Calculating Index Changes
Movements of price indexes from one month to another usually should be expressed as percent changes, rather than as changes in index points, because the latter are affected by the level of the index in relation to its base period, while the former are not. Each index measures price changes from a reference period defined to equal 100.0. The current standard base period for most commodity-oriented PPI series is 1982, but many indexes that began after 1982 are based on the month of their introduction.
An increase of 20 percent from the base period in the Finished Goods Price Index, for example, is shown as 120.0, which can be expressed in dollars as follows: “Prices received by domestic producers of a systematic sample of finished goods have risen from $100 in 1982 to $120 today.” Likewise, a current index of 133.3 would indicate that prices received by producers of finished goods today are one-third higher than what they were in 1982.
Read more about this topic: U.S. Producer Price Index
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