Close to the French Consumer Price Index, the Producer Price Index is an indicator providing insight about the production prices variations for various categories of industrial products. Like the French CPI, data is updated each month by the INSEE, sub-aggregates are often reweighed (Last one was in 2010). The figure also represents a major KPI for France. Financial markets try to predict variations of the French PPI. Unexpected numbers can create relative volatility.
The number traditionally reported by media is the monthly base price variation of the global French PPI including producer price for domestic and external markets. Also, some other publications by the INSEE display the domestic prices after taxes and are often used for business purposes, like contract indexation. Another important indicator released at the same time is the imported industrial goods price index. It gives insights about the competitiveness of imported goods in France.
Global evolution of French PPI
Like the French CPI, the French PPI drops in Autumn 2008. Out of this, the global growth seems to be slower since April 2011, showing a relative stabilization of produced goods price. 2 major factors can explain this deceleration:
- A stabilization of the price of raw materials.
- A steady cost of labour in France.
Covered field and exceptions in the French PPI
The INSEE announced covering 99,5% of the domestic market and 99,1% for the outside market in the French PPI. INSEE civil servants perfom survey directly at French companies. In order to not twist results, the French PPI excludes some state-sponsored industrial sectors:
- Nuclear fuel
- Planes, boats and space vehicles
Prices can also be voluntary maintained to artificial levels in these industries to meet very unique business needs. Without these sectors, the INSEE estimates covering the total economy at 94% for the domestic market, 86% for the externals.
The French PPI destination gap
2 sub-aggregates form the French PPI. Domestic market products and the outside market products. This graph shows the evolution of the 2 indexes value, with the difference between the 2 values displayed as a technical indicator.
If the variations of the 2 indexes seems very similar, the gap between them increases progressively. Actually, the more are the indexes in term of value, the more important is the difference between them.
There is 2 possible explanations to this gap:
- Currency market variations are making French produced good more competitive to export than to sell on the domestic market.
- Taxes added to the production prices make domestic sold products heighten the price growth effects.
Among the others KPIs
Another indicator close to the French PPI is the French Manufacturing PMI, published every month and giving insights on level of activity of the French manufacturing sector. By relating these 2 indicators, we can get a clearer picture of the French manufacturing sector.