How is an index interpreted?
An index is a tool that simplifies the measurement of movements in a numerical series. Movements are measured with respect to the base period, when the index is set to 100. Currently, most PPIs have an index base set at 1982 = 100. (Some PPIs have a base corresponding to the month prior to the month that the index was introduced.) BLS measures price change in relation to that figure. An index of 110, for example, means there has been a 10-percent increase in prices since the base period; similarly, an index of 90 indicates a 10-percent decrease. Movements of price indexes from one month to another are usually expressed as percent changes rather than as changes in index points because index point changes are affected by the level of the index in relation to its base period, while percent changes are not. An advantage of calculating percent changes is that the result will be the same no matter what base period is specified. The example below demonstrates the computation of index point an
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