Topic Archives: U.S. Statistical System

Why This Counts: What is the Producer Price Index and How Does It Impact Me?

The Producer Price Index (PPI) – sounds familiar, but what is it exactly? Didn’t it used to be called the Wholesale Price Index? It is related to the Consumer Price Index, but how? How does the PPI impact me?

Lots of questions! In this short primer we will provide brief answers and links for more information. Note, if you are an economist, this blog is NOT for you. It’s an introduction for everyone else!

Video: Introduction to the Producer Price Index

Before we go any further – what is an index? (You said this was a primer!)

An index is like a ruler. It is a way of measuring the change of just about anything. Producer price indexes measure the average change in prices for goods, services, or construction products sold as they leave the producer.

Here is an example of how an index works:

  • Suppose we created an index to track the price of a gallon of gasoline.
  • When we start tracking, gasoline costs $2.00 a gallon.
  • The starting index value is 100.0.
  • When gasoline rises to $2.50, our index goes to 125.0, which reflects a 25-percent increase in the price of gasoline.
  • If gasoline then drops to $2.25, the index goes to 112.5. The $0.25 decline in price reflects a 10-percent decrease in the price of gasoline from when the price was $2.50.

If you are a gasoline dealer, you might find a gasoline index useful. Instead of driving around every day to write down the prices of each competitor’s gasoline and averaging them together, the index can provide the data for you. (Question #5 in the PPI Frequently Asked Questions explains how to interpret an index.)

PPI is called a “family” of indexes. There are more than 10,000 indexes for individual products we release each month in over 500 industries. That is one big family!

OK, so PPI has lots of data – but what kind of data?

PPI produces three main types of price indexes: industry indexes, commodity indexes, and final demand-intermediate demand (FD-ID) indexes.

An industry refers to groups of companies that are related based on their primary business activities, such as the auto industry. The PPI measures the changes in prices received for the industry’s output sold outside the industry.

  • PPI publishes about 535 industry price indexes and another 500 indexes for groupings of industries.
  • By using the North American Industry Classification System (NAICS) index codes, data users can compare PPI industry-based information with other economic programs, including productivity, production, employment, wages, and earnings.

The commodity classification of the PPI organizes products by type of product, regardless of the industry of production. For example, the commodity index for steel wire uses pricing information from the industries for iron and steel mills and for steel wire drawing.

  • PPI publishes more than 3,700 commodity price indexes for goods and about 800 for services.
  • This classification system is unique to the PPI and does not match any other standard coding structure.

We also have more information on the differences between the industry and commodity classification systems.

The FD-ID classification of the PPI organizes groupings of commodities by the type of buyer. For example, the PPI for final demand measures price change in all goods, services, and construction products sold as personal consumption, capital investment, export, or to government. As a second example, the PPI for services for intermediate demand measures price change for services sold to business as inputs to production.

  • PPI publishes more than 300 FD-ID indexes.
  • This FD-ID classification system is unique to the PPI and does not match any other standard coding structure.

Now let’s go back to the beginning

  • 1902: Wholesale Price Index program begins, which makes it one of the oldest continuous set of federal statistics. The Wholesale Price Index captures the prices producers receive for their output. In contrast, the Consumer Price Index captures the prices consumers pay for their purchases.
  • 1978: BLS renames the program as the Producer Price Index to more accurately reflect that prices are collected from producers, rather than wholesalers.
  • PPI also shifts emphasis from a commodity index framework to a stage of processing index framework. This minimized the multiple counting that can occur when the price for a specific commodity and the inputs to produce that commodity are included in the same total index. For example, think of gasoline and crude petroleum both included in an all-commodities index.
  • 1985: PPI starts expanding its coverage of the economy to include services and nonresidential construction. As of January 2018, about 71 percent of services and 31 percent of construction are covered.
  • 2014: PPI introduces the Final Demand-Intermediate Demand system.
  • The “headline” number for PPI is called the PPI for Final Demand. It measures price changes for goods, services, and construction sold for personal consumption, capital investment, government purchases, and exports. We also produce a series of PPIs for Intermediate Demand, which measure price change for business purchases, excluding capital investment.
  • Let me give you an example: Within the PPI category for loan services, we have separate indexes for consumer loans and business loans. The commodity index for consumer loans is included in the final demand index and the commodity index for business loans is mostly in an intermediate demand index.
  • The Frequently Asked Question on the PPI for Final Demand provides even more information on this new way of measuring the PPI. The blog, Understanding What the PPI Measures, may also be helpful.
  • We also have an article that explains how the PPI for final demand compares with other government prices indexes, such as the CPI.

