Producer price indices do not measure costs

In his letter, Karm Farrugia (May 8) is flummoxed that producer prices went up by 39 per cent for the home producer and down by seven per cent for the exporter.

A producer price index shows the average changes over time in the selling prices received by producers for their output. The index does not measure changes in the costs of producing that output. Indeed, these changes may not have an influence on the selling price, especially for some export-oriented firms. Domestic producers include energy producers, where the energy index, owing to higher oil prices, went up by 54 per cent, thus "pulling up" producer prices. The energy index does not feature in export producer prices, as neither water nor electricity is produced for export purposes.

This is clearly shown in Table 2 in the NSO's news release 076/2009 dated May 4, and borne out by an explanation in methodological note 6.