PPI (Producer Price Index)

The Producer Price Index (PPI) measures how much prices are rising or falling at the wholesale level—basically what manufacturers and suppliers pay for raw materials and goods before they reach store shelves. You'll hear about PPI in economic news because it's an early warning sign of inflation (when everything gets more expensive). If producer prices jump, consumer prices usually follow a few months later. For example, if steel prices spike, furniture makers pay more, which eventually means you might pay more for a couch. The Federal Reserve watches PPI closely when deciding whether to raise interest rates, which affects stock valuations and your investment returns.