The PPI indicates changes in producer prices of locally produced commodities including exports. In South Africa PPI data comes from Statistics South Africa's monthly Survey of Prices of Locally Produced Commodities (which are locally sold or exported). These indices for commodities are classified to designated industries of the South African economy.
PPIs are used for a variety of different purposes, including:
- As a short-term indicator of inflationary trends – The monthly PPI with detailed product and industry data allows short-term price inflation to be monitored through different stages of production.
- Contract price adjustments – The purpose of using the PPI for indexing long-term contracts to take the inflationary risk out of the contract.
- A deflator in the compilation of national accounts – a fundamental use of the PPI is as a deflator in the national accounts. Therefore, the concepts underlying the PPI are often conditioned by those underlying the national accounts.
The PPI uses two classification systems, the Central Product Classification (CPC) and Standard Industrial Classification (SIC) systems. The CPC is used to identify and aggregate products. The CPC is a classification based on the physical characteristics of goods or on the nature of the services rendered. It covers products that are an output of economic activities, including transportable goods, nontransportable goods and services.
