Bureau of Labor Statistics
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Producer Price Index (PPI)
Explanatory Note (PDF)
Brief Explanation of Producer Prices Indexes
The Bureau of Labor Statistics (BLS) term Producer Price Index (PPI)
refers to a family of indexes that measure the average change over time in
the prices received by domestic producers of goods and services. PPIs
measure price change from the perspective of the seller. This contrasts
with other measures, such as the Consumer Price Index (CPI); CPIs measure
price change from the purchaser's perspective. Sellers' and purchasers'
prices can differ due to government subsidies, sales and excise taxes, and
More than 8,000 PPIs for individual products and groups of products
are released each month. PPIs are available for the products of virtually
every industry in the mining and manufacturing sectors of the U.S. economy.
New PPIs are gradually being introduced for the products of industries in
the trade, finance, and services sectors of the economy.
More than 100,000 price quotations per month are organized into three
sets of PPIs: (1) Stage-of-processing indexes; (2) commodity indexes; and
(3) indexes for the net output of industries and their products. The stage-
of-processing structure organizes products by class of buyer and degree of
fabrication. The commodity structure organizes products by similarity of
end use or material composition. The entire output of various industries
is sampled to derive price indexes for the net output of industries and
The index measures price change from a designed reference date. For
the CPI-U and the CPI-W the reference base is 1982-84 equals 100.0. The
reference base for the C-CPI-U is December 1999 equals 100.
An increase of 16.5 percent from the reference base, for example, is shown
as 116.5. This change can also be expressed in dollars as follows: the
price of a base period market basket of goods and services in the CPI has
risen from $10 in 1982-84 to $11.65.
Within the stage-of-processing system, finished goods are commodities
that will not undergo further processing and are ready for sale to the
final-demand user, either an individual consumer or business firm.
Consumer foods include unprocessed foods such as eggs and fresh vegetables,
as well as processed foods such as bakery products and meats. Other
finished consumer goods include durable goods such as automobiles,
household furniture, and appliances, as well as nondurable goods such as
apparel and home heating oil. Capital equipment includes producer durable
goods such as heavy motor trucks, tractors, and machine tools.
The stage-of-processing category for intermediate materials, supplies,
and components consists partly of commodities that have been processed but
require further processing. Examples of such semifinished goods include
flour, cotton yarn, steel mill products, and lumber. The intermediate
goods category also encompasses nondurable, physically complete items
purchased by business firms as inputs for their operations. Examples
include diesel fuel, belts and belting, paper boxes, and fertilizers.
Crude materials for further processing are products entering the
market for the first time that have not been manufactured or fabricated and
that are not sold directly to consumers. Crude foodstuffs and feedstuffs
include items such as grains and livestock. Examples of crude nonfood
materials include raw cotton, crude petroleum, coal, hides and skins, and
iron and steel scrap.
The commodity classification structure of the PPI organizes products
by similarity of end use or material composition, disregarding industry of
origin. Fifteen major commodity groupings (2-digit commodity codes) make
up the All Commodities Index. Each major commodity grouping includes (in
descending order of aggregation) subgroups (3-digit), product classes (4-
digit), subproduct classes (6-digit), and individual items (8 digit).
Nearly all 8-digit commodities under the traditional commodity coding
system are now derived from corresponding industry-classified product
indexes. In such instances, movements in the traditional commodity price
indexes and corresponding percent changes will be virtually identical to
their industry-based counterparts, even if their index levels differ.
Industry Net-Output Price Indexes
PPIs for the net output of industries and their products are grouped
according to the North American Industry Classification System (NAICS).
Prior to the release of January 2004, industry-based PPIs were published
according to the Standard Industrial Classification (SIC) system. Industry
price indexes are compatible with other economic time series organized by
industry, such as data on employment, wages, and productivity. Table 5 of
the PPI Detailed Report includes data for NAICS industries and industry
groups (3-, 4-, 5-, and 6-digit codes); indexes for Census product classes
(7- and 8-digits), products (9-digits), and more detailed subproducts (11-
digits); and, for some industries, indexes for other sources of revenue.
