Wholesale Price Index (WPI)
Candlefocus EditorWholesalers purchase goods from manufacturers and then sell them to retailers. WPI reflects the change in prices of a basket of commodities that wholesalers purchase from manufacturers and pass on to retailers. This basket of commodities typically consists of 1400-2000 goods and services such as food and beverage, pharmaceuticals, textiles, fuel, metals, and chemicals.
The changes in the prices of these items are recorded on a monthly basis and compiled into a single index for each month. This index is then compared with the previous month to calculate the percentage change in WPI to reflect inflation.
WPI has several advantages over the other popular price indices, like the Consumer Price Index (CPI). Unlike the CPI, WPI measures more frequent changes in the price of goods and services, at a much faster rate. This helps economists to understand the demand and supply conditions in different sectors of the economy at a much more timely manner.
Also, the WPI is more accurate in terms of reflecting the inflationary pressures at the early stages of the economic cycle. This is because the WPI considers a larger set of goods and services, which helps to reflect the situation of the economy more accurately and quickly.
For governments and central banks, WPI is important data to track inflation since it affects many key policy decisions and overall economic outlook. WPI helps to shape policymakers’ decisions concerning tax policies, interest rates and other economic practices.
In conclusion, the Wholesale Price Index (WPI) is a key economic indicator used to measure changes in wholesale prices over time. It reflects the demand and supply conditions of the economy at a much more timely manner, and is used by policymakers to make key economic decisions.