Indicators for producer price pressures in consumer goods inflation

Ieva Rubene

Economic Bulletin Boxes, 2023, vol. 3

Abstract: The increase in consumer goods price inflation in the euro area over the last two years was preceded by a sharp rise in producer prices. Producer price indices (PPIs) capture the prices of goods at the time when these goods leave factory gates. Simple correlation analysis suggests that the strength of the link between producer and consumer price indices can vary over time. Indicators of producer price pressures on consumer price inflation (IPPIs) are constructed using dynamic impulse responses of consumer prices to changes in producer prices (elasticities), obtained with the local projections (LP) estimation method. The IPPIs based on these elasticities and actual PPI data suggest a significant increase in underlying cost pressures over the course of 2022. The level of these pressures remained high for both non-food consumer goods and food products in early 2023. Overall, IPPIs can help to assess the strength and direction of the underlying pressures on NEIG and food prices, but they remain subject to several caveats. JEL Classification: E31, E37

Keywords: Consumer prices; cost pressures; food prices; inflation; non-energy industrial goods prices; producer prices (search for similar items in EconPapers)
Date: 2023-05
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