Reading indicators: using weights and contributions to see which item moved the totalAbout the "marks allocation" in an index: even a small item can move the total
A price index is the sum of price movements of individual items, each multiplied by a weight. The Bank of Japan's Services Producer Price Index takes the 2020 average as 100 and distributes a total weight of 1,000 across its items. Using the preliminary September figures released on October 27 as an example, this article sets out how to read how much each item moved the total.
- Weight of the all-items average
- 1,000.0
- Weight of ocean freight transportation
- 5.6
- Year-on-year change for that item
- Up 97.7%
- Calculation
- 5.6 / 1,000 x 97.7
- Effect on the total (rough estimate)
- About 0.5 point
Key points
- How the index is built (2020 base): it consists of the all-items average, 7 major groups, 26 groups, 59 subgroups and 146 items. Weights are based on the average value of business-to-business transactions in 2019 and 2020, and the index is a fixed-base Laspeyres weighted average. Monthly preliminary figures are released on the 18th business day of the following month
- The basic reading: how much an item moved the all-items average can be roughly estimated as its weight divided by 1,000, multiplied by its year-on-year change
- Example 1: ocean freight transportation has a weight of 5.6 out of 1,000, and rose 97.7% year on year in September. The calculation suggests it pushed the total up by about 0.5 point. Of the total's 3.7% rise, about 0.5 point comes from this single item
- Example 2: road freight transportation has a weight of 65.9 and rose 4.6% year on year. The calculation gives about 0.3 point. Even with a weight more than ten times larger, a smaller price move means a smaller effect on the total
- The Bank of Japan also publishes an all-items average excluding the five international transportation items (international air passenger transportation, ocean freight transportation excluding tankers, ocean tankers, international air freight transportation, and international mail). In September that measure rose 2.9%, less than the 3.7% for the total
What to do in practice
- Do not apply the index's rate of increase directly to your own company; multiply it by the share of your own spending, which is your own weight
- Check the breakdown and weights to see whether the whole figure is being pulled along by one item that moved sharply
- Preliminary figures may be revised later, so confirm against the latest published values before relying on them
When you combine the prices of many goods and services into a single number, the ones traded in large amounts are counted heavily and the ones traded in small amounts are counted lightly. That heaviness is called the weight. In the Bank of Japan's index of prices of services traded between companies, a total of 1,000 is divided among 146 services.
Points
- The total weight of 1,000 is divided among the services. Items with a large weight tend to have a large effect on the total
- But even a small weight can move the total if the price moves a lot. Ocean freight rates carry a weight of only 5.6, yet because they roughly doubled in a year they pushed the total up by about 0.5 point
- Truck freight rates carry a weight of 65.9 and rose 4.6% in a year. The weight is more than ten times larger, but the effect on the total was only about 0.3 point
What the words mean
- Weight
- The marks allocated when calculating an index; items traded in larger amounts count more
- Contribution
- How much of the total's movