What Is Producer Price Index PPI M/M And How It Affects The Markets?

Producer Price Index PPI is an important economic news release that has the potential to move the market if there is a lot of deviation between the expected and the actual released figures. Producer Price Index (PPI) measures a change in the prices of goods and services, over a span of time, either as they leave their place of production or as they enter the production process. PPI measures a change in the prices received by domestic producers for their outputs or the change in the prices paid by domestic producers for their intermediate inputs.

How much PPI M/M can affect the markets? The Labor Department said on Friday its producer price index for final demand edged up 0.1 percent after a 0.4 percent rise in June. The increase was in line with economists’ expectations. Producer inflation data has been volatile since the government revamped the PPI series at the start of the year to include services and construction.

As you can see since the deviation from the expectation was not much, the market did not moved much. PPI is considered to be a leading indicator of inflation. When PPI rises, it is an early indication that inflation in the economy is on the rise. There is always a lag. When inflation rises and the economy overheats, central banks are always forced to increase the interest rates in an effort to cool down the economy.