CH: Producer and Import Price Index


Tue Aug 15 02:15:00 CDT 2017

Actual Previous
M/M % change 0.0% -0.1%
Y/Y % change -0.1% -0.1%

Highlights
The combined producer and import price index remained unchanged on the month in July. Year-on-year, prices were down 0.1 percent, unchanged from the June annual rate.

The flat headline reading reflected a balance in the declines of prices of petroleum products, down 1.9 percent on the month, that were offset by higher prices for scrap, up 3.1 percent, and other metal products, up 1.2 percent.

Producer prices remained unchanged on the month, but were down 0.6 percent year-on-year. Import prices were down 0.1 percent on the month, but up 0.9 percent from the level a year ago.

The underlying core composite price index was unchanged versus June and 0.5 percent lower on the year. Pipeline inflation pressures remain very subdued.

Definition
The producer price and import price index focuses on the actual prices of products on the market (transaction price) at the time of the order. The prices of domestic products are taken at the producer or factory level, excluding value added tax and consumption taxes. For imports, prices are collected at the Swiss border, without the value added tax, taxes on consumption and tariffs. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer

Description
The PPI measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months. Producer prices are more volatile than consumer prices. While the CPI is the price index with the most impact in setting interest rates, the PPI provides significant information earlier in the production process. The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace. The bond market rallies when the PPI decreases or posts only small increases, but bond prices fall when the PPI posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.