Finished Goods Producer Price Index
Chart of the Week for December 21 - December 27, 2007
The Finished Goods Producer Price Index ("PPI") measures the average change in wholesale prices across the domestic economy and is a closely watched indicator of inflationary pressure. Finished goods are final stage products that are ready for the consumer to buy and therefore include all production line price changes. Economists measure finished goods PPI in terms of headline (all products) and core (excluding oil and food).
The chart above illustrates the recent divergence of headline and core PPI. The year over year headline PPI has reached 1981 levels; a period marked by steep rises in inflation. In contrast, core PPI has remained steady for the past two years. This recent rise in the headline PPI can be attributed to energy prices which rose 14.1% in November 2007. The fact that the core PPI remains steady indicates that prices should remain stable but the effects of the higher energy prices add a layer of uncertainty.
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