Using the Producer's Price Index and the Census of Manufacturers, buyers can track material price movements and changing patterns in labor rates within selected industries. The ability to measure the increase in material and labor costs present in the price structure should make it easier to protect against the price increase. It should also make it more difficult for the suppliers to "pass along" increases in prices that do not add value to the product. In addition, using the material to labor ratio from the Census of Manufacturers, the buyer can monitor trends toward material intensity in the industry. Should this occur, it becomes more difficult to blame price increases on labor, if it is becoming a smaller fraction of price. The PPI can also be used to verify long-term price increases in the industry as well as key component increases.
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