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To: Gottfried who wrote (1151)	8/21/1997 1:40:00 AM
From: Bill Ulrich	of 1894

Gottfried, that's a mighty 'BIG' question! I would guess that the core of inflation is the increase in the cost of doing business for the suppliers of raw materials. This would include salary increases, utility increases, etc... At the raw material level, the increases can be quites small, nearly imperceptible, but as they filter through the chain from factory to vendor to retailer to consumer, the small amounts gather some padding along the way. The CPI, then, is an indicator of current or recent inflation whilst the PPI (Producer's Price Index) could be used to guage potential direction. The accuracy of these indices relies on the contents of their 'basket of goods', hence the CPI is often revised -- not sure about the PPI. I've read in a few econ journals that the PPI has fallen out of favor somewhat but this isn't an area I follow very closely, so don't put too much faith in my memory. The CPI will be upgraded to include computers and some electronic goods (pagers?) in order to better reflect where average Americans dispose of their income. I wonder how long it will take to add ISP services to the list? -MrB

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