Why is the PPI important?

To me?

  • Inflation is the higher costs of goods and services. Low inflation may be good for the economy as it increases consumer spending while boosting corporate profits and stocks.
  • A change in producer prices may be a leading indicator of consumers paying more or less. Higher producer prices may mean consumers will pay more when they buy, whereas lower producer prices may mean consumers will pay less to retailers. For example, if the PPI gasoline index increases, you may see an increase soon at the pump!

To others (which may impact me!)?

  • Policymakers, such as the Federal Reserve, Congress, and federal agencies regularly watch the PPI when making fiscal and monetary policies, such as setting interest rates for consumers and businesses.
  • Business people use the PPI in deciding price strategies, as they measure price changes in inputs for their goods and services. For example, a company considering a price increase can use PPI data to compare the growth rate of their own prices with those in their industry.
  • Business people adjust purchase and sales contracts worth trillions of dollars by using the PPI family of indexes. These contracts typically specify dollar amounts to be paid at some point in the future. For example, a long-term contract for bread may be escalated for changes in wheat prices by applying the percent change in the PPI for wheat to the contracted price for bread.

Video: How the Producer Price Index is Used for Contract Adjustment

PPI is a voluntary survey completed by thousands of businesses nationwide every month. BLS carefully constructs survey samples to keep the number of contacts to a minimum, making every business, large and small, critical to the accuracy of the data. We thank you, our faithful respondents! Without you, BLS could not produce gold-standard PPI data.

Finally, check out the most recent monthly PPI release to get all the latest numbers. Head to the PPI Frequently Asked Questions to learn more. Or contact the PPI information folks at (202) 691-7705 or ppi-info@bls.gov.

Want to learn more about BLS price programs? See these blogs:

 

Do You Understand Your Local Economy?

The national unemployment rate may make the headline news every month, but many folks are most interested in understanding their own local economy.

BLS has a stat for that (really MANY statistics for that)! In fact, BLS data were highlighted in a webinar focusing on local data sponsored by the Association for Public Data Users, the American Statistical Association, and the Congressional Management Foundation.

Dr. Martin (Marty) Romitti, a Senior Fellow at the Center for Regional Economic Competitiveness, presented a webinar called “Understanding Your Congressional District’s Economy and Workforce Using Federal Statistical Data.” Though geared to Congressional staff, the information is applicable to anyone interested in knowing more about their local economy.

By using an extended example of the Napa, California, metropolitan area (where we immediately think, “Wine Country!”), Dr. Romitti finds some interesting information that may shatter some of your preconceived notions of that region.

He does this by answering 10 questions — 5 about “our people,” where he uses U.S. Census Bureau data and 5 about “our economy,” where he uses BLS data.

We are going to focus on the BLS portion (run time 31:12)* of the webinar. The five questions Dr. Romitti poses about our economy are:

  1. How healthy is my economy now?
  2. How many unemployed people live in my area?
  3. What are the largest employing industries?
  4. Which industries pay most to workers?
  5. What are our economic strengths?

Below are some steps and tips if you want to access the same information as Dr. Romitti on www.bls.gov. Note that he uses Internet Explorer; use a different browser and your screen will look different.

Dr. Romitti uses two BLS tools; we have included the path and links to pages as appropriate:

  • To answer Questions 1 and 2: Economy at a Glance -> California -> Napa (Dr. Romitti suggests clicking on the maps.)
    • Tips:
    • For context, suggest you compare your area data to your state numbers. Beware: Your state unemployment rate is seasonally adjusted, while your area data are not.
    • Also, for context, you may want to look at the data over time, such as the last 10 years. Just remember the “Great Recession” occurred starting in late 2007.
  • To answer Questions 3, 4, and 5: BLS Data Tools -> Employment -> Quarterly -> State and County Employment and Wages -> Tables

By following these instructions, you can uncover the same information as Dr. Romitti. We believe Dr. Romitti does a good job of explaining how to answer questions related to local economic data in under an hour!

But wait, there’s more! Let me offer two more resources in your quest for local data:

  1. Are you familiar with our Economic Summaries? These summaries present a sampling of economic information for the area covered, such as unemployment, employment, wages, prices, spending, and benefits. For example, take a look at San Francisco. If you are looking for something quick and easy, you might find what you need in one of these summaries.
  2. The Economic Summaries are produced by the BLS regional information offices. The BLS regional office staff stand ready to assist you with questions about your local economy.

