Which index measures inflation from the perspective of producers?

The Producer Price Index (PPI) is the measure that assesses inflation from the perspective of producers. It tracks the average changes in prices that producers receive for their goods and services over time. By focusing on the wholesale stage of the production process, the PPI provides insights into price changes before they reach consumers. This is particularly important because changes in producer prices can signal future changes in consumer prices, as producers may pass on their cost increases to consumers in the form of higher retail prices.

The PPI is a vital economic indicator for analysts and policymakers since it helps in understanding inflation trends that begin at the production level. It includes data from various sectors, such as manufacturing, agriculture, and services, making it a comprehensive measure of price dynamics within the economy. Understanding producer inflation can help forecast future consumer inflation trends, making the PPI a critical tool for economic analysis and decision-making.