Indexes may represent one of three kinds of product indexes. Every
industry has primary product indexes to show changes in prices received by
establishments classified in the industry for products made primarily, but
not necessarily exclusively, by that industry. The industry classification
of an establishment is determined by which products comprise a plurality of
its total shipment value. In addition, most industries have secondary
product indexes that show changes in prices received by establishments
classified in the industry for products chiefly made in some other
industry. Finally, some industries have miscellaneous receipts indexes to
show price changes in other sources of revenue received by establishments
within the industry that are not derived from sales of their products, for
example, resales of purchased materials, or revenues from parking lots
owned by a manufacturing plant.
PPIs are based on selling prices reported by establishments of all
sizes selected by probability sampling, with the probability of selection
proportionate to size. Individual items and transaction terms from these
firms are also chosen by probability proportionate to size. The BLS
strongly encourages cooperating companies to supply actual transaction
prices at the time of shipment to minimize the use of list prices. Prices
submitted by survey respondents are effective on the Tuesday of the week
containing the 13th day of the month. This survey is conducted primarily
through the mail.
Price data are provided on a voluntary and confidential basis; only
sworn BLS employees are allowed access to individual company price reports.
BLS publishes price indexes instead of unit dollar prices. All PPIs are
subject to revision 4 months after original publication to reflect the
availability of late reports and corrections by respondents.
BLS periodically updates the PPI sample of survey respondents to
better reflect current conditions when the structure, membership,
technology, or product mix of an industry shifts significantly and to
spread reporting burden among smaller firms. Results of these resampling
efforts are incorporated into the PPI with the release of data for January
Weights for most traditional commodity groupings of the PPI, as well
as weights for commodity-based aggregate indexes calculated using
traditional commodity groupings, such as stage-of-processing indexes,
currently reflect 1997 values of shipments as reported in the Census of
Manufactures and other sources. From January 1996 through December 2001,
PPI weights were derived from 1992 shipment values. Industry indexes also
are now calculated with 1997 net output weights. This periodic update of
the value weights used to calculate the PPI is done to more accurately
reflect changes in production and marketing patterns in the economy. Net
output values of shipments are used as weights for industry indexes. Net
output values refer to the value of shipments from establishments within
the industry to buyers outside the industry. However, weights for
commodity price indexes are based on gross shipment values, including
shipment values between establishments within the same industry. As a
result, broad commodity grouping indexes, such as the PPI for All
Commodities, are affected by the multiple counting of price change at
successive stages of processing, which can lead to exaggerated or
misleading signals about inflation. Stage-of-processing indexes partially
correct this defect, but industry indexes consistently correct for this at
all levels of aggregation. Therefore, industry and stage-of-processing
indexes are more appropriate than broad commodity groupings for economic
analysis of general price trends.
Price Index Reference Base
Effective with publication of January 1988 data, many important PPI
series (including stage-of-processing groupings and most commodity groups
and individual items) were placed on a new reference base, 1982=100. From
1971 through 1987, the standard reference base for most PPI series was
1967=100. Except for rounding differences, the shift to the new reference
base did not alter any previously published percent changes for affected
PPI series. (See "Calculating Index Changes," below.) The 1982 reference
base is not used for commodity indexes with a base later than December 1981
or for industry net output indexes and their products.
For further information on the underlying concepts and methodology of
the Producer Price Index, see chapter 14, "Producer Prices," in BLS Handbook
of Methods (April 1997), Bulletin 2490. This document can be downloaded
from the BLS website at (http://www.bls.gov/opub/hom/homch14_itc.htm),
and reprints are available on request.
Calculating Index Changes
Each PPI measures price changes from a reference period which equals
100.0. An increase of 5.5 percent from the reference period in the
Finished Goods Price Index, for example, is shown as 105.5. This change
can also be expressed in dollars, as follows: Prices received by domestic
producers of a sample of finished goods have risen from $100 in 1982 to
$105.50. Likewise, a current index of 90.0 would indicate that prices
received by producers of finished goods are 10 percent lower than they were
Movements of price indexes from one month to another are usually
expressed as percent changes, rather than as changes in index points.
