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How are PPIs calculated?

April 26, 2017calculated ppis

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How are PPIs calculated?

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The formula used to calculate the PPIs is a modified Laspeyres index. The Laspeyres index compares the base period revenue for a set of goods to the current period revenue for the same set of goods. The following formula closely approximates the actual computation procedure: Where: is the price of a commodity in the base period; is the price of a commodity in the current period; and is the quantity of the commodity shipped during the base period. In this form, the index is the weighted average of price relatives (price ratios for each item. The expression represents the weights in value form.