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CH: Producer and Import Price Index
| Actual | Previous | |
| Month over Month | -0.2% | -0.2% |
| Year over Year | -2.2% | -1.8% |
Highlights
Producer and import prices fell a combined 0.2 percent month-on-month in January and were 2.2 percent lower from a year ago, thereby continuing the price contractions seen in December. Core inflation which excludes items subject to volatile price swings, such as agricultural goods, petroleum products, and gas fell 0.1 percent from December and 1.5 percent from a year ago.
Petroleum products saw an 8.1 percent month-on-month decline and fell 20.6 percent from a year ago. At the same time, energy prices fell 2.4 percent month-on-month and 7.6 percent year-on-year.
Once again, the strength of the Swiss franc was a factor in prices contracting. Producer prices alone fell 0.2 percent from December while down 1.5 percent from a year ago, while import prices fell 0.5 percent and 3.5 percent from the same periods.
Prices for the sale of domestic goods fell 0.2 percent in January and 0.3 percent year-on-year domestically, while those slated for exports rose 0.1 percent month-on-month and fell 2.1 percent from January of last year.
Aside from price swings for some volatile items, there are no broad indications of upward pipeline inflationary pressures. Inflation is unlikely to be a big factor in the deliberations of the Swiss National Bank when they meet next week for their quarterly policy assessment.
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 producer price and import price index 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 and import prices are more volatile than consumer prices. While the CPI is the price index with the most impact in setting interest rates, the producer price and import price index provides significant information earlier in the production process. The producer price and import price index 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 producer price and import price index decreases or posts only small increases, but bond prices fall when the index 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.