Handbook of Methods Producer Price Indexes History
Producer Price Indexes: History
Known until 1978 as the Wholesale Price Index, or WPI, the Producer Price Index (PPI) is one of the oldest continuous systems of statistical data published by the Bureau of Labor Statistics (BLS), as well as one of the oldest economic time series compiled by the United States federal government. When it was first published in 1902, the index covered the years 1890 through 1901. The origins of the WPI can be found in an 1891 U.S. Senate resolution authorizing the Senate Committee on Finance to investigate the effects of tariff laws “upon the imports and exports, the growth, development, production, and prices of agricultural and manufactured articles at home and abroad.”1 The PPI product classification system, known as the Commodity classification system, has existed in various states of detail since the program’s inception, is unique to BLS, and remains in existence today.
Hover over the red dot to see historical information.
Timeline
Key developments
1902: The Bureau of Labor Statistics (BLS) releases Course of Wholesale Prices, which subsequently was published annually. This first publication included price information for 250 individual items.
1913: All Commodities index introduced under the umbrella of a program that came to be known as the Wholesale Price Index (WPI).
1914: Systematic weighting of commodities introduced, based on data from the 1909 U.S. Census of Manufacturers. Weights continued to be updated on a regular basis. The WPI expanded to cover 340 indexes.
1915: WPI data first included in the Monthly Labor Review.
1922: Expansion to over 450 indexes. Indexes for beer, whiskey, and liquors discontinued because of Prohibition.
1927: Data rebased to 1926=100. The WPI expanded to 550 indexes, including the introduction of an index for automobiles.
1930: Monthly publication of Wholesale Prices and Indexes commenced.
1932: Weights updated to reflect 1926 values of shipments.
1934: Reintroduction of indexes for alcoholic beverages following the passage of the Twenty-first Amendment in December 1933.
1937: Transition from chain-type formula to fixed-base formula.
1947: WPI expanded to over 1,800 indexes.
1952: Stage-of-Processing (SOP) aggregation introduced. To standardize price information collection, WPI implements specific pricing-date methodology.
1967: Industry-based Standard Industrial Classification (SIC) system of indexes introduced.
1976: Weights updated to reflect 1972 values of shipments.
1978: The WPI program renamed Producer Price Index (PPI) to better emphasize the types of prices being measured. The program transitioned the headline measure from the All Commodities index to the SOP system, featuring Finished Goods as the headline index. PPI introduced a survey design based on probability sampling. PPI began the probability-based sampling and data collection process for 500 SIC industries. Obtaining near-complete coverage of the mining and manufacturing sectors on an industry basis took until 1984.
1985: Introduced indexes for line-haul railroad industry, the first PPI service indexes.
1986: Developed quality adjustment using hedonic regressions. Introduced indexes tracking changes in prices for materials and supply input indexes for the construction sector.
1987: Incorporated interplant transfers into the commodity index system of indexes. Updated weight basis to reflect 1982 values of shipments.
1988: Rebased indexes to 1982=100.
1992: Updated weight basis to reflect 1987 values of shipments.
1996: PPI introduced price collection via fax into the PPI survey. Updated weight basis to reflect 1992 values of shipments.
1998: Updated SOP allocations to reflect 1992 Input/Output Accounts data.
2002: Updated weight basis to reflect 1997 values of shipments.
2004: Conversion of industry-based PPIs from the SIC to the North American Industry Classification System (NAICS).
2005: Introduced construction sector output indexes.
2007: Updated weight basis to reflect 2002 values of shipments.
2009: With over 70-percent coverage of the Services sector of the economy, PPI expanded the commodity system of indexes to include data tracking prices received by the Services and Construction sectors. Updated SOP allocations to reflect 2002 Input/Output Accounts data.
2011: PPI introduced data collection of price update information from respondents via the internet.
2012: Updated weight basis to reflect 2007 values of shipments.
2014: PPI transitioned its headline measure of inflation from SOP system to the Final Demand–Intermediate Demand (FD–ID) system.
2018: Updated weight basis to reflect 2012 values of shipments.
2021: Updated FD–ID allocations to reflect 2012 Input/Output Accounts data. Published interim index values to three decimal places of precision.
