US producer prices fell in December for the third consecutive month, bringing a closely watched gauge of inflation to a rate more in line with pre-pandemic times.
Wholesale inflation as measured by the Producer Price Index rose 1% annually in December, up slightly from November’s revised 0.8% reading, according to data released Friday by the Bureau of Labor Statistics.
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PPI is a closely watched inflation gauge since it captures average price shifts before they reach consumers and serves as a potential signal for the prices consumers ultimately end up paying.
Real wages are measured against CPI, which does account for shrinkflation.
And while CPI is described as using a “basket” of goods, the basket is rather comprehensive. It’s pretty much everything you could find in a grocery, pharmacy, department store, etc.
CPI intentionally excludes B2B goods like sheets of stainless steel, even though the B2B market is far larger than the consumer market. That way, a drop in the price of stainless steel sheets cannot “cancel out” an increase in the price of orange juice. CPI is meant to reflect what consumers are experiencing, not what businesses are experiencing.