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Home » Forex Glossary » Producer Price Index (PPI) - United States

Producer Price Index (PPI) - United States

Tracks the changes producers and manufacturers charge their goods or services, as well as how the prices charged are distributed through the production process. The PPI can indicate inflation since manufacturers generally charge higher prices for their goods or services. If inflation exists the dollar's value declines as prices rise, therefore giving the consumer less purchasing power in terms of buying goods and services. Thus when the PPI increases this indicates a heightened inflationary pressures. When this happens the Fed increases interest rates to offset inflationary pressures. The report also indicates how an increase in raw materials effect intermediaries and into the final product.