Wholesale Price Index (WPI)

What Is a Wholesale Price Index (WPI)?

A wholesale price index (WPI) measures change in the overall price of goods before they are sold at retail. This incorporates the prices charged by manufacturers and, frequently outside the U.S., wholesalers. Typically communicated in terms of the percentage change from the prior month or a year sooner, the WPI is a inflation indicator.

In the U.S., the WPI has been reported as the Producer Price Index (PPI) starting around 1978.

How a Wholesale Price Index (WPI) Works

Wholesale price indexes are reported month to month to follow the overall rate of change in producer and wholesale prices. The index is set at 100 for its base period, and calculated based on subsequent price changes for the aggregate output of goods.

To illustrate, expect January 2021 is the base period. Assuming the aggregate price level rose 9.7% over the course of the next year, the WPI for January 2022 will be at 109.7.

A WPI commonly considers commodity prices, yet the products included differ from one country to another. They are additionally subject to change, depending on the situation, to better mirror the current economy. A few small countries just compare the prices of 100 to 200 products, while bigger ones will generally remember huge number of products for their WPIs.

The Wholesale Price Index versus the Producer Price Index

In the U.S. wholesale price index reporting traces all the way back to 1902. In 1978, the BLS renamed the WPI the producer price index (PPI) in part in light of the fact that the index never measured price change in the wholesale market, zeroing in reliably on the prices charged by producers.

Around then, the BLS moved to a methodology partitioning goods based on their stage of production. That concentration, which limits double counting, continues in the current PPI methodology collecting prices into conclusive demand and Intermediate demand indexes relying upon whether the price is that of a completed product or a intermediate good.

Features

• A wholesale price index (WPI) measures overall change in producer prices after some time.
• It is a measure of inflation based on the prices of goods before they arrive at consumers.
• In the U.S. the WPI was renamed the Producer Price Index (PPI) in 1978.
• The U.S. WPI never measured the prices charged by wholesaling middle people.
• The U.S. PPI incorporates product category indexes recognizing intermediate and completed goods.