Index point changes are affected by the level of the index in relation to
its base period, whereas percent changes are not. The following example
shows the computation of index point and percent changes.
|Index Point Change
|Finished Goods Price Index
|Less previous index
|Equals index point change
|Index point difference
|Divided by the previous index
|Results multiplied by one hundred
0.034 x 100
|Equals percent change
Seasonally Adjusted and Unadjusted Data
Because price data are used for different purposes by different
groups, BLS publishes seasonally adjusted and unadjusted changes each
month. Seasonally adjusted data are preferred for analyzing general price
trends in the economy, because these data eliminate the effect of changes
that normally occur at about the same time, and in about the same
magnitude, every year-such as price movements resulting from normal weather
patterns, regular production and marketing cycles, model changeovers,
seasonal discounts, and holidays. For these reasons, seasonally adjusted
data more clearly reveal underlying cyclical trends. Unadjusted data are
of primary interest to users who need information that can be related to
actual dollar values of transactions. Individuals requiring this
information include marketing specialists, purchasing agents, budget and
cost analysts, contract specialists, and commodity traders. It is the
unadjusted data that are generally cited in escalating long-term contracts
such as purchasing agreements or real estate leases. (See Escalation and
Producer Price Indexes: A Guide for Contracting Parties, BLS Report 807,
September 1991, available on request from the BLS.)
In 1998, the PPI implemented the X-12-ARIMA Seasonal Adjustment
Method; prior to that year the PPI employed the X-11 method. Each year,
the seasonal status of most commodity indexes is re-evaluated to reflect
more recent price behavior. Industry net output indexes are not seasonally
adjusted. For time series that exhibit seasonal pricing patterns, new
seasonal factors are estimated and applied to the unadjusted data for the
previous 5 years. These updated seasonally adjusted indexes replace the
most recent 5 years of seasonal data.
Seasonal factors may be applied to series using either a direct or
aggregative method. Generally, commodity indexes are seasonally adjusted
using direct seasonal adjustment, which produces a more complete
elimination of seasonal movements than the aggregative method. However,
the direct seasonal adjustment process may not yield figures that possess
additive consistency. Thus, a seasonally adjusted index for a broad
category that is directly adjusted may not be logically consistent with all
seasonally adjusted indexes for its components. Seasonal movements for
stage-of-processing indexes are derived indirectly through an aggregative
method that combines movements of a wide variety of subproduct class (6-
Seasonally adjusted indexes can become problematic when previously
stable and predictable price patterns abruptly change. If the new pattern
persists, the seasonal adjustment method will eventually reflect it
adequately; if these patterns keep shifting, however, seasonally adjusted
data will become chronically troublesome. This problem occurs relatively
infrequently for farm and food-related products but has more often affected
manufactured products such as automobiles and steel.
Since January 1988, the PPI has used Intervention Analysis Seasonal
Adjustment methods to enhance the calculation of seasonal factors. With
this technique, outlier values that may distort the seasonal pattern are
removed from the data prior to applying the standard seasonal factor
estimation procedure. For example, a possible economic cause for large
price movements for petroleum-based products might have been the Persian
Gulf War. In this case, intervention techniques allowed for better
estimates of seasonally adjusted data. On the whole, very few series have
required intervention. Out of nearly 900 seasonally adjusted series, only
16 interventions were performed in 1997.
For more information relating to seasonal adjustment methods, see (1)
"Appendix A: Seasonal Adjustment Methodology at BLS," in the BLS Handbook
of Methods (April 1997), Bulletin 2490 and (2) "Summary of Changes to the
PPI's Seasonal Adjustment Methodology" in the January 1995 issue of
Producer Price Indexes.
Retrieving PPI data from the PPI Website
PPI data can be obtained from the WWW address (http://www.bls.gov/ppi).
Scrolling down the page to the "Get Detailed Statistics" header reveals
the following 5 methods of data retrieval:
Most Requested Series is a form-based application that allows the
user to quickly obtain PPI time series data by selecting from two separate
lists (commodity and industry) of the most commonly requested time series,
including the All Commodities Index and the stage-of-processing indexes
(for example, Finished Goods). Within each list, any one-or all-of the
time series shown can be selected. A user can modify the date range and
output options after executing the query, using the reformat button above
the data output table.
Create Customized Tables is a form-based query application designed for
users unfamiliar with the PPI coding structure. It guides a user through
the PPI classification system by listing index titles and does not require
knowledge of commodity or industry codes. Data retrieved are based on a
query formulated by selecting data characteristics from lists provided.
