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					CPI and PPI
Consumer Price Index (Consumer Price Index), the English abbreviation for the CPI,
reflecting and living-related goods and services price index statistics out of the price
changes are usually observed as an important indicator of inflation. If a major increase
in the consumer price index shows that inflation has become a destabilizing factor in
the economy, the central bank would tighten monetary policy and fiscal policy risk,
leading to uncertain economic outlook. Therefore, excessive increase in the index are
not in the market. For example, in the last 12 months, consumer price index rose 2.3%,
it said the cost of living than the average of 12 months increased by 2.3%. When the
cost of living increase, the value of your money will be decreased. That is, a year ago
received a 100 yuan note, you can buy today is only 97.75 yuan worth of goods or
services. Generally speaking, when the CPI> 3% increase when we called
Inflation, that is inflation; and when the CPI> 5% increase, we call it Serious
Inflation, that is inflation.

Producer Price Index (PPI): The main purpose of the producer price index in
measuring the production of various commodities at different stages of the price
change case. In general, the production of commodities is divided into three stages:
First, the original stage: goods not do any processing; 2, intermediate stages: product
requires further processing; third, final stage: this point will not do any processing of
goods procedures.
  PPI is a measure of change in the trend of industrial enterprise product prices and an
index of change, a time to reflect changes in production prices of important economic
indicators, is also formulating economic policy and an important basis for national
accounts. At present, China PPI survey has more than 4000 kinds of products
(including more than 9500 kinds of specifications of goods), covering all the 39
industrial categories, 186 types involved in the investigation.
  Conduction law according to the price, PPI has a certain impact on the CPI. PPI
price levels reflect the production processes, CPI price level of consumer segments.
General volatility of the overall price level in the production first appeared, and then
the downstream industry chain to spread, and finally spread to consumer goods. Chain
can be divided into two: one for industrial production as raw materials, there is the
means of production of raw materials → → conduction means of subsistence.
Another is the production of agricultural products as raw materials, there are means of
agricultural production of agricultural products → → food conduction. In China, the
above two pathways of view, the present article, namely, the conduction of
agricultural products to the food more fully, since 2006 food prices is the main factor
driving up CPI. But first, the basic industrial products to the CPI is the failure of the
  As the CPI includes not only consumer prices but also service prices, CPI and PPI
are not strictly in the statistical coverage on the corresponding relationship between
the CPI and PPI changes so inconsistencies are possible. CPI and PPI in a departure
from the state continued, the law does not meet the price transmission. Price
Transmission occurs mainly due to fracture of the industrial market is a
buyer's market and the Government manipulated the price of public goods.
  In different market conditions, prices of industrial goods to the final consumer price
transmission, there are two possible scenarios: First, a seller's market
conditions, rising costs due to industrial prices (such as electricity, water, coal and
other energy, raw material prices) up the final will be successfully transmitted to
consumer prices; Second, conditions in the buyer's market, because of
oversupply, prices of industrial goods delivered to the consumer price is difficult,
companies need to profit on the rising cost of compression to be digested, the result
showed in downstream product price stability, and may even continue to lower
corporate profits reduced. Difficult to digest for some costs of business, could face
bankruptcy. Can successfully complete the transfer of industrial prices (mainly
electricity, coal, water, energy and raw material prices) are currently the main scope of
government price adjustment. In the upstream price (PPI) continued to move higher,
companies can not smooth out the upper reaches of the transfer of costs to final
consumer prices (CPI) increase, eventually leading to reduction in corporate profits.
  PPI is usually observed as an important indicator of inflation. As a result of seasonal
changes in food prices to increase, while energy prices are often unexpected
fluctuations, in order to more clearly reflect the overall situation of commodity price
changes, generally the change of food and energy prices removed, thus forming the
"core producer price index "and further observed the rate of
inflation trends.
  In the United States, the U.S. Producer Price Index data collection by the U.S. Labor
Bureau, their way of a questionnaire to the major manufacturers to collect data,
collected on a monthly basis, including the week containing the 13th of 2300 kinds of
commodities Price, plus the right to convert 100 decimal form, for ease of comparison,
the base period to 1967. In general, when the producer price index increase is
substantial and sustained increase in speed when the corresponding response of the
central bank to raise interest rates is inflation measures Zuzhi rapid rise, then the
increased possibility of currency appreciation; and vice versa.
  Economists focus on the real PPI and the media focus on core PPI, after removal of
food and energy, called "core PPI" (Core PPI) index, in order to
correctly judge the trend of prices of real --- this is because food and energy prices
have been affected by the seasons and the supply and demand, volatile. core PPI will
shortly be misleading.
  How to calculate, PPI focuses on the industrial, mining, raw materials, semi-finished
products prices, is also added to the service, but smaller proportion. U.S. Department
of Labor will do the investigation in more than 25,000 enterprises, obtained product
prices, according to industry and the economy in different proportion, proportion and
weight distribution.
  PPI to reflect the price received by producers of raw materials fluctuations,
projections expected CPI, to estimate the risk of inflation.
  In summary, PPI rose is not a good thing, if the transfer cost producers,
end-consumer prices, inflation rose. If you do not transfer, corporate profits decline,
there are downside risks to the economy.

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