Introducing Producer Price Index research series based on a geometric-mean formula

This article introduces Producer Price Index (PPI) research series calculated with a geometric-mean (geomean) formula and explains the formula’s methodological advantages. The article also compares official and geomean PPIs to illustrate how formula choice affects index values. Most users of Producer Price Index (PPI) data know that PPIs measure the average changes over time in the selling prices received by domestic producers of goods and services. What is less commonly known, however, is how these changes are calculated—which formulas are used, what determines formula choice, and how that choice affects an index. This article explains the motivation behind the U.S. Bureau of Labor Statistics (BLS) PPI research series calculated with a geometric-mean (geomean) formula. In addition, the article presents comparisons between official and geomean PPIs, illustrating the effects of formula choice on index values. Important empirical insights are also introduced by comparing PPI and Consumer Price Index (CPI) data and methods.