The Price Index That Predicts the Future (and maybe your egg budget)

Not financial advice - your money, your choice

-0.1% is the inflation number reported for the Producer Price Index this past week. It’s also the percentage of friends I’ll lose each month if all I do here is copy-paste boring acronym definitions…

The Producer Price Index - PPI for short - comes from the Bureau of Labor Statistics. Think of it as an economic crystal ball: it measures what businesses pay before those costs trickle down to me and you — a.k.a. the people just trying to afford coffee and rent.

Governments and central banks use PPI and measures like it to decide how much money the government should print or if interest rates should be raised/lowered, making it harder/easier for you and me to buy things like cars and homes. They also use it to inform fiscal policy decisions; if the government needs to pass a spending/tax bill to stimulate the economy or raise more revenue for more spending. 

In the US, we’ve gotten to a place where pretty much every bill passed feels like: ‘More free stuff, everyone and also, lower taxes! Don’t worry about the math!’ Because, honestly, the hardest pitch a politician can make is ‘Vote for me, I’ll raise your taxes AND cut your medicare.’ Yeah, good luck with that. 

The goal of all of this economic wardry (monetary & fiscal policy) reduces down to these three things:: 

1. Keep inflation tame

2. Support jobs

3. Prevent our financial system from bursting into flames

The first 2 make up the Federal Reserve Bank’s “Dual Mandate”. Basically, they’re supposed to keep inflation and deflation in check; kind of like balancing on a seesaw while juggling flaming chainsaws.

Too much inflation and you’ll need a wheelbarrow of cash for a single loaf of bread. Too much deflation? No one spends because they want the bread that is ‘Half off tomorrow!’. Businesses cut prices, then slash jobs, and before we know it no one is buying anything because, surprise, they’re unemployed.

The other side of the Federal Reserve Bank’s (the Fed) dual mandate is keep unemployment around 4-5% (this is considered full-employment). Too few people working? Spending tanks. They’re like the goldilocks of economics. Not too hot, not too cold or the porridge will get thrown at the Chair of the Fed - Jerome Powell.

Remember eggs in 2019? They were about $1.50 per dozen. In 2025, peak prices were around $6.23 per dozen! That’s a 315% increase in price. Yowling yolks, Batman!

Eggs show up  in CPI, but PPI would be the input for eggs. Think land, feed, veterinary services, and the chickens themselves. Which means in this case… chickens DID come before the egg.

Falling PPI means that the cost of chickens making eggs (and lots of other things) is dropping. Translation: your Costco egg budget may finally get a break.

Now toss tariffs into the mix. Imagine you’re Costco and you hear about tariffs, so you panic buy six months with of TVs. For now, you are insulated and don’t have to raise prices. But fewer shipments means fewer trucks which means less fuel, cheaper gas, and truckers cutting rates to stay busy. One domino falls and the rest start to fall.

Because businesses tend to stock up early in anticipation of price increases (in this case, from tariffs) PPI moves before CPI. So if last weeks CPI looked spicy (2.9%, up from 2.7%), don’t freak. Part of PPI is whispering, ‘Relax, bro. Chiller days may be coming.’

Even though services deflated enough (-0.2% month over month) to bring the whole PPI negative, the goods part of PPI still went up (+0.1%). It’s a bit like testing your body fat percentage after a week getting on a new nutrition kick (services going down) and starting a training plan only to realize that you hadn’t kicked your habit of eating a pizza every other day (goods going up). The net effect looks flat or maybe slightly down in the short term thanks to exercise but if you zoom out year over year, you’re still up a couple of belt notches (+2.6% year over year in the case of PPI).

This combined with the fact that unemployment seems to be steadily going up puts us on a tight rope. We’re having to walk across and face the consequence of where if we fall to one side we end up in a recession from low employment and persistent inflation and on the other we manage to stick a soft landing (stable employment and inflation slowing closer to 1%).

If this explanation went down better than than raw acronym soup, subscribe to my YouTube channel or newsletter. Your wallet (and maybe your egg budget) will thank you. And hey, maybe even that friend that you didn't lose this month!

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