The index is calculated using a weighted average of the inputs.
1. Select the inputs and normalize the inputs
The weighted average is calculated using the period-over-period percent change of input series. Therefore, after you select the input series, you need to specify the type of inputs, such that all inputs can be normalized to the same basis for calculation.
For Raw data, the period-over-period percent change will be calculated, and be used as input to the weighted average calculation.
Formula
Where:
= input series
For % Change, the series will be used directly as input.
For % Change, YoY, the series will be converted from year-over-year percent change to period-over-period percent change.
Formulas
The first step is to convert the input series, which is in year-over-year percent change, to an index. The initial observation(s) are set to 100, with subsequent values calculated as:
The second step is to calculate period-over-period percent change, and use it as input to the weighted average calculation.
2. Calculate the weighted average of the inputs
After all inputs are normalized, the period-over-period percent change of the index is calculated as:
Formula
Where:
= input series
= weight of input series
What happens if input is missing?
3. Convert the output from percent change to level
The next step is to convert the period-over-period percent change to an index. The initial observation is set to 100, with subsequent values calculated as:
Formula
4. Rebase the index to the designated base period
The index is then rebased to a new base period.
Formula
