How It Differs From CPI
Because the two indices are similar in fashion, a change in the PPI often anticipates a change in the CPI. However, there are times when the CPI exhibits a change of a significantly different magnitude (or direction) compared to the PPI. This is due to the different definition and uses of the two indices. The primary use of the PPI is to deflate revenue streams to get the real picture of output, while the CPI is to describe changes in the cost of living. Because of these differences, each uses prices from a different set of commodities and services.
Read more about this topic: U.S. Producer Price Index
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