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Sept 25 -- The Bureau of Labor Statistics (BLS) is producing an experimental set of satellite inputs to industry price indexes. These indexes measure price change for the net inputs consumed by most 3-digit North American Industry Classification System (NAICS) industry groupings, excluding capital investment and labor. The new satellite series are not official statistics and are separate from the existing official Producer Price Index (PPI) inputs to industry series. These satellite series, however, improve upon the existing inputs to industry indexes by adding prices for imported inputs from the Import Price Index. The satellite indexes also cover a far larger portion of the economy than the official input indexes, which are only available for construction industries and a very limited number of mining, manufacturing, and services industries.  
 
BLS Associate Commissioner Jeff Hill writes: I’m pleased to announce that BLS is publishing the satellite series in an Excel worksheet file found on the BLS website at https://www.bls.gov/ppi/a-new-bls-satellite-series-inputs-to-industry-price-indexes.htm. Most of the indexes estimate price change back to January 2019. For the next year or so, we will continue to add data to the Excel file each month after the PPI and MPI data releases. The existing input index series will continue to publish on PPI release day until BLS transitions the new data from a satellite series to an official BLS data product and combines the two together, which I hope will occur in late 2021, at which time the older series will also begin to include imported inputs.
 
Before this transition can happen, however, we would appreciate feedback on the data. Is it useful? Is it organized clearly? What do you think of the new methodology for incorporating the imported inputs to production? On the web page with the data you will find a link to a new Monthly Labor Review article that describes the methodology in detail as it was presented at CRIW and JSM.
 
Also, we are considering the best approach for a monthly press release for this data. Because the data do not aggregate into a high-level “headline” figure the way most of our estimates do, what will be most important to highlight in our press release? Key industry or industry groups by importance to the economy?  Or perhaps those with the biggest price change for the month? If you have an opinion, we want to hear it!

Send feedback to: Satellite_Series_Feedback@bls.gov   
Satellite series webpage:  https://www.bls.gov/ppi/a-new-bls-satellite-series-inputs-to-industry-price-indexes.htm
MLR article "A new BLS satellite series of net inputs to industry price indexes: methodology and uses" https://www.bls.gov/opub/mlr/2020/article/pdf/a-new-bls-satellite-series-of-net-inputs-to-industry-price-indexes.pdf
Satellite Input to Industry Series (.xslx)   https://www.bls.gov/ppi/bls-satellite-input-to-industry-indexes.xlsx
 
The satellite BLS net inputs to industry indexes measure the average change in prices industries pay for inputs, excluding capital investment and labor. These indexes contrast with PPI's currently published net inputs to industry indexes because they include prices for both domestically produced and imported inputs to industries, while the currently published net inputs to industry indexes only include prices for domestically produced inputs.

To construct an overall input to industry index, two separate indexes are first calculated: one measuring price change for domestically produced inputs and the other measuring price change for imported inputs. Producer Price Index commodity indexes are used to construct the domestic portion of the overall index and Import Price Indexes are used to construct the imported portion of the index. The two indexes are then aggregated to an overall price index that measures price change for inputs to the industry sector, regardless of their country of origin.
 
Four potential uses for the BLS satellite index series: industry cost analysis, price transmission analysis, contract escalation, and deflation.
 
Industry cost analysis
The most straightforward use of the net inputs to industry price indexes is to measure changes in industry input costs over time. Calculating the percent change in index levels between two periods provides a measure of the change in an industry’s input costs, excluding those for labor and capital investment. In addition, subaggregate  indexes can be used to compare price trends for domestically produced and imported inputs. Finally, subaggregate indexes within the index for domestically produced inputs can be used to compare price trends for domestically produced goods and services inputs.
 
Price adjustments for contracting parties
BLS price index data are widely recognized as useful in price adjustment clauses, because they provide an objective price-change measure free from possible manipulation by contracting parties. The satellite series of input price indexes offers a new set of data that contracting parties can use in price adjustment clauses.
 
Price transmission analysis
The analysis of price transmission involves estimating the causal relationships between prices in a supply chain. The new satellite net inputs to industry indexes provide data users with an opportunity to analyze price transmission between BLS input and output price indexes for industry groups.
 
Deflation
Deflation entails removing the effect of price changes from a revenue stream in order to separate changes in revenue due to changes in product quantities sold from changes in revenue due to changes in prices.    
 
Points of contact: Jayson Pollock, supervisory economist, Office of Prices and Living Conditions, U.S. Bureau of Labor Statistics pollock.jayson@bls.gov   Jonathan C. Weinhagen, economist, Office of Prices and Living Conditions, U.S. Bureau of Labor Statistics weinhagen.jonathan@bls.gov

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