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Economy
Price Indexes
Last updated: 9/2/08
What the Indicators Mean
Economists turn to two price indexes when they need to forecast the rate of inflation and track prices: The producer price index (PPI) and the consumer price index (CPI). The PPI, released monthly by the U.S. Bureau of Labor Statistics, represents the measure of change in wholesale prices. The index tracks the prices of foods, metals, lumber, oil and gas, in addition to other commodities, but doesn’t include services. Because upward or downward changes in prices are typically passed on to consumers, PPI trends are seen as accurate indicators for changes in the CPI.The CPI, also know as the cost-of-living index, is the index that measures the prices of a fixed basket of goods purchased by a consumer. This figurative basket includes food, transportation, shelter, clothing, medical care, entertainment, among other items. The index is widely used as the benchmark for gauging adjustments to social security payments, union contracts and tax brackets, as well as determining cost-of-living increases in pensions and wages.
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