CPI and PPI are both inflation measures, but they observe prices at different points in the economy. The Consumer Price Index focuses on what households pay. The Producer Price Index focuses on prices received by domestic producers.
That is why the two reports can move in different directions during the same month.
What does CPI measure?
CPI follows a basket of consumer goods and services, including housing, food, energy, medical care, transport and recreation. Statistical agencies weight categories to reflect household spending patterns.
When people say “inflation was 3%,” they are often referring to the 12-month change in a headline consumer-price index. Core CPI usually excludes food and energy because those categories can be volatile, though households still pay those costs.
What does PPI measure?
PPI tracks selling prices received by producers for goods and services. It can include raw materials, intermediate products and finished output at different stages of production.
The important word is received. PPI is not a direct measure of the final checkout price paid by a household.
Can PPI predict CPI?
Sometimes, but not mechanically. Higher factory, freight or wholesale costs can reach consumers later, especially when businesses have pricing power. Companies can also absorb costs through lower profit margins, improve efficiency or face long-term contracts that delay price changes.
Taxes, retail competition, rents, wages and service costs can push CPI even when producer-goods inflation is quiet.
Why markets watch both
Central banks care about persistent inflation, not one isolated number. CPI helps describe household price pressure, while PPI can reveal stress earlier in supply chains.
Investors compare headline and core measures, monthly and annual changes, revisions and the categories driving the movement. A softer headline caused only by falling petrol prices tells a different story from broad easing in housing and services.
A simple example
If wheat, electricity and packaging become more expensive, a bakery's producer costs rise. The bakery may raise bread prices, accept a smaller margin or reduce another expense. PPI captures parts of the upstream movement; CPI captures the price eventually faced by the shopper.
For more economic context, read our global economy outlook and browse the Business section. Find more step-by-step coverage in Explainers.
