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CH: Producer and Import Price Index
| Actual | Previous | |
| Month over Month | -0.3% | -0.4% |
| Year over Year | -2.1% | -1.8% |
Highlights
Producer and consumer prices declined in June in large part due to lower import prices, falling 0.3 percent month-on-month and 2.1 percent year-on-year. At their core, prices were down 0.5 percent in June and 0.8 percent lower than a year ago.
The import price component saw priced fall 0.7 percent from the previous month, while they were 0.8 percent below their year-ago levels. At the same time, producer prices fell 0.1 percent month-on-month and 2.7 percent from June of last year.
The main driver behind the monthly decline were a 12.5 percent decrease in the price for imported petroleum products, and a 14.3 percent drop for petroleum and natural gas. This is due in great part because of the strong Swiss franc which helps when buying dollar-denominated products.
Prices for domestic manufactured goods were 0.3 percent lower in June and unchanged from a year ago, while export prices were unchanged and down 4.5 percent year-on-year.
The results show the volatility resulting from the war in the Middle East where June was a relatively calm month between the US and Iran. However, with attacks beginning again, prices are likely to ratchet up again in July.
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.