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CH: Producer and Import Price Index
| Actual | Previous | |
| Month over Month | 0.8% | 0.2% |
| Year over Year | -2.0% | -2.7% |
Highlights
Producer and import prices rose 0.8 percent in April compared to a 0.2 percent increase in March while falling 2.0 percent from the same month a year ago. In March prices fell 2.7 percent year-on-year.
Import prices were the main driver, rising 2.3 percent month-on-month and falling 1.0 percent year on year. Producer prices along rose 0.2 percent in April and fell 2.4 percent year on year.
As with most indicators in March and April, the story is energy prices. On the producer side, petroleum produce prices rose 19.5 percent in April and 31.6 percent year-on-year. On the import side they rose even more, up 53.2 percent month-on-month and 58.4 percent year-on-year.
Core inflation which excludes volatile products such as fresh food and energy rose 0.1 percent in April and fell 2.2 percent year-on-year on the producer side. Core import prices were down 0.1 percent during the reporting month and 3.1 percent below their year ago levels.
While core prices show moderate underlying inflation, the problem is nevertheless acute. Eventually, higher energy prices will bleed further into the broader economy with consumers and business affected. They in turn will have to likely pare back on discretionary spending.
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.