2023: Updated weight basis to reflect 2017 values of shipments. PPI commodity indexes concorded with the North American Product Classification System.
Commodity Classifications and the WPI
Products in the PPI were originally classified according to the commodity classification structure. This structure organizes products by similarity of end use or similarity of material composition, regardless of whether the products are classified as primary or secondary in their industry of origin. This system is unique to the PPI and does not match any other standard coding structure, such as the North American Industry Classification System (NAICS) or the United Nations’ Standard International Trade Classification. The historical continuity of index series, the needs of index users, and a variety of ad hoc factors were important in developing the PPI commodity classification. Prior to January 2009, the commodity classification system included only goods-based price indexes. With the release of data for January 2009, PPI expanded the commodity classification structure to include services and construction products. The commodity classification system is organized as a hierarchical structure that starts with major commodity groupings (at the 2-digit level of aggregation). Major groupings 01 through 15 encompass commodity-based goods indexes. Major groupings 30 through 61 include services-based commodity indexes, and major grouping 80 encompasses construction-based commodity indexes. Each major commodity grouping includes (in descending order of aggregation) subgroups (at the 3-digit level), product classes (4-digit level), subproduct classes (5- and 6-digit levels), item groupings (7-digit level), and individual items (8-, 9-, and 10-digit levels).
From 1913 through 1977, the primary aggregate index of the WPI program was the All Commodities Wholesale Price Index (commonly referred to as the All Commodities index). This index was a weighted average of all individual commodity indexes. A major criticism of this aggregate index was that the phenomenon of multiple counting was inherent in the index. Multiple counting occurs when a price change early in the production chain is included multiple times as it passes through to later stages of production, resulting in an overstatement of price change. This situation became particularly evident in the early 1970s, when crude petroleum prices increased rapidly. Since crude petroleum was manufactured into other goods, the prices of those goods also increased, due to the higher acquisition costs of crude petroleum. Because the All Commodities index and other high-level indexes included both the earlier stage and later stage price changes, the result was an overstatement of inflation. This led to significant modifications for the PPI program beginning in 1978.
Stage-of-Processing (SOP) indexes
In 1978, there were two major changes to what was then known as the Wholesale Price Index program. The program was renamed the PPI program to better reflect that prices collected were from producers, rather than wholesalers. The second major change was to switch emphasis away from the All Commodities index, a single aggregate index that was a weighted average of all detailed indexes, to a set of indexes that measured prices at different stages of production. This aggregation structure, with historical data back to 1947, was known as the SOP system. The SOP system included overall indexes for Crude Materials (raw materials), Intermediate Materials (partially processed products, as well as supplies, for business demand), and Finished Goods (completed goods ready for final sale for personal consumption and capital equipment)—the new headline PPI index. The SOP system reduced index bias related to the multiple-counting phenomenon and allowed data users to track price changes as they passed through successive stages of the economy.
Industry classifications
The unique PPI commodity classification system made it difficult to compare producer price movements with other data. This led to the introduction of an industry classification system of PPI data based on the Standard Industrial Classification (SIC) system. The SIC system was a companion to the commodity system, where all individual prices collected were assigned to indexes in both classifications, providing data users with two perspectives of price movement. The SIC system organized products based on industry of origin, whereas the commodity classification system classifies products by product type, irrespective of industry of origin. In 2004, the PPI transitioned from the SIC system to the North American Industry Classification System (NAICS). This transition allowed the PPI industry structure to be more closely aligned with those of Canada and Mexico, providing data users the ability to easily compare economic statistics between the three countries.
Final Demand–Intermediate Demand (FD–ID) system
As the U.S. economy continued to evolve, the services sector became a larger share of domestic economic output. A major criticism of the SOP system was that it only measured price changes for goods, excluding price movements for the services and construction sectors. In 2014, the PPI transitioned to the FD–ID aggregation system, which expanded coverage to include price movement data for services, construction, government purchases, and exports alongside the existing SOP goods indexes. The FD–ID system expanded PPI coverage of the U.S. economy to about 70 percent of domestic production.
Last Modified Date: July 31, 2025
United States Department of Labor
