Why do we need cpi and ppi

For example, the PPI for personal consumption includes medical services that are paid for by third parties such as employers or the federal government.

The CPI, by contrast, includes only payments made directly by consumers for medical care. In December , medical care services composed A final difference in scope between the PPI and the CPI occurs for services whose prices contain an interest rate component. The scope of the CPI includes services, such as banking services and insurance services, whose prices have an interest rate component, but the interest rate component of these services is not included in the index. The scope of the PPI also encompasses services whose prices include an interest rate component, but this index includes the interest rate component of those prices.

Banking services account for approximately 4 percent of the PPI for personal consumption, and insurance services compose 3. Within the PPI, changes in interest rates will affect price indexes for banking and insurance. The scope of the CPI includes some banking services, such as ATM fees, and many insurance services; however, the interest rate component of these services is not included. Both series have grown at a fairly constant rate over the medium term. Does this mean that future CPI inflation is imminent?

What does the sharp increase in the PPI mean for consumer prices? Only time will tell. Your trusted data source since Posted on April 12, The PPI comprises prices of both capital equipment and consumer goods.

Meanwhile, the CPI covers many areas of goods and services. Sales and excise taxes are not taken into account while determining PPI. Difference Between Similar Terms and Objects.

MLA 8 S, Prabhat. Name required. Email required. A primary use of the CPI is to adjust income and expenditure streams for changes in the cost of living.

First, the Finished Goods Price Index includes price changes for producers' durable equipment, which are not purchased by typical consumers and, therefore, are not included in the CPI.

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