From PPI to CPI

The consumer price index (CPI) measures the cost of a fixed bundle of consumer goods relative to the cost of those same goods in a chosen reference year. Inflation is the percent change in the index from one year to the next and reflects how prices are changing for consumers.
The producer price index (PPI) is a similar construct that measures the price that producers get for their wares. It was formerly called the wholesale price index (WPI). Because many of these goods are intermediate goods and thus inputs to the production of final consumer goods, one might hypothesize that changes in the PPI could forecast future changes in the CPI.
The FRED graph above shows recent movements in these two series (January 2015 to present). Both series have grown at a fairly constant rate over the medium term. Moreover, after an initial dip at the start of the COVID recession, the

Federal Reserve Source

Author: RealEstate