Producer Price Index PPI Guide to use in market

Producer Price Index PPI measures the price changes of products produced by producers on a monthly basis and it is one of the most important indicators that measure the economic health like CPI or Inflation, GDP and unemployment rates other indicators.

These data are reviewed through a comprehensive survey of various sectors, including
manufacturing, agriculture, mining, and the public service sector, as well as the consumer price index as a base point.

For example, if there is a 115% increase in producer price, it means a 15% increase.

Unlike the retail sales figures, PPI does not include the tax account and the freight and distribution expenses of the products.

In general, the rise in PPI Producer Price Index means economic growth and a better employment level for the manufacturing sector.

The PPI is closely related to the market as it measures the current level of inflation.

Like other inflation indices, the rise in Producer Price Index PPI signals a rise in interest rates to curb inflation, which leads to an increase in the currency demand.

Core Producer Price Index PPI

They calculate the Core PPI it in the same way as PPI, but does not include elements with high price volatility such as energy and food, so it is more accurate than the PPI.

The PPI is the first inflation report to be released monthly.

 

Therefore it is important for traders and investors as it signals inflationary pressures affecting interest rates.

Impact of the Producer Price Index on the Market:

The effect of the producer price index on the Forex market is lower than in other markets.

When the index rises, this gives a signal of increased inflation and thus reduce the demand for the currency.

whereas its impact on bonds and shares, is when the PPI is high, the value of bonds and
shares is decline because of the impact of inflation so investors move to other markets.

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Hassan Hadaoui
Hassan Hadaoui
Writer and Economist
BC XTB

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