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Producer Price Index (PPI) vs Consumer Price Index (CPI)

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Pro Tip

  1. The CPI is a leading indicator for FED monetary policy.
  2. And the PPI is a leading indicator for the CPI.

Why Producer Price Index (PPI) Is Important?

Inflation factors are probably the second-most-watched indicator after unemployment data, as it helps investors deduce the future direction of monetary policy.

However this can be considered a backwards approach as inflation is generally considered a leading indicator and unemployment is considered a lagging indicator.

The core PPI can serve multiple roles in improving investment-making decisions because it can serve as a leading indicator for CPI.

BOTTOM LINE:

  1. The CPI is a leading indicator for FED monetary policy.
  2. And the PPI is a leading indicator for the CPI.
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