PPI stands for Producer Price Index and it is a leading indicator of consumer inflation, extremely important for any central bank in the world because one of the goals/mandates of every central bank is to fight inflation. Not in the sense that we should not have inflation at all, because certain levels of inflation are healthy for any economy, but to have inflation under control. That is why, for example, the vast majority of central banks in the developed economies have the mandate of keeping inflation below or close to two percent.
PPI shows the actual change in the price of finished goods and services sold by producers and this is important as usually this changes are transmitted to the final consumer and the level of inflation generated will be sensed in the whole economy.
Looking at he past six months data that we analyze and we can say that for the past two months, in June and July, there is a clear pick up in the PPI levels, but hardly to make for an even short term trend. Levels are small, below 1%, so even with the huge quantitative easing programs that are running in the United States, inflation still seems to be subdued.
The most important things to take into consideration when looking at the PPI are the following:
- release date: monthly, about 17 days after the month ends;
- release time: 12:30 GMT, during the North American session;
- leading indicator of consumer inflation;
- first tier data;
- brings high volatility levels.