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Handbook of Methods

Handbook of Methods

Index Numbers

Definition

An index is a tool that simplifies the measurement of movements in a numerical series. For example, most of the specific Consumer Price Indexes (CPIs) have a 1982-84 reference base. That is, BLS sets the average index level (representing the average price level)—for the 36-month period covering the years 1982, 1983, and 1984—equal to 100. The Bureau measures changes in relation to that figure.

How to use it

An index of 110, for example, means there has been a 10-percent increase in price since the reference period; similarly an index of 90 means a 10-percent decrease. Movements of the index from one date to another can be expressed as changes in index points (simply, the difference between index levels), but it is more useful to express the movements as percent changes. This is because index points are affected by the level of the index in relation to its base period, while percent changes are not.