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Producer price indices (PPI)
A variety of tools are used to measure price changes taking place in an economy. These include consumer price indices (CPI), price indices relating to specific goods and/or services, GDP deflators and producer price indices (PPI). Whereas CPIs are designed to measure changes over time in average retail prices of a fixed basket of goods and services taken as representing the consumption habits of households, the purpose of PPIs is to provide measures of average movements of prices received by the producers of commodities.
Producer price indices measure changes in prices at an early stage in the production process. Because of this, they are often seen as advance indicators of price changes throughout the economy, including changes in the prices of consumer goods and services.
Definition
Producer prices are defined as "ex-factory prices” and exclude any taxes, transport and trade margins that the purchaser may have to pay. Manufacturing covers the production of semi-processed goods and other intermediate goods as well as final products such as consumer goods and capital equipment.
Comparability
The price indices shown here are intended to be producer price indices for manufacturing. In practice many countries do not calculate such indices for the manufacturing sector alone. The indices for Austria, Greece, Italy, Luxembourg, Mexico, Spain, Switzerland and Turkey all have broader coverage, usually including (in addition to manufacturing) mining, electricity, gas and water and, in some countries, agriculture.
An additional problem is that Austria and Turkey calculate wholesale price indices rather than producer price indices. Wholesale prices include taxes and transport and trade margins in addition to the ex-factory cost of the goods.
There are also differences between countries in the ways in which they adjust prices for quality changes, in the frequency with which the weights are updated, and in the price index formulae used.
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Long-term trends Compared with consumer prices, producer prices have risen more slowly throughout the period. More than half of OECD countries recorded average annual increases of under 2% and in two countries – Japan and Switzerland – producer prices were actually lower at the end of the period than in 1992. All countries recorded unusually sharp rises in 1995, 2000 and 2005 due to sharp movements in world commodity prices, but for most of the period annual increases have been modest in the EU15 countries, in Australia, Canada, Japan, Korea, New Zealand and the United States. However PPIs rose sharply in both Mexico and Turkey, and the four new OECD member countries from central Europe also experienced above averaged increases in their PPIs; rises were particularly large in Hungary and Poland and more moderate in the Czech Republic and Slovak Republic. |
Source
- OECD (2006), Main Economic Indicators, OECD, Paris.
Further information
Analytical publications
- Brook, A.M. et al. (2004), Oil Price Developments: Drivers, Economic Consequences and Policy Responses, OECD Economics Department Working Papers, No. 412, OECD, Paris.
- OECD (2007), OECD Economic Outlook: December No. 80 – Volume 2006 Issue 2, OECD, Paris.
Methodological publications
- IMF, ILO, OECD, Eurostat, UN, World Bank (2004), Producer Price Index Manual: Theory and Practice, IMF, Washington, DC.
- OECD (2002), "Comparative Methodological Analysis: Consumer and Producer Price Indices”, Main Economic Indicators, Volume 2002, Supplement 2, OECD, Paris.
Websites
- OECD Main Economic Indicators, www.oecd.org/std/mei.
| Texts | |
| • | Indicator web page |
| • | Indicator in PDF |
| Tables (xls) | |
| • | PPI: manufacturing |
| Graphics | |
| • | PPI: manufacturing |
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