Industrial producer prices in the domestic market experienced a substantial monthly increase of 2.0 percent in July, suggesting that the costs of products produced within the country are on the rise. Nevertheless, producer prices have declined over the past year, as evidenced by the 1.6 percent year-over-year decrease in domestic prices, despite this monthly increase.

The prices of residential and non-residential buildings in the construction sector remained unchanged from the previous month, but they decreased by 2.6 percent in comparison to July 2023. This suggests stability in the short term but a notable decrease over the year, driven by shifts in prices in the housing market. On the other hand, the cost of construction of roads and railways increased marginally by 0.3 percent month-over-month, but it decreased by 1.5 percent annually, suggesting that there is some fluctuation in public infrastructure expenses. In comparison to the domestic market, the foreign market exhibited minimal volatility, as evidenced by the minimal change in producer prices.

In general, the domestic market exhibits indications of short-term inflationary pressure; however, the annual declines indicate that the industrial and construction sectors are still undergoing adjustments, which is indicative of the broader economic environment, bringing the RPI and RPI-P to 6 respectively, indicating that the Italian economy is performing slightly above market forecasts.

The producer price indices (PPI) measure transaction prices, exclusive of VAT, for goods from industrial activities sold on the Italian market. Construction is excluded. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer and, in contrast to the consumer price index (CPI), excludes VAT and other deductible taxed associated with turnover.

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).

Because the index of producer prices measures price changes at an early stage in the economic process, it can serve as an indicator of future inflation trends. The producer price index and its sub-indexes are often used in business contracts for the adjustment of recurring payments. They also are used to deflate other values of economic statistics like the production index. It should be noted that the PPI excludes construction.

The PPI provides a key measure of inflation alongside the consumer price indexes and GDP deflators. The output price indexes measure change in manufacturer' goods prices produced and often are referred to as factory gate prices. Input prices are not limited to just those materials used in the final product, but also include what is required by the company in its normal day-to-day operations.

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.