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October 1997, Vol. 120, No. 10
Accurate export (and import) price indexes have long been considered crucial for the construction and analysis of such critical economic data as measures of inflation-adjusted net exports, price elasticities of goods in world trade and estimates of the impact of exchange rate fluctuations on domestic inflation and U.S. "competitiveness." Historically, price indexes reflective of total output for U.S. companies, such as the Bureaus producer price indexes (PPI), were frequently used as substitutes for export price indexes. In order to assess the similarity between these two series, the Bureau of Labor Statistics (BLS) recently undertook a project to compare price trends of the Bureaus export price indexes (XPI) with producer price indexes.
The Producer Price Index is designed to measure price changes in a domestic industrys total output, regardless of the destination of that output. The Export Price Index is designed to measure price changes of only those goods that are physically shipped out of the country. Thus, the export price index would appear, at first glance, to be a subset of the producer price index and arguably derivable from it. In general, nearly all of the companies, products, and prices that make up the universe of U.S. exporters also are found in the universe of U.S. domestic producers.1 However, there are significant differences between the two indexes, including differences in the underlying concepts and in the operational methodology used to construct the indexes.
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1 The export indexes do, however, include nonmanufacturers such as brokers and freight forwarders, which are not included in the PPI.
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