Understanding Producer and Consumer Price Indices
The Producer Price Index (PPI) and the Consumer Price Index (CPI) are crucial economic indicators. The PPI measures the average change over time in the selling prices received by domestic producers for their output, while the CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Although both are related to price changes, they are not highly correlated, meaning they can show different trends at times. For example, in July, the PPI showed a modest increase of 2.2% over the previous 12 months, down from 2.7% in June, indicating slower price growth at the production level.
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