Two options are available to create customized tables, depending on a
user's browser capability. The one-screen option is a Java
application that uses a single screen to guide a user through the available
time series data. The second option is a multiple screen, nonJava-based
application. Both methods allow a user to browse the PPI coding structure
and select multiple series codes. Using the one-screen option, users can
modify the date range and output options after executing the query using
the reformat button above the data output table.
Series Report is a form-based application that uses formatted PPI time
series identifiers (commodity or industry codes) as input in extracting
data according to a specified set of date ranges and output options. This
application provides the most efficient path for those users who are
familiar with the format of PPI time series identifiers. Up to 300 indexes
can be extracted at one time.
There are three basic formats for creating a unique PPI time series
identifier. For commodity and stage-of-processing indexes, enter a "wpu"
prefix (not seasonally adjusted) or a "wps" prefix (seasonally adjusted) in
combination with a commodity-based code to create a series identifier.
Will provide data for:
||Drugs and pharmaceuticals, seasonally adjusted
||Pharmaceutical preparations, cardiovascular system
||Finished goods, not seasonally adjusted
For a current industry-based price index organized according to the North
American Industry Classification System (NAICS), enter the prefix "pcu"
followed by the industry-product code. The series identifier for products
primary to an industry include 12 numeric digits, the six-digit industry
code is repeated, and up to seven additional digits of product detail.
Dashes are used as place holders for higher-level industry group codes.
current NAICS series
Will provide data for:
||Chemical manufacturing, not seasonally adjusted
||Automobile and light duty motor vehicle manufacturing
||Offices of physicians, one and two physician practices and single specialty group practices, general/family practices
To identify a discontinued industry-product code based on the Standard
Industrial Classification (SIC), enter a "pdu" prefix and "#" between the
fourth and fifth characters of the product code. A series identifier for
the discontinued dataset uses underscores as placeholders to complete a
reference to an SIC industry group code of less than four digits. (All PPI
industry-based indexes organized by SIC were discontinued with the
introduction of the NAICS.) In all cases, no spaces are permitted.
discontinued SIC series
Will provide data for:
||Chemicals and allied products, not seasonally adjusted
||Blast furnaces, steel works, and rolling and finishing mills, not seasonally adjusted
Flat Files and the FTP server are best suited for those users requiring
access to either a large volume of time series data or other PPI-related
documentation (such as, seasonal factor and relative importance tables).
The FTP site can be accessed at (ftp://ftp.bls.gov) or directly from the
links on the "Get Detailed Statistics" page or the PPI homepage. Data and
documentation available for download include:
|NAICS Current Series
|SIC Discontinued Series
|Latest News Release
The FTP site maintains files to help with searches and downloads.
These files are centrally located in the /pub/doc directory. Within this
directory, go to the overview.txt file for an overview relating to all BLS
data available through the FTP site. For commodity-based PPI data (which
appear in tables 1, 2, 3, 6, 7, and 8 of the PPI monthly detailed report
and tables 1, 2, 3, and 5 of the monthly news release), the program help
file is wp.txt. For current industry-based PPI data based on the NAICS
(which appear in tables 4, 5, and 9 of the monthly PPI report and table 4
of the monthly news release), the file is pc.txt. For industry-based SIC
time series that have been discontinued, go to pd.txt. (These and other
help files are also maintained within each of the five directories listed
Other Sources of PPI Data
PPI data can also be accessed via the BLS homepage
(http://www.bls.gov). After clicking the "Get Detailed Statistics" link at
the top of the homepage a chart appears listing all of the available BLS
programs. The following four methods are available for PPI data: Most
requested statistics, create customized tables (one screen or multiple
screens), and flat files. Additional sources of BLS data are also
accessible from this page including: Economic news releases, series
report, and economy at a glance.
The PPI homepage (http://www.bls.gov/ppi) contains additional
information regarding PPI data and methodology. The top section of the
homepage provides PPI news releases, both current and archived, as well as
general PPI information. The "Tables Created by BLS" section found beneath
the statistics section provides relative importance and seasonal factor
tables. The remaining sections offer special notices and publications
pertaining to PPI methodology and applications.
Last Modified Date: May 16, 2008