PPI is the abbreviation of production price index (Producer Price Index), which is an index that measures the trend of ex-factory prices of production and manufacturing companies.
is an important economic indicator that reflects the price changes in the production field in a certain period, and is also an important basis for management to formulate relevant economic policies and national economic accounting .
Generally speaking, the production of goods is divided into three stages: the original stage, the sign at this time is that the goods have not yet been processed; the intermediate stage is that the goods need to be further processed; the completion stage, the sign at this time is that the goods do not need to be processed any more.
Therefore, PPI includes price information in three production stages: raw materials, semi-finished products and final products, which is the predecessor of CPI.
Like CPI, PPI is also one of the important indicators for predicting inflation , but its reflection is mainly concentrated in that before inflation is transferred to consumer goods, its prediction of inflation is more forward-looking than CPI.
so the changes between the two may be inconsistent, and the conduction effect on CPI will also show different manifestations.
According to my country's data, in terms of the transmission of agricultural products to food, CPI is more affected by PPI. In terms of the transmission of industrial products to daily necessities, CPI often does not necessarily perform consistent with PPI.
PPI has risen. In many cases, the impact of CPI may not be obvious, and there will even be a certain degree of decline, and vice versa.
Of course, if CPI and PPI have a long-term deviation, it does not conform to the price transmission law.
Theoretically, the price fluctuations faced during the production process will be reflected in the price of the final product, so observing the changes in PPI will help predict future price changes.
In terms of macroeconomics, when the PPI continues to be too high, it means that the economy may be overheating. 2001-2004 PPI was particularly active, and consumer demand growth was relatively stable. The changes in the prices of terminal consumer goods mainly resulted from fluctuations in the prices of upstream products.
After 2004, due to the significant changes in residents' demand for terminal consumer goods, downstream commodity prices have driven significant changes in prices of upstream products. Especially since the second half of 2006, with the explosive growth of residents' demand for housing and automobile consumer goods, the original supply and demand balance has been broken, which eventually led to a rapid rise in CPI and prompted the rapid rise of PPI.
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On the contrary, if the PPI growth rate slows down, it will effectively alleviate the pressure caused by the rapid growth rate of CPI, thereby effectively reducing the expectation of inflation, but it also brings the possibility of slowing economic development.
In the second half of 2008, with the spread and deepening of the global financial crisis , the prices of various commodities fell, and the combined effect of multiple factors caused the CPI to fall, and the final PPI also fell significantly in the following months.
Usually, when CPI and PPI remain in an upward state for a long time, it generally means that the growth rate of economic construction is accelerating and inflation begins to rise. If the two rise too fast, it will inevitably lead to excessive inflation and thus damage economic development. On the contrary, if both fall at the same time, it means that the growth rate of economic construction slows down.
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Follow us, become friends, and grow together. This article was first published by "Mr. Jin Yi 2022" and has the same name on the WeChat official account.
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