*The taped webinar starts with a musical interlude and some brief introductions. The real action starts at the following run-time intervals:

Run Time                    Presentation Topic   

6:46                             Introduction by Dr. Romitti

11:30                           About our people (Census Bureau data)

31:12                           About our economy (BLS data) begins

52:36                           Regional Economic Accounts (Bureau of Economic Analysis data)

58:53                           Conclusion

60:00                           End

Data Privacy Day is Every Day at BLS

There are many commemorative days, weeks, and months, but Data Privacy Day on January 28 is one that we here at BLS live every day of the year.

If this is the first time you’re hearing about it, Data Privacy Day is an international effort to “create awareness about the importance of:

  • respecting privacy,
  • safeguarding data and
  • enabling trust.”

These three phrases are central to everything we do at BLS—but don’t take my word for it! Instead, let’s hear from some of our staff members about what data privacy means in their day-to-day work lives.

I chatted with staff members from three key areas at the Bureau:

  • Collection — our field economists collect data from respondents.
  • Systems — our computer specialists protect the IT infrastructure where we keep the data.
  • Analysis — our economists analyze the data, prepare products, and explain the data to our customers.

Now, let’s meet the staff.

Richard Regotti

Richard Regotti

My name is Richard Regotti, Field Economist in the BLS Chicago Regional Office, Cleveland Area Office. I have proudly served the public in this position for 12 years. As a Field Economist I am responsible for collecting data and developing positive relationships and securing cooperation from survey respondents for the Producer Price Index and the International Price Indexes.

 

 

 

 

 

 

Jess Mitchell

Jess Mitchell

My name is Jess Mitchell and I have been an Information Security Specialist in the Bureau’s national office since 2013. I started with BLS in 1999. Currently, I am the Computer Security Incident Response Team Lead, so I, along with my team members, investigate, analyze and report on computer security incidents as well as the impact or potential impact of cyber threats and vulnerabilities to BLS systems and data.

 

 

 

 

 

Karen Kosanovich

Karen Kosanovich

My name is Karen Kosanovich, Economist, and I have spent the past 19 years working with unemployment data from the Current Population Survey, and 25 years total at BLS. I develop analyses, such as The Employment Situation, and talk to our customers about the data.

 

 

 

 

 

 

Question 1. One of our core BLS values is the confidentiality of data: All respondent data are completely confidential and used for statistical purposes only. How does this impact you in your daily work?

Richard: On a daily basis I am asking producers and service providers to voluntarily provide very sensitive company information. Even after identifying myself as a representative of our Federal Government, some respondents are not comfortable with agreeing to provide us their confidential information for use in our statistical output. By focusing on the mission of the BLS and the legal protections that are in place to safeguard survey data, I am able to function on the front line as a data collector.

Jess: This core value of data confidentiality helps me to focus on the importance of protecting the confidentiality of BLS data when my team members and I are investigating threats. The importance of BLS data underscores the importance of our daily work to keep BLS data and data respondent information confidential.

Karen: I don’t have access to information about specific people who respond to our survey. All personally identifying information is stripped away before the statistical information is given to an economist like me to analyze. For my colleagues and me, confidentiality means protecting our estimates from being distributed in advance of the official release of the unemployment rate at 8:30 a.m. on the day we publish our data.

Question 2. Does adherence to this core value create any challenges for you in your work? How have you overcome those challenges?

Richard: Adherence to complete confidentiality, supported by the fact that the data are used for statistical purposes only, presents no challenge to me; this core value is a selling point and something I make sure all potential survey participants are aware of prior to providing any data to the BLS.

Jess: Adherence to the core BLS value of data confidentiality does create a challenge when we need to engage our office in an incident or threat investigation; we must be very diligent not to share Confidential Information Protection and Statistical Efficiency Act (CIPSEA) information.

Karen: Our procedures for working with embargoed (prerelease) information are so ingrained in my work routine that I don’t notice any challenges from them. The people I work with all have the same responsibility and a strong commitment to public service, so it is easy for us to keep vigilant.

Question 3. If you could make a statement to the American people about why they should trust BLS with their information, what would that be?

Richard: BLS is not a compliance or regulatory agency in any way. We are only concerned with providing accurate, timely, relevant, and unbiased data that reports on the health and well-being of our economy. Your information contributes to the validity of BLS data.

Jess: The confidentiality of BLS data is always at the root of my office’s work, and I see the same focus on data privacy and confidentiality and diligence toward the safeguarding of CIPSEA data throughout the entire culture of BLS.

Karen: Although I don’t have names and personal details of specific unemployed people who respond to our survey, my colleagues and I are very mindful of the importance of representing the experience of all Americans when we produce our estimates. The data we publish are not just numbers, but tell the story of real people. It can be very stressful to be unemployed, and those who have been looking for work for a very long time face significant challenges in the labor market. We take our jobs, and our mission, very seriously.

