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MadMarketScientist

Producer Price Index (PPI) Definition

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The Producer Price Index (PPI) is also known as Producer Inflation. This is a very important report as the rate of producer inflation directly affects the rate at which consumers will buy goods, affects consumer sentiment towards the economy and impact consumer spending. The PPI is actually a collection of indexes that mirrors price changes at three stages of production: industry stage, processing-stage based and commodity-based stages.

An increase in PPI is generally viewed as bullish for the currency in view, while a decrease in PPI is generally viewed as bearish. This is because of the expectation that this will have on interest rates as fixed by the central banks. However, the effect that the PPI value has on the currency has to be put in context of the prevailing situation of the country in focus before being traded.

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