An inflation measure that tracks the average change in selling prices received by domestic producers — a leading indicator for CPI.
PPI measures inflation at the wholesale level — the prices producers (factories, manufacturers, farms) charge for their goods. It comes BEFORE CPI in the supply chain, so it's a leading indicator of consumer inflation. If producers are paying more for inputs and charging more for outputs, those prices eventually flow through to consumers and show up in CPI a few months later.
The headline PPI gets the attention, but pros watch "core PPI" (excluding food and energy) for the cleaner signal. Energy prices are too volatile to give a reliable inflation read on their own. Core PPI is what the Fed actually pays attention to when assessing inflation pressure.
PPI is released monthly in the US, typically a day or two before CPI. It often pre-positions traders for the bigger CPI move — a strong PPI usually means a strong CPI is coming, and the dollar tends to rally accordingly.
Real trade example
The Sep 2024 US PPI came in hotter than expected at +0.3% vs flat forecast. EUR/USD dropped 25 pips on the print, then dropped another 50 pips when CPI confirmed two days later.
Frequently asked about ppi (producer price index)
What is a ppi (producer price index) in trading?+
An inflation measure that tracks the average change in selling prices received by domestic producers — a leading indicator for CPI.
When will I see ppi (producer price index) used in real trading?+
On the economic calendar a day or two before CPI. Less hyped than CPI but tradeable.
What is the most common mistake traders make with ppi (producer price index)?+
Treating PPI as a stand-alone number. PPI's main value is as a setup for CPI. Use it to position before the bigger release, not as a final word on inflation.
What do experienced traders know about ppi (producer price index) that beginners don't?+
If PPI surprises hot, position SHORT EUR/USD before the CPI release later in the week. The hot PPI usually means a hot CPI follows, and pre-positioning captures the bigger move.