Turning to consumer prices, the effect is strongest for processed food prices, both through a
direct impact and through the pricing chain effect from PPI consumer goods. For the other
consumer price components, the effect is almost identical and increases progressively to about
an impact of less than 0.01% after 8 quarters. Using the weighted average for the CPEX
suggests an impact of 0.010% after 16 quarters, which is somewhat larger than the one found
for energy commodity prices.
Chart 8 shows the impact multiplier of a 1% increase in industrial raw material prices. As
expected, the effect is strongest on intermediate goods PPI (0.11% after 4 quarters), while the
effect on the consumer goods PPI is smaller and more gradual (0.03% after 8 quarters) and
there is no effect on energy PPI. On the consumer price side, the effect is strongest for
processed food (0.023% after 16 quarters), and somewhat smaller for non-energy industrial
goods prices (0.016% after 16 quarters) and services (0.009% after 16 quarters). Most of the
effect comes through after about 10 quarters, i.e. somewhat slower than for producer prices.
Chart 8 Impact multiplier of industrial raw material prices
(deviation from baseline following 1% increase in raw material prices)
Effect of 1% increase in industrial raw
material prices on producer prices
(deviation from baseline)
Effect of 1% increase in industrial raw
material prices on consumer prices
(deviation from baseline)
PPENE: PPI energy; PPINT: PPI intermediate goods; PPCONS: PPI consumer goods; CPFDPR: HICP
processed food; CPNEIG: HICP non-energy industrial goods; CPSERV: HICP services, CPEX: HICP excluding
unprocessed food and energy.
Taking the effects of energy, food and industrial raw material prices together, Chart 9 shows
the impact of a 1% increase in all commodity prices simultaneously. This effect is simply
obtained by adding up the impact multipliers of the individual commodity prices as shown
above. The overall effect on the PPI is strongest for the energy component (0.26% after 16
quarters), followed by the intermediate goods component (0.15% after 16 quarters) where part
of the effect comes from the direct effect of industrial raw material prices and part from the
indirect effect of energy commodity prices. The effect on consumer goods producer prices is
И ECB
Working Paper Series No 1104
November 2009