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PRODUCER PRICE INDEX

Statistics Directorate    
French Equivalent: Indice des prix à la production (IPP)

Definition:
A measure of the change in the prices of goods and services either as they leave their place of production or as they enter the production process. A measure of the change in the prices received by domestic producers for their outputs or of the change in the prices paid by domestic producers for their intermediate inputs.

Context:
The producer price index does not attempt to measure the actual level of prices, but is limited to the measurement of the average change in prices from one period to another. The producer price index does not measure the value of production or cost of production, but it can be used to measure either the change in output prices due to changes in the basic prices received by producers or, alternatively, the change in prices paid by producers for inputs of goods and services used in the production of output.

In general terms a PPI can be described as an index designed to measure either the average change in the price of goods and services as they leave the place of production or as they enter the production process. Thus, producer price indices fall into two clear categories input prices (i.e. purchase prices) and output prices (i.e., basic prices).

The 1993 SNA (paragraph 6.205) defines a producer (output) price as: “The amount receivable by the producer from the purchaser for a unit of a good or service produced as output minus any VAT or similar deductible tax, invoiced to the purchaser. It excludes any transport charges invoiced separately by the producer”. (Draft Producer Price Index Manual, The Technical Expert Groups on the Producer Price Index, Part 1 - The Theory and Concepts of PPI Measurement, Chapter 2. The Purpose and Uses of Producer Price Indices, paras. 2,3,5,6).

Source Publication:
ILO, IMF, OECD, Eurostat, UNECE, World Bank, 2004, Producer Price Index Manual: Theory and Practice, International Monetary Fund, Washington DC.

Cross References:
Consumer price index
Input producer prices
Output producer prices
Wholesale prices index

Hyperlink:
http://www.imf.org/external/np/sta/tegppi/index.htm

Statistical Theme: Prices and purchasing power partities

Created on Tuesday, September 25, 2001

Last updated on Friday, July 8, 2005