Producer Price Index DefinitionThe producer price index measures a monthly fixed basket of goods by stage-of-production, industry and commodity. The stage-of-production organizes products by degree of fabrication into three broad groups: finished goods, intermediate materials, supplies and components, and crude materials for further processing.The producer price index for finished goods is the most widely quoted of the various indexes, but as financial market participants have become more sophisticated, they have begun to monitor the indexes for the earlier stages of processing -- intermediate goods and crude materials -- as predictors for the finished goods index. Why Investor's Care The PPI measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pr