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June 5 -- The Bureau of Labor Statistics (BLS) invites comments on its proposed renewal of the Producer Price Index (PPI) through October 2023. Comments are due by August 4.
Proposed change: In fiscal year 2020, PPI and BLS’s Import Price Index (MPI) will introduce a satellite set of net inputs to industry price indexes. These new indexes measure price change for both domestically produced and imported inputs consumed by most 3-digit North American Industrial Classification System (NAICS) industry groupings, excluding capital investment and labor. The new satellite series are complimentary to official indexes and are produced and published separately from the existing official PPI inputs to industry series. The new data series improves upon the existing net inputs to industry price indexes by adding prices for imported inputs of goods. The satellite series also represent a major coverage expansion relative to the official input price indexes, which are only available for construction industries and a very limited number of mining, manufacturing, and services industries. The new data provide business users with additional data options for industry cost analysis, price transmission analysis, contract escalation, and deflation of revenue streams, removing the effects of price changes and converting nominal revenue into real revenue. Each month beginning with the initial data release, PPI and MPI will post an Excel file on a new web page with data for the current period and revised data for the four months prior. Data in the table are published at the third decimal place level of precision. PPI will advertise the availability of the satellite data and conduct presentations to obtain user feedback.

The PPI, one of the Nation's leading economic indicators, designated as a Principal Federal Economic Indicator. The PPI consists of a family of indexes that measures the average change over time in the selling prices received by domestic producers of goods and services. About 10,000 PPIs for individual products and groups of products are released each month. PPIs are available for the output of nearly all industries in the goods-producing sectors of the U.S. economy—mining, manufacturing, agriculture, fishing, and forestry—as well as natural gas, electricity, construction, and goods competitive with those made in the producing sectors, such as waste and scrap materials. The PPI data are widely used by the business community as well as by government. In particular the data are used as an economic indicator playing a crucial role in market analysis, as a deflator of other economic series, the basis for the calculation of price adjustments for contracts and purchase agreements and as an input to economic research. These uses highlight the necessity of the PPI in order to understand the economy.

PPI data meets a wide range of government needs by providing a description of the magnitude and composition of price changes within the economy. Government agencies view these indexes as sensitive indicators of the economic environment and closely follow each monthly release of statistics. PPI data are vital in helping the President and Congress set fiscal spending targets. The Federal Reserve Board Open Market Committee monitors producer prices to help determine monetary policy. Federal policy makers at the Department of the Treasury and the Council of Economic Advisors utilize these statistics to help interpret the economic environment and make decisions based upon these interpretations. Many dollar-denominated measurements of economic performance, such as the Gross Domestic Product (GDP), require accurate price data for the conversion of nominal dollars into real dollars. National income accounting figures must also be inflation free in order to remain relevant to fiscal and monetary policy makers setting objectives. Price adjustment clauses in government purchasing contracts commonly use one or more PPIs. According to a conservative estimate hundreds-of-billions of dollars' worth of contracts and purchase agreements employ PPIs as part of price adjustment clauses. Failure to calculate these price data would prolong the time frame needed for accurate recognition of and appropriate adaptation to economic events.

The private sector also makes extensive use of PPI data. Researchers commonly use producer prices to probe and measure the interaction of market forces. Private firms use PPIs for contract escalation and price adjustment. The Internal Revenue Service (IRS) recommends using PPI data for certain kinds of tax related inventory accounting, such as Last-In-First-Out (LIFO). Private businesses extensively use PPIs for planning and operations. Firms often compare the prices they pay and receive with changes in appropriate PPIs.

Economic researchers and forecasters also put PPIs to regular use. They use PPI data to better understand market forces. Research topics requiring producer price data include studying elasticities, potential lead and lag structures within price changes, and the identification of prices that demonstrate tremendous influence throughout the economy if they change. Policy-makers, businesses, and researchers all require complete descriptions of price change trends if they are to perform effectively and efficiently.

PPI website:  https://www.bls.gov/ppi/
Federal Register notice: https://www.federalregister.gov/documents/2020/06/05/2020-12199/proposed-collection-comment-request
Supporting Statement Part A (draft) -- purpose, uses, data products, proposed changes:   https://www.dropbox.com/s/h4hh6bn3f57om3w/Supporting%20Statement%20Part%20A%20PPI%202020%20draft.docx?dl=0
Supporting Statement Part B (draft) -- universe, sample size, collection and estimation procedures: https://www.dropbox.com/s/cw6fpa7sjr9kik8/Supporting%20Statement%20Part%20B%20for%20PPI%202020%20DMS%20v1.3.docx?dl=0
Point of contact: (202) 691-7705  ppi-info@bls.gov

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