Economic Variables, Pull Data for as Many

¶ … economic variables, pull data for as many years as possible and transform it into charts, explain each variable with a little background information and explain about what your variable measures and explain a bit about the history of your data. Explain what the data represents and cause and effects of increases and decreases.

Producer Price Index (PPI) Commodities.

The Producer Price Index (PPI) Commodities is the official measure of producer prices in the U.S. It is the instrument that measures the average changes in prices that producers receive for their labor.

Until 1978, the PPI was known as the Wholesale Price Index, or WPI. It is published by the Statistics and complied by the Federal Government and remains one of the oldest systems of statistical data. Its historical origin lies in the 1891 U.S. Senate resolution which authorized the Senate Committee on Finance to investigate the effects of the tariff laws "upon the imports and exports, the growth, development, production, and prices of agricultural and manufactured articles at home and abroad."(BLS Handbook of Methods)

The data itself is collected through a systematic sampling of producers in the manufacturing, mining, and service industries and this data is then published by the Bureau of Labor Statistics. Virtually every type of occupation in the mining and manufacturing categories are sampled and interviewed, and more are added all the time by the PPI. Confidentiality of the respondents is assured by the Confidential Information Protection and Statistical Efficiency Act of 2002 (Title 5 of Public Law 107-347) and this, to a great extent, encourages respondents to participate since response is voluntary.

The PPI categorizes its information according to three descriptions: industry, commodity, and stage of processing (SOP).

1. Industry -- the PPI measures the average change in prices received for an industry's output sold to another industry.

2. Commodity -- the PPI organizes products by grouping them according to their similarity of their instrumental use or their material characteristics.

3. Stage of Processing - The PPI classifies commodities according to the class of buyer and the amount of processing or assembling that the products have undergone. There are finished goods which are ready for sale, as well as (a secondary commodity) intermediate materials that require further processing and, finally, crude materials that need to be worked on before being sold to the consumer.

The movement of the price changes form one month to another are expressed in percentage changes rather than as changes in index points. Price changes are measured from a reference point that equals 100.0. So for example the Excel sheet shows PPI for stage of processing of Finished Goods with base date being 1982 (which is the commonly accepted base period for most PPIs). The record itself was taken from the years of 1947-2002. January 2012 has the notation of 192.0 which can be read that there was an increase of 192% from the base period in the Finished Goods Price Index. In long hand, this will be read as the following:

"Prices received by domestic producers of a systematic sample of finished goods have risen from $100 in 1982 to $192 today."

The accompanying graph illustrates this rise in percentage growth of average changes in prices that producers received for their labor between the years 1947-2002.

Employment Cost Index

The employment cost index (ECI) is a quarterly economic series which records the changes in the cost of labor for businesses in the U.S.A. The ECI is prepared by the Bureau of Labor Statistics (BLS).

The ECI is often conflated with the consumer price index (CPI)] and indeed gets less attention that it, but it is really a different instrument. Whilst the CPI measures inflation in consumer prices, the ECI indicates whether labor expenses (or salaries / costs of hiring are rising or falling. It thereby measures inflation of wages and employer benefits.

The ECI is used not only by U.S. business but also by the Federal Reserve for making its decisions as wells by the Government for adjusting its employee salary (Investopedia).

The Excel sheet shows labor compensation from years 2001 to 2002. It is in percentage change and is for all fields (all Civilians). We see, for instance, a dip in salary in 2010 to 1.0 slowly climbing up to our present level of 1.7. Yet, we are still way behind the higher salary obtained in 2001 of 3.7 in both Quarters 1 and 4 of that year. By 2002, wage had dropped dramatically from 3.5 in the first Quarter to 2.8 in Quarter 4. Whilst presumably advantageous for employers, they likely lost workers due during that and the coming years. 2006 slightly picked up. 2007 was a good year with wages in the third percentage, but this was before it dipped again to our present low but slowly rising rate.

This is represented on the graph in image form by the peak in 2001, the dip, rising again in 2007 before careening once again.

Consumer price Index

The Consumer price Index (CPI) measures changes in the consumer goods that are purchased by households. It is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services." (Bureau of Labor Statistics.) Different and broken down indexes are computed for different categories and sub-categories of goods and services and these are combined with weights that reflect their shore in the total of the consumer expenditures in order to see which products / services consumers are currently prioritizing.

The annual percentage change in the CPI is sued a measure of inflation as wells barometer of the value of the currency. The CPI is used for many reasons not least for indexing the real value of wages, salaries, pensions, for regulating prices and for deflating currency to show changes in real values. It is one of the most closely watched barometers in the U.S.A.