CPI vs PPI: Consumer Price Index vs Producer Price Index
Short answer. The Consumer Price Index (CPI) measures the change in prices consumers pay for a basket of goods and services, including taxes and retail margins. The Producer Price Index (PPI) measures the prices producers receive for their output, before retail markup. PPI often moves first and can foreshadow consumer prices.
Side by side
| Consumer Price Index (CPI) | Producer Price Index (PPI) | |
|---|---|---|
| Measures | Prices paid by consumers | Prices received by producers |
| Includes taxes and retail margins | Yes | No |
| Coverage | Household spending basket: housing, food, transport, care | Output of farms, factories, mines, services sold to businesses |
| Published by | US Bureau of Labor Statistics | US Bureau of Labor Statistics |
| Common use | Cost-of-living adjustments, inflation target | Early signal of cost pressure, contract escalators |
| Volatility | Smoother | More volatile, driven by commodities |
| Link to the other | Lags producer cost changes | Can lead CPI by weeks or months |
Which one fits you?
Lean towards Consumer Price Index (CPI) if…
- you track inflation as households feel it
- you index wages, benefits or leases to the cost of living
Lean towards Producer Price Index (PPI) if…
- you track costs for manufacturers and suppliers
- you want an early hint of consumer price pressure
Frequently asked questions
Which does the Fed watch?
The Fed’s 2% target is defined on the PCE price index, but CPI and PPI both feed into its view.
Why can PPI rise while CPI stays flat?
Producers may absorb higher costs in their margins, or the rise is in goods that make up a small part of what households buy.
What is core CPI?
CPI excluding food and energy, which are volatile, to show the underlying trend.
General education, not personal financial advice. Figures are typical US examples and vary by provider and year.