Producer Price Indexes

Producer Price Indexes Introduced for the Wholesale Trade Sector—NAICS 423, 424, and 425120

To expand service sector coverage in the Producer Price Index (PPI), the Bureau of Labor Statistics (BLS) in July 2005 introduced a group of indexes for the wholesale trade sector of the U.S. economy. The indexes include coverage for two subsectors, merchant wholesalers, durable goods—North American Industry Classification System (NAICS) 423—and merchant wholesalers, nondurable goods—NAICS 424—in addition to coverage for the wholesale trade agents and brokers industry—NAICS 425120. Data for NAICS 423 and NAICS 425120 date back to July 2004, while data for NAICS 424 date back to December 2004. Data for these indexes will appear in table 5 of the PPI Detailed Report and are available online through the BLS website (merchant wholesalers, durable goods; merchant wholesalers, nondurable goods; wholesale trade agents and brokers).

BLS publishes indexes only at the subsector level for merchant goods wholesalers, using codes 423 for merchant wholesalers, durable goods and 424 for merchant wholesalers, nondurable goods. Publication of data for these two subsectors provides coverage for a total of 68 industries, 36 within NAICS 423 and 32 within NAICS 424. One notable exception within subsector 423 is the exclusion of NAICS 423930, recyclable material merchant wholesalers. Output from this industry has historically been covered separately, and related data are available under the industry’s 1997 NAICS code, 421930 (recyclable materials wholesalers).

The 2002 NAICS definition represents a major change from the 1997 definition for the wholesale trade sector. According to the 2002 definition, merchant wholesalers include only those establishments that buy or sell goods on their own account. The key characteristic of wholesale establishments included in these subsectors, 423 and 424, is retaining title to the goods being sold. Wholesale trade agents and brokers do not take title to the goods. Therefore, under the 2002 NAICS definition, these agents and brokers are a separate subsector, 425.

Wholesale output can be defined as the efficient transfer of goods from the manufacturer to another party for resale. Wholesalers perform one or more of the following functions: Selling and promoting, buying and assortment building, bulk breaking, warehousing, transporting, bearing risk, and providing market information.

The prices of services provided by merchant wholesalers are measured by margins. The gross margin is the difference between the acquisition price and the selling price to the next-level buyer. The most prevalent margin price for merchant wholesalers is the average gross margin per unit for a particular customer class or supplier class for all sales within a product group. Margin prices based on transactions for a single product are acceptable when average prices cannot be provided by a company.

Merchant wholesalers, durable goods—NAICS 423

Industries in the merchant wholesalers, durable goods subsector sell capital or durable goods to other businesses. Merchant wholesalers take title to the goods that they sell; in other words, they buy and sell goods on their own account. Durable goods are new or used items generally with a normal life expectancy of 3 years or more. Durable goods wholesale trade establishments are engaged in wholesaling items such as motor vehicles, furniture, construction materials, machinery and equipment (including household appliances), metals and minerals (except petroleum), sporting goods, toys and hobby goods, and parts. This subsector contains 36 different industries; its index includes data back to June 2004.

Merchant wholesalers, nondurable goods—NAICS 424

Industries in the merchant wholesalers, nondurable goods subsector sell nondurable goods to other businesses. Nondurable goods are items generally with a normal life expectancy of less than 3 years. Nondurable goods merchant wholesale trade establishments are engaged in wholesaling items such as paper and paper products, chemicals and chemical products, drugs, textiles and textile products, apparel, footwear, groceries, farm products, petroleum and petroleum products, alcoholic beverages, books, magazines, newspapers, flowers and nursery stock, and tobacco products. This subsector contains 32 different industries; its index includes data back to December 2004.

Wholesale trade agents and brokers—NAICS 425120

NAICS 425120 comprises wholesale trade agents and brokers acting on behalf of buyers or sellers in the wholesale distribution of goods. Agents and brokers do not take title to the goods being sold, but rather receive a commission or fee for their service. Agents and brokers for all durable and nondurable goods are included in this industry. Establishments acting in the capacity of agents or brokers that operate using the Internet or other electronic means instead of a sales force are classified in industry 425110, business to business electronic markets.

The types of prices collected in this industry include the average dollar value of commission per unit for a particular customer class for all of the sales of a particular product, the dollar value of the commission based on a transaction for a single product, and flat-fee commission prices. The index includes data back to June 2004.

Last Modified Date: November 5, 2008

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