Welcome
Many of us aren't very familiar with everything that's factored in to establish where the U.S. economy is at and where it will most likely be in the near future. There is, however, one element that links in to many of other components, causing numbers to rise and fall. That element is the Producer Price Index. The Producer Price Index, or PPI, calculates changes in the prices domestic producers receive for their products and services. In short, the PPI indicates whether U.S. goods are selling for more or less in the current world market and serves as a barometer for our economic future.
Many countries throughout the world have their own PPI as well. The U.S. PPI is among the oldest, originating in the U.S. Senate in 1891. The Bureau of Labor Statistics now handles the publications of PPI reports, which are put out once a month with an annual revision every February. The PPI is one of the country's longest running systems of published statistical data and won't be going anywhere any time soon. The latest PPI numbers can be seen at http://www.bls.gov/ppi or at http://www.whitehouse.gov/fsbr/prices.html
There are three different types of producer price indexes; the industry-based PPI, the commodity-based PPI, and the stage-of-processing based PPI. The industry-based PPI is organized by type of industry and measures how much of one industry's output sells for to the other industries. Commodity-based PPI is arranged by similarity of material composition or use of a commodity to measure how much a particular type of product is selling for. There are 15 groupings in the commodity-based PPI, 2 for farming products and processed foods and feeds, and 13 for industrial commodities. In the stage-of-processing based PPI, indexes are regrouped to measure the different stages of processing. The three stages of processing are finished goods, intermediate materials, supplies and components, and crude materials that need to be processed further.
The PPI was begun to analyze the effects of importing and exporting farm and manufactured goods and still serves that purpose today, though it has expanded quite a bit. All of this information helps us to understand how our domestic products are fairing in the rest of the world. The producer price index is unique in that it gives consumers a look at price changes from the seller's point of view, which has just as much meaning to our economic future.