PPI measures the prices businesses receive for the goods and services they produce — essentially, inflation at the wholesale or production level, before it gets passed on to consumers. Because producers often pass cost increases through to retail prices with a lag, PPI is sometimes watched as an early signal for where CPI may be headed in the following months.
It's a noisier number than CPI in practice — production costs can be affected by one-off supply chain issues that don't end up reaching consumers at all — so markets generally react to it less violently than to CPI, but it's still part of the broader inflation picture central banks weigh.