| Actual | Previous | |
| Month over Month | 1.1% | 0.0% |
| Year over Year | -3.3% | -0.8% |
Highlights
Prices for mining, quarrying, energy and water were responsible for a large swing in November producer prices which rose 1.1 percent from October when they were unchanged, and contributed to a 3.3 percent decline in the year-on-year figure in the home market.
Prices for the sector were up 3.7 percent month-on-month in November after a 0.5 percent rise the previous month. For the year, they fell 14.8 percent, extending a 6.9 percent decline the previous month. This was due to higher wholesale spot electricity prices. Coking coal and refined petroleum products registered a 6.3 percent increase from October and a 5.3 percent year-on-year decline.
Prices in other sectors were far less volatile. Transportation equipment increased 0.1 percent month-on-month and 0.7 percent year-on-year, while electrical equipment, computers, and machinery rose 0.2 percent from October and fell 0.4 percent year-on-year.
Import prices rose 0.3 percent in November from a month ago when they fell by the same amount. From November of last year, they were down 3.1 percent after a 2.1 percent fall in November.
Today's data are more of an anomaly than a new trend. To be sure, spot electricity prices can be an issue if they persist. But for now, there are now there are no real surprises among the major sectors.
Definition
The producer price indices (PPI) measure transaction prices, exclusive of VAT, for goods from industrial activities sold on the French 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.