The Producer Price Index measures prices of goods at the wholesale level. There are three broad subcategories within PPI: crude, intermediate, and finished. The market tracks the finished goods index most closely, as it represents prices for goods that are ready for sale to the end user. Goods prices at the crude and intermediate stages of production often provide an indication of coming (dis)inflationary pressures, but the closer you get to crude goods, the more that these prices track commodity prices which are already available in traded indices such as the CRB (Commodity Research Bureau).
At all stages of production, the market places more emphasis on the index
excluding food and energy, referred to as the core rate. Food and energy prices
tend to be quite volatile and obscure trends in the underlying inflation rate.
Though the market reaction is determined by the month/month changes, year/year
changes are also noted by analysts. The index is not revised on a monthly basis,
but annual revisions to seasonal adjustment factors can produce small
adjustments to past releases.