Calculating index changes.

Each PPI measures price changes from a reference period that equals 100.0. An increase of 5.5 percent from the reference period in the Finished Goods Price Index, for example, is shown as 105.5. This change also can be expressed in dollars, as follows: prices received by domestic producers of a sample of finished goods have risen from $100 in 1982 to $105.50. Likewise, a current index of 90.0 would indicate that prices received by producers of finished goods are 10 percent lower than they were in 1982.

Movements of price indexes from one month to another are usually expressed as percent changes, rather than as changes in index points. Index point changes are affected by the level of the index in relation to its base period, whereas percent changes are not. The following example shows the computation of index point and percent changes.

Index point change

Finished Goods Price Index        107.5
Less previous index               104.0
Equals index point change           3.5

Index percent change

Index point change                  3.5
Divided by the previous index     104.0
Equals                            0.034
Result multiplied by 100    0.034 x 100
Equals percent change               3.4