The Trader's Guide to Key Economic Indicators: Updated and Expanded Edition

12

Consumer and Producer Price Indexes

AN INCREASE IN THE PRICES of goods and services is called inflation. A certain level of inflation in the economy is normal, even healthy. Accelerating inflation, however, can cause severe problems, sometimes sparking recession. No wonder the financial markets keep a close eye on price measures and their growth rates. For this purpose, many traders and economists, including those at the Federal Reserve Board, favor the implicit price deflators contained in the gross domestic product (GDP) report (see Chapter 1). That report appears only quarterly, however. For more timely—and detailed—inflation indicators, most market participants turn to the reports on the consumer price index (CPI) and the producer price ...