And now the rules:

Of course, we don’t work in a vacuum. Like any other organization, we have rules that we live under.

BLS makes a pledge of confidentiality to its respondents that data collected are used for statistical purposes only. The pledge is covered by CIPSEA, which makes it a felony to disclose or release the information for either nonstatistical purposes (for example, regulatory or law-enforcement purposes) or to unauthorized persons. In addition, the Office of Management and Budget has Statistical Policy Directives (3 and 4) that govern BLS news releases to ensure they meet specific accuracy, timeliness, and accountability standards.

On January 28, and every day, we hope you will take steps to protect your own privacy and the privacy of others. Here at BLS we will continue to educate and raise awareness about respecting privacy and safeguarding data. It is core to our mission and central to our staff values. Without the trust these actions produce among the American people, we could not do our work in providing gold-standard data for and about America’s workers.

Thank you for your trust and happy Data Privacy Day!

Celebrating 75 Years of BLS Regional Offices

World War II had a significant impact on the U.S. Bureau of Labor Statistics. In 1942, the Office of Price Administration asked BLS to help them understand what was going on with prices and price controls. Price controls? Remember, this was during World War II and there was significant government intervention in markets. Shortly after that, the National War Labor Board asked BLS to conduct surveys and evaluate wage rate increases. These two projects showed the need for local information, not just national averages. Why am I writing about events from World War II? Well, the growing need for local data led BLS to create our regional offices, and we recently celebrated their 75th anniversary. I want to tell you a little about these offices and their rich history.

Today, BLS staff throughout the country collect price and wage data and more. As you can imagine, the uses of these data and the methods for collecting them have changed significantly. Our regional offices collect survey data, work closely with our state partners, and help people find and understand the information they need.

Survey data collection has changed significantly from the 1940s. Today our regional staff throughout the country work with survey respondents to make it as easy as possible to provide accurate information. Modern technology makes it easier to respond to our surveys, but even more important is the close relationships our regional staff have with survey respondents. That high-touch, high-tech approach has proven successful and helped us achieve high response rates.

BLS has a long history of working with states. We wrote about this unique and important partnership back in 2016. Our regional staff work closely with their state colleagues to provide data that are timely, accurate, and relevant to the local economy. We are proud of our partnership with the states.

Finally, each regional office has a small staff of economists dedicated to providing information to the public. These Economic Analysis and Information staff write news releases and other reports that focus on local data. The staff support our data collection efforts through outreach to local business communities and associations. The staff also provide information to people and businesses who use data to make important decisions.

What started as a way to provide analysis on government price controls and wage increases has evolved and blossomed into an integral part of BLS. The pioneering staff from our past and the dedicated staff of today allow us to produce gold standard economic statistics.

Congratulations to the BLS regional offices staff on 75 years of excellent service to the nation!

BLS Microdata Now More Easily Accessible to Researchers across the Country

I am pleased to announce that BLS is now part of the Federal Statistical Research Data Center Network.

Researchers at universities, nonprofits, and government agencies can now go to 24 secure research data centers across the United States to analyze microdata from our National Longitudinal Surveys of Youth and our Survey of Occupational Injuries and Illnesses. Before, researchers had to visit our headquarters in Washington, D.C., to use these data.Image of researchers examining data.

Making our underlying data more accessible for researchers from coast to coast is a huge step forward, and I hope it will lead to a surge in research using BLS data. I believe that having more researchers use BLS data not only will showcase new uses of the data but improve our products by encouraging researchers from BLS and other organizations to collaborate. It also supports transparency because external researchers can analyze inputs to our published statistics.

Another key benefit to having BLS data alongside datasets from the U.S. Census Bureau and the National Center for Health Statistics is that researchers can combine data from two or more agencies. Using multiple datasets allows researchers to match data to answer new questions with no more burden on our respondents. Put simply, more data = better research = better decisions that rely on research.

Researchers are enthusiastic about adding BLS data to the research data center network.

“We at the Federal Reserve Bank of Atlanta are excited that more BLS microdata are available to researchers. Policy questions are usually complicated. Matched data from different sources can give researchers a much better understanding of economic relationships. That will help us provide more informed policy advice,” said John Robertson, senior policy adviser at the Federal Reserve Bank of Atlanta.

Over the next year, we will add more BLS data to the research data centers based on user demand.

Researchers can also still visit us at our D.C. headquarters to access our full suite of microdata. To learn more and to apply, see our BLS Restricted Data Access page.