Producer Price Index and Future Inflation

Study Edexcel Economics producer-price-index questions by interpreting movements in input prices as possible signals of future consumer-price trends.

Exam points

Identify the producer price index as an indicator based on prices paid by firms for inputs.
Interpret a fall in the index as lower producer costs, which can reduce future cost-push pressure.
Select the likely effect only after linking the direction of the index movement to future price trends.

[Maximum number: 1]

South Korea’s producer price index fell from July to September 2019. What was the most likely effect?

Real incomes fall

Cost-push inflation

Consumer prices fall

Base rate rises

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