What Is a Wholesale Price Index (WPI)?
Let me explain what a Wholesale Price Index (WPI) is: it measures the change in the overall price of goods before they reach retail. This covers prices charged by manufacturers and, in many cases outside the US, by wholesalers. You’ll usually see it expressed as a percentage change from the previous month or year, and it serves as a straightforward indicator of inflation.
In the US, what we once called the WPI has been known as the Producer Price Index (PPI) since 1978.
Key Takeaways
- A wholesale price index (WPI) measures overall change in producer prices over time.
- It is a measure of inflation based on the prices of goods before they reach 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 intermediaries.
- The U.S. PPI includes product category indexes distinguishing between intermediate and finished goods.
How a Wholesale Price Index (WPI) Works
You should know that wholesale price indexes get reported monthly to track the overall rate of change in producer and wholesale prices. The index starts at 100 for its base period, and it’s calculated from subsequent price changes for the aggregate output of goods.
To give you an example, let’s say January 2021 is the base period. If the aggregate price level rises 9.7% over the next year, the WPI for January 2022 would stand at 109.7.
A WPI generally accounts for commodity prices, but the specific products included differ by country. These lists can change as needed to reflect the current economy better. Smaller countries might only compare prices of 100 to 200 products, while larger ones include thousands in their WPIs.
The Wholesale Price Index vs. the Producer Price Index
In the US, reporting on the wholesale price index goes back to 1902. By 1978, the Bureau of Labor Statistics (BLS) renamed it the Producer Price Index (PPI), partly because the index never actually measured price changes in the wholesale market—it always focused on prices charged by producers.
At that point, the BLS moved to a methodology that divides goods by their stage of production. This approach, which cuts down on double counting, continues in the current PPI by aggregating prices into final demand and intermediate demand indexes, depending on whether the price is for a finished product or an intermediate good.
