A family of index that measures the average change in selling prices received by domestic
producers of goods and services over time. Producer Price Index measure price change from
the perspective of the seller. This contrasts with other measures, such as the Consumer Price
Index (CPI), that measure price change from the purchaser's perspective.
Sellers' and purchasers' prices may differ due to government subsidies,
sales and excise taxes, and distribution costs. The PPI Index is often used as a predictor of consumer price index.
Intheory, the price increases incurred by retailers will be passed on to the consumer, thereby
affecting the CPI. Investors will sometimes watch the Producer Price Index, then, in an
attempt to determine upcoming movements in the CPI.