| Actual | Previous | |
|---|---|---|
| Month over Month | 1.8% | 1.0% |
| Year over Year | -0.7% | -3.8% |
Highlights
Producer prices for the domestic market rose 1.8 percent on the month in November following an unrevised 1.0 percent rise in October. The annual inflation rate increased from minus 3.8 percent to minus 0.7 percent, recovering from October's 5-month low.
The monthly headline rise was largely due to energy where prices were up fully 4.9 percent. Elsewhere, consumer and intermediate goods remained flat, however capital goods fell 0.3 percent. As a result, core prices remained flat on the month and up just 0.3 percent on the year.
Today's update leaves the Italian RPI at minus 7 and the RPI-P at minus 25, showing overall economic activity lagging market expectations.
The monthly headline rise was largely due to energy where prices were up fully 4.9 percent. Elsewhere, consumer and intermediate goods remained flat, however capital goods fell 0.3 percent. As a result, core prices remained flat on the month and up just 0.3 percent on the year.
Today's update leaves the Italian RPI at minus 7 and the RPI-P at minus 25, showing overall economic activity lagging market expectations.
Definition
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.
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).
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.
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.
