What Is a Wholesale Price Index (WPI)?
A wholesale price index (WPI) measures change in the overall price of goods before they are sold at retail. This includes the prices charged by manufacturers and, often outside the U.S., wholesalers. Usually expressed in terms of the percentage change from the prior month or a year earlier, the WPI is an inflation indicator.
In the U.S., the WPI has been reported as the Producer Price Index (PPI) since 1978.
- 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
Wholesale price indexes are reported monthly to track the overall rate of change in producer and wholesale prices. The index is set at 100 for its base period, and calculated based on subsequent price changes for the aggregate output of goods.
To illustrate, assume January 2021 is the base period. If the aggregate price level rose 9.7% over the next year, the WPI for January 2022 will be at 109.7.
A WPI typically takes into account commodity prices, but the products included vary from country to country. They are also subject to change, as needed, to better reflect the current economy. Some small countries only compare the prices of 100 to 200 products, while larger ones tend to include thousands of products in their WPIs.
The Wholesale Price Index vs. the Producer Price Index
In the U.S. wholesale price index reporting dates back to 1902. In 1978, the BLS renamed the WPI the producer price index (PPI) in part because the index never measured price change in the wholesale market, focusing consistently on the prices charged by producers.
At that time, the BLS shifted to a methodology dividing goods based on their stage of production. That focus, which minimizes double counting, persists in the current PPI methodology aggregating prices into final demand and Intermediate demand indexes depending on whether the price is that of a finished product or an intermediate good.