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Industrial inflation

Industrial inflation is an increase in the general level of prices for raw materials and supplies, as well as for intermediate and final goods produced by industrial enterprises for the domestic market.

One of the macroeconomic indicators used to analyze industrial inflation is the producer price index, which reflects the change in the level of producer prices for industrial goods relative to the same period in the previous or base year. The index is measured as a percentage, calculated by statisticians and central banks on a monthly basis (for example, in the USA, Russia, Sweden, Spain, Poland, China, and Greece) or quarterly (for example, in Australia, Hong Kong, Albania, Oman, and Fiji).

In contrast to the CPI, this index shows the change in prices for goods at the wholesale level of their sale, that is, among those who carried out their production, while the CPI reflects the change in prices in places of the final sale of products. Only goods are included in the index calculation, not goods and services as in the CPI. In addition, imported goods are not taken into account when calculating changes in producer prices. An increase in the producer price index may precede an increase in consumer inflation. The index takes into account all stages of production: raw materials, intermediate stages, and finished products.

The graph below shows the change in producer prices in countries from different regions of the world for 2016-2021.

The graph shows that in the Spring of 2020, producer prices were falling against the backdrop of a collapse in commodity prices and the crisis.

Producer prices can also be calculated in points. In May-June 2021, the maximum values of producer prices were observed in Belarus, Kazakhstan, Argentina, Ghana, and Turkey, the minimum values (less than 100 points) - in Azerbaijan, Qatar, Ireland, the Philippines, and Singapore.

Some countries, such as the United States and the United Kingdom, use an indicator such as base producer prices to estimate industrial inflation, which excludes certain categories of goods. For example, in the United States, food and energy prices are not taken into account when calculating the indicator. In both countries, indices are calculated and published on a monthly basis and measured in points.

The chart shows the dynamics of basic producer prices in the United States and the United Kingdom.

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