What is the 'Wholesale Price Index - WPI'
The wholesale price index is an index that measures and tracks the changes in the price of goods in the stages before the retail level. WPI shows the average price change of goods included in the index and is often expressed as a ratio or percentage, and the change is one indicator of a country's level of inflation. Although many countries and organizations use WPI, many other countries, including the United States, use the producer price index instead.
BREAKING DOWN 'Wholesale Price Index - WPI'WPI compares the total costs of the goods being considered in one year with the total costs of goods in the base year. To illustrate, imagine 2010 is the base year. The total prices for that year are equal to 100 on the scale. Prices from another year are compared to that total and expressed as a percentage of change. For example, if the total price of the goods under consideration in 2010 was $4,300, and the total for 2015 is $5,000, the WPI for 2015 with a base year of 2010 is 116, indicating an increase of 16%.
What Products Does the WPI Include?
WPI typically take into account commodity prices, but the products included vary from country to country, and they are subject to change as needed to better reflect the current economy. Some small countries only compare the prices of 100 to 200 products, while large industrial countries like the United Kingdom and the United States tend to include thousands of products in their WPI.
The United States includes commodities at various stages of production, and as a result, many items are counted more than once. For example, the index includes cotton prices for raw cotton, cotton yarn, cotton gray goods and cotton clothing. In addition, the United States also includes crude materials, consumer goods, fruit, grains and apples, and it creates indexes for nearly 100 subgroups. However, it's important to note that the United States no longer uses the WPI. Instead it uses the producer price index.
What Is the Difference Between the WPI and the PPI?
The United States first began measuring its WPI in 1902, but in 1978, it changed the name of the measured index to PPI. Prior to this point, the United States only measured its economy with the WPI, but upon making the shift, the country began to embrace several indexes including the PPI and the consumer price index. Based on data collected by the Bureau of Labor Statistics, the PPI relies on the same calculations as the WPI. However, the name is more accurate. WPI, unfortunately, is not restricted to wholesale goods, making the name slightly misleading.