Price Transmission Within the Producer Price Index Final Demand-Intermediate Demand Aggregation System

• Activity Number: 32 - Measuring the Economy: Economic and Workforce Statistics
• Type: Contributed
• Date/Time: Sunday, July 30, 2017 : 2:00 PM to 3:50 PM
• Sponsor: Government Statistics Section
• Author(s): Jonathan Weinhagen*
• Companies: U.S. Bureau of Labor Statistics
• Keywords: Producer Price Index ; Inflation

Abstract

In 2014, the Producer Price Index (PPI) program of the Bureau of Labor Statistics transitioned from the Stage of Processing system to the Final Demand-Intermediate Demand (FD-ID) system as the key structure used for analyzing the behavior of producer prices. The FD-ID system comprises two main portions: final demand and intermediate demand. The final-demand portion of the system measures price change for goods, services, and construction products sold for personal consumption, as capital investment, for export, and to government. The intermediate-demand portion of the FD-ID system measures price change for goods, services, and construction products sold to businesses as inputs to production, excluding capital investment. This study uses vector auto-regression models to examine the causal direction of price change within the PPI FD-ID aggregation system. The analysis provides evidence of forward price transmission from the intermediate demand to the final demand portion of the system.