What is a Wholesale Price Index (WPI)?
A wholesale price index (WPI) tracks changes in the total price of items before they are sold at retail. This covers the rates paid by manufacturers and, typically outside the U.S., distributors. The WPI measures inflation, often given as a percentage change from a month or year ago.
The Function of a Wholesale Price Index (WPI)
Wholesale price indexes are released monthly to monitor the total rate of change in producer and wholesale prices. The index is computed using consecutive price changes for the entire production of items and has a base period of 100.
For example, let’s say the base period is January 2021. If the aggregate price level grew 9.7% during the following year, the WPI for January 2022 will be 109.
A WPI typically takes into consideration commodity prices. However, the items covered differ from nation to nation. Additionally, they might be altered better to represent the state of the economy at any time. While more significant nations often include hundreds of goods in their WPIs, several small countries merely compare the costs of 100 to 200 products.
Comparing the Producer Price Index with the Wholesale Price Index
Reporting for the U.S. wholesale pricing index goes back to 1902. Because the WPI always focused on the prices paid by producers rather than tracking changes in wholesale market prices, the BLS renamed it the Producer Price Index (PPI) in 1978.
At that point, the BLS switched to a methodology that separated products according to their manufacturing stage. This emphasis on reducing duplicate counting is maintained in the present PPI technique. It combines prices to create indexes of intermediate and final demand based on whether the price refers to an intermediate or finished good.
Conclusion
- A wholesale price index, or WPI, measures the entire change in producer prices over time.
- It is an inflation indicator based on the cost of goods at the point of sale.
- The Producer Price Index (PPI) replaced the WPI in the United States in 1978.
- The prices that the U.S. WPI never measured wholesale intermediates charge.
- Product category indexes that differentiate between intermediate and finished items are included in the U.S. PPI.
