adjust seasonal patterns with X-13 ARIMA software from the US Census Bureau, using direct adjustment for commodities and indirect aggregation for FD-ID. Industry indexes stay unadjusted; factors are rebuilt yearly over the last 5 years with Intervention Analysis since January 1988. Abrupt shifts can distort adjusted data.