Producer price index (PPI)
|Release Date:||Usually released out of the US on the 14th day of the new month|
|Release Time:||At 8.30am US Eastern Time|
|Released By:||The US Bureau of Labor Statistics|
The Producer Price Index is a measure of inflation on the producer’s end of the supply chain. This data is released in several countries. In the US, the data is released by the Bureau of Labor Statistics in the US, US Department of Labor.
This indicator measures the change in the price of a finished goods and services sold by producers. Producer prices tend to account for some part of overall inflation. Finished goods must pass through wholesalers and retailers, and any increases in the cost of the finished goods along the supply chain will have inflationary effects on the prices at which consumers purchase them.
This report also goes by several other names: Finished Goods PPI, Wholesale Prices or PPI for Final Demand.
Time of Release
The Producer Price Index report is usually released out of the US on the 14th day of the new month. The time of release is 8.30am US Eastern Time. The data is released on the website of the US Bureau of Labor Statistics and also on independent news feeds from Bloomberg and Thomas Reuters.
Interpreting the Data
The method by which the PPI is calculated was changed in Feb 2014. The PPI usually has greater impact if it hits the market before the CPI. The PPI is tightly correlated with CPI: if the prices of goods increase before they reach the stores where consumers buy them, it is more than likely that consumers will end up paying more for them. The PPI is thus a leading indicator of consumer inflation. The reverse is also the same.
The PPI is thus a high impact news release because it not only affects consumer inflation, but also affects manufacturing, employment, consumer spending habits and interest rates. It can therefore be traded off the cgarts on news release.
Actual reading > expected reading –> USD positive
Actual reading < consensus figure --> USD negative.
The same effect is also experienced in other countries whose currencies are well traded in the forex market. We therefore also expect the GBP, AUD, CAD and NZD to be affected by the PPI reports in the same manner the USD is affected by the PPI.
The PPI out of the UK is usually expressed as an annualized number, while that of the US is expressed as a month over month (m/m) number.