ABSTRACT
This chapter explores some implications of the increasing difference between retail and producer prices. It focuses on movements in retail/consumer prices alone can lead to a misinterpretation of important economic trends. In particular, real exchange rate movements, real interest rates and real wage changes are very different when viewed from the perspective of the producer price index. The gap between the growth rate in producer prices and retail/consumer prices has been particularly sharp in Bulgaria, but has also been observed in Poland and Hungary. In 1993 the National Statistical Institute changed the method of calculating the index, moving from a calculation of a retail price index to a consumer price index with an identifiable market basket of goods. The rise in retail prices relative to producer prices has created a shift in the terms-of-trade between the producer sector and the retail/distribution sector.
