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Definitions
WHAT IS INFLATION?
Inflation is an overall increase in the prices of goods or services in an economy. Over time, currency loses value and it doesn’t have as much purchasing power as it once did. In other words, whatever a dollar can buy is reduced over time. Inflation can occur for a variety of reasons, like higher wages, lower interest rates, supply chain issues, or broader issues in the global economy.
{re·ces·sion A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in Gross Domestic Product (GDP) in two successive quarters. {
PRODUCER PRICE INDEX (PPI)
The Producer Price Index (PPI) is an economic measurement of the average change in prices that domestic producers of goods receive for their products in a given country or region.
PPI is a metric used in economics to help define inflation rates. Previously known as Wholesale Price Index (WPI).
CONSUMER PRICE INDEX (CPI)
Inflation rates are calculated using the Consumer Price Index (CPI) and the Personal Consumption Expenditures Price Index (PCE). Together, these data points are used to determine the rate of increase in prices over a given period of time. The two broad, general causes of inflation are “demandpull inflation” and “cost-push inflation”. Demand-pull inflation refers to situations where there are not enough products or services being produced to keep up with demand. Cost-push inflation occurs when the cost of producing products and services rises, forcing business to raise their prices.
