Wholesale price index
Encyclopedia
The Wholesale Price Index (WPI) is the price of a representative basket
of wholesale
goods. Some countries (like India
and The Philippines) use WPI changes as a central measure of inflation
. However, United States
now report a producer price index
instead.
The Wholesale Price Index or WPI is "the price of a representative basket of wholesale goods. Some countries use the changes in this index to measure inflation in their economies, in particular India – The Indian WPI figure is released weekly on every thursday and influences stock and fixed price markets. The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index
. The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.
Laspeyres Formula (relative method)
Ten-Day Price Index
Calculation Method
Price index
A price index is a normalized average of prices for a given class of goods or services in a given region, during a given interval of time...
of wholesale
Wholesale
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services...
goods. Some countries (like India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
and The Philippines) use WPI changes as a central measure of inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
. However, United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
now report a producer price index
Producer price index
A Producer Price Index measures average changes in prices received by domestic producers for their output. It is one of several price indices.Its importance is being undermined by the steady decline in manufactured goods as a share of spending....
instead.
The Wholesale Price Index or WPI is "the price of a representative basket of wholesale goods. Some countries use the changes in this index to measure inflation in their economies, in particular India – The Indian WPI figure is released weekly on every thursday and influences stock and fixed price markets. The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index
Consumer price index
A consumer price index measures changes in the price level of consumer goods and services purchased by households. The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of...
. The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.
Calculation
The wholesale price index (WPI) is calculated based on the wholesale price of a few relevant commodities of over 2,400 commodities available. The commodities chosen for the calculation are based on their importance in the region and the point of time the WPI is employed. For example in India about 435 items were used for calculating the WPI in base year 1993-94 while the advanced base year 2004-05 uses 676 items. The indicator tracks the price movement of each commodity individually. Based on this individual movement, the WPI is determined through the averaging principle. The following methods are used to compute the WPI:Laspeyres Formula (relative method)
- It is the weighted arithmetic mean based on the fixed value-based weights for the base period.
Ten-Day Price Index
- Under this method, “sample prices” with high intra-month fluctuations are selected and surveyed every ten days through phone. Utilizing the data retrieved by this procedure and with the assumption that other non-surveyed "sample prices" remain unchanged, a "ten-day price index" is compiled and released.
Calculation Method
- Monthly price indexes are compiled by calculating the simple arithmetic mean of three ten-day “sample prices” in the month.
See also
- Consumer price indexConsumer price indexA consumer price index measures changes in the price level of consumer goods and services purchased by households. The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of...
- Monetary Union Index of Consumer PricesMonetary Union Index of Consumer PricesThe Monetary Union Index of Consumer Prices is a weighted average of European Monetary Union countries' HICP . It is widely used a measure of inflation throughout the Eurozone - the countries with the Euro as their currency.- See also :* Harmonised Index of Consumer Prices* Consumer price index*...
- Producer price indexProducer price indexA Producer Price Index measures average changes in prices received by domestic producers for their output. It is one of several price indices.Its importance is being undermined by the steady decline in manufactured goods as a share of spending....
- Price indexPrice indexA price index is a normalized average of prices for a given class of goods or services in a given region, during a given interval of time...
- InflationInflationIn economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...