Definition
The Wholesale Price Index (WPI) measures the changes in the price of goods sold and traded in bulk by wholesale businesses to other businesses rather than to the public. This index is often used as an indicator of the inflation rate in the economy and mirrors the prices of a basket of wholesale goods, providing insights into price movements before they reach the retail level.
Examples
- Agricultural Products: WPI includes prices of commodities like wheat, rice, pulses, and other essential grains.
- Industrial Goods: The index also covers various industrial goods such as steel, cement, chemicals, and petroleum products.
- Manufactured Goods: Prices of clothing, machinery, and consumer electronics are also tracked within the WPI.
Frequently Asked Questions (FAQs)
What is the purpose of the Wholesale Price Index (WPI)?
The Wholesale Price Index (WPI) is used to track the average change in price of various goods before they are sold at retail level. It helps to understand inflation trends and is often used by policymakers to make economic decisions.
How is WPI different from Consumer Price Index (CPI)?
While the WPI measures the price changes at the wholesale level, the Consumer Price Index (CPI) measures the price changes of goods and services purchased by consumers at retail prices. CPI is often seen as a measure of cost of living, whereas WPI reflects inflation at a broader industry level.
How often is the Wholesale Price Index calculated?
In most countries, the WPI is calculated and published on a monthly basis. However, the frequency can vary depending on the country’s statistical norms.
What items are included in the WPI basket?
The WPI basket typically includes goods that are major items of wholesale trading, ranging from agricultural products and industrial inputs to finished manufactured goods.
Who publishes the Wholesale Price Index?
The government or national statistical agencies of respective countries generally compile and publish the Wholesale Price Index. For example, in the United States, it’s often compared with the Producer Price Index (PPI).
Related Terms
Producer Price Index (PPI)
Producer Price Index (PPI) is an alterative measure that reflects the average change in selling prices received by domestic producers for their output. It includes prices for goods at the wholesale and raw material stage before they reach the consumer market.
Inflation
Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, to keep the economy running smoothly.
Consumer Price Index (CPI)
Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
Online References
- Investopedia on Producer Price Index (PPI)
- Wikipedia on Wholesale Price Index
- OECD Glossary of Statistical Terms - Wholesale Price Index
Suggested Books for Further Studies
- “Economic Indicators For Dummies” by Michael Griffis
- “Handbook of Key Economic Indicators” by R. Mark Rogers
- “Consumer Price Index Manual: Theory and Practice” by International Labour Office, ILO
- “Applied Economic Statistics” by Richard A. Stoke
Fundamentals of Wholesale Price Index (WPI): Economics Basics Quiz
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