PPI, wholesale prices and CPI: what is the difference? Explain it simply
Three German price measures were published in October, and each covers a different stage of the same chain. Producer prices measure what manufacturers receive for goods they make and sell in Germany. Wholesale prices measure what wholesalers charge. Consumer prices measure what households pay in shops.
In September, producer prices rose 6.7% on the year (PPI report), wholesale prices rose 8.7% (wholesale report), and consumer prices rose 3.3% (CPI report). The gap between the stages is one reason traders watch the chain, although the link between them is loose. A simple way to remember the order is to follow a product from the factory to the shop: producer, then wholesale, then consumer.
We would like the friendliest explanation in the community:
- How would you explain the three measures to a friend who has only shopped at a supermarket?
- Why do you think consumer prices can rise by less than wholesale prices?
- Which of the three do you watch first when you trade EUR?
- What did you find confusing about these measures when you first met them?
How inflation moves currencies explains why inflation matters for the euro.
Please keep replies friendly and practical. Posts that promise a direction or sell signals will be removed.
Background: How inflation moves currency pairs: the CPI transmission
Inflation is the input central banks watch most closely, which makes CPI the release that moves currencies most. Here is the transmission chain — from print to policy to price — and why the details beat the headline.
How does inflation affect currency prices?
Through central bank policy: higher inflation raises the odds of tighter policy, which attracts money and strengthens the currency. The chain runs from the print to the policy read to yields to the pair.
Why does the market react to the core CPI number?
Core CPI strips out food and energy, giving the cleanest read on underlying inflation. Central banks treat energy shocks as transitory, so the market's policy read focuses on the core measure.
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