Inflation indicators

When inflation arises, bank interest rate tend to increase to fight against it. In additional, high interest rate may alternately support the local currency rate . Normally we use the indicators below to measure the inflation trade.

Producer price index (PPI). The compilation of most sectors of the economy, such as manufacturing, mining, and agriculture. PPI does not include imported goods, services, or taxes. It measures the average change over time in the selling prices received by local producers for their output. For PPI calculator, refer to http://www1.jsc.nasa.gov/bu2/inflation/ppi/inflatePPI.html

Consumer price index (CPI). Reflects the average change in retail prices paid by most consumer for a fixed market basket of goods and services. The CPI data is obtained from a sample of prices for food, shelter, clothing, fuel, transportation, and medical services that people purchase in daily basis.

For example, in 2000, you buy a book cost $10 and then in 2006 the same book will cost $11.76.

Formula:
CPI in 2000 = 110.88
CPI in 2006 = 130.4
Price in 2000= Price in 2006( 2000 CPI /2006 CPI)
$10=$11.76 (110.88/130.4)

Gross national product implicit deflator. It’s calculated by dividing the current dollar GNP figure by the constant dollar GNP figure.

Gross domestic product implicit deflator. It’s calculated by dividing the current dollar GDP figure by the constant dollar GDP figure.

Commodity research bureau's (CRB) futures index . An equally weighted index of 21 commodities, commonly used to gauge the effects of inflation.

The “Journal of Commerce” industrial price index (JoC). Consists of the prices of 18 industrial materials and supplies processed in the initial stages of manufacturing, building, and energy production.