CPI steals the spotlight, but if you're not watching PPI, you're trading half-blind.
The Producer Price Index (PPI) doesn’t get as many headlines, but it punches well above its weight in terms of market impact. It can flip rate expectations, slam yields, and push the dollar in either direction, all before CPI even has a chance to speak.
Here’s what you need to know and why it matters.
1. PPI = Wholesale Inflation Signal
PPI measures the average change in prices that producers receive for goods and services. Think of it as the upstream inflation gauge, what businesses pay before costs trickle down to consumers.
Traders track it because it can front-run CPI. If producers are getting squeezed, it’s only a matter of time before that hits shelves, gas stations, or your favorite food app.
2. Hot PPI = Pressure Cooker for the Fed
A hotter-than-expected PPI print means inflation may not be as contained as hoped. That throws cold water on rate-cut bets and boosts the USD.
Example: If Core PPI MoM comes in at 0.5% when markets expected 0.2%, yields might pop, gold could take a hit, and rate-sensitive stocks might pull back hard.
3. Watch Core More Than Headline
Headline PPI includes food and energy, which are noisy. Core PPI strips them out, giving a clearer signal of sticky inflation.
Traders are watching Core PPI MoM more than YoY right now, as the Fed is focused on month-to-month changes to see if inflation is re-accelerating or cooling off.
4. PPI + CPI = The Full Inflation Picture
PPI isn’t a solo act. It works best when paired with CPI. If both are hot, the market reacts sharply. If PPI comes in soft but CPI stays high, confusion reigns and volatility spikes.
Use both together to get a sense of inflation flow: from producers to consumers.
5. Don’t Sleep on Surprises
Like CPI, PPI surprises move markets. A wide miss or beat vs. expectations can swing yields, FX, and risk sentiment.
Keep an eye on consensus forecasts. If the actual print shocks, algos jump, traders chase, and the volatility fireworks begin.
Here’s the Takeaway:
PPI may not get the glam of CPI, but it’s a critical piece of the inflation puzzle. Especially in an environment where the Fed is hypersensitive to data. If you’re trading FX, gold, indices, or rates, PPI should be on your radar. It’s early, it’s fast-moving, and it often hints where CPI is heading next.
