Difference Between CPI and PPI

CPI vs PPI

CPI stands for Consumer Price Index, and PPI stands for Producer Price Index. Though CPI and PPI are economic indicators, they are different.

CPI can be called an indicator by which the government calculates the general level of inflation. On the other hand, PPI can be called an indicator that shows the average price changes obtained by domestic producers for their output.

Another difference that can be seen between CPI and PPI, is that the CPI’s primary use is to adjust income and expenditure. The PPI’s primary use is to deflate revenue streams, which helps to measure the growth of output.

The Producer Price Index comprises prices of both capital equipment and consumer goods, but does not take into account prices for services. Meanwhile the CPI covers many areas of goods and services, like food and beverages, alcohol, tobacco, education and communication, medical care, housing, transportation and recreation. The major components needed for determining PPI include the commercial production of goods/sales (Industry sector), physical substances, like foods and grains (Commodity), and steps or preparation (Processing stage).

Another difference that can be seen between the two, is that sales and excise taxes are not taken into account while determining PPI. On the other hand, the price collected for items is included in CPI.

There is also a difference in the timing of data collection between CPI and PPI. While the Producer Price Index takes into account the price of goods on a particular date, the Consumer Price Index takes into account the price throughout the first eighteen working days of a month.

Summary

1. CPI is an indicator by which the government calculates the general level of inflation. PPI is an indicator that shows the average price changes obtained by domestic producers for their output.

2. The PPI comprises prices of both capital equipment and consumer goods. Meanwhile, the CPI covers many areas of goods and services.

3. Sales and excise taxes are not taken into account while determining PPI. On the other hand, the price collected for items is included in CPI.

4. While the Producer Price Index takes into account the price of goods on a particular date, the Consumer Price Index takes into account the price throughout the first eighteen working days of a month.

5. CPI’s primary use is to adjust income and expenditure. The PPI’s primary use is to deflate revenue streams, which helps to measure the growth of output.

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