The Central Statistical Office (CSO) is gearing up to introduce a new index aimed at calculating price data from producers spanning various industries within the economy. Recently, the CSO staff underwent training sessions to facilitate the development of a Producer Price Index (PPI) tailored specifically for Saint Lucia.
The PPI serves as a critical metric, capturing the average fluctuations in the prices of goods and services across different stages of production, including raw materials, intermediate goods, and finished products. Widely recognized as an indicator of inflationary pressures in the economy, the PPI plays a pivotal role, given its ability to reflect changes in producer prices that can ultimately influence consumer prices over time.
“One of the most important things that a PPI is used for is a deflator in the national accounts. The national accounts, the primary measure is GDP, which many people will be familiar with and is the main measure of how an economy is performing. When we measure an economy, we want to do it keeping prices the same. So, we want to eliminate the effects of inflation and the PPI is the way we do that for domestic production.”
Cat Pegler, Consultant and Training Facilitator representing the IMF, emphasized the widespread practice of compiling Producer Price Indexes (PPIs) by statistics offices globally. These indexes offer invaluable insights into trends encompassing production costs, input prices, and price competitiveness. By providing a comprehensive understanding of these dynamics, PPIs empower businesses, policymakers, and economists to make well-informed decisions regarding pricing strategies, monetary policies, and economic forecasts.
“We try to follow international classifications. There is a set of international classifications that define the structure of a PPI. We are always trying to build-in international comparability. So you can compare, producer price inflation in one country with that of another.”
Stephanie Marshall-Constantine, a Statistician with the Central Statistical Office, highlighted Saint Lucia’s pioneering role as the first territory in the OECS Region to compile a Producer Price Index (PPI) for the accommodation and restaurant sectors since 2017. With this training session, the CSO is poised to achieve another milestone by venturing into the compilation of the PPI for the manufacturing and construction sectors in Saint Lucia for the first time.
“For the accommodation, we do it quarterly for the manufacturing and construction, we’re just in the process of producing that price index we are going to do it monthly.”
The overarching goal of the training in Producer Price Index (PPI) is to equip the Central Statistical Office with the capability to initiate data collection for the production of PPI, starting with the manufacturing sector as a priority, and subsequently extending to the construction sector at a later stage.
“It’s less of a training and more of a hands-on workshop. We are reviewing all of the data sets that we might have available that will underpin the PPI, thinking about the methods, and designing questionnaires. So, it’s more of a collaborative piece of work to help develop the PPI.”
While consumers may not directly engage with the PPI in their daily activities, policymakers, businesses, and consumers need to understand and monitor the producer price dynamics for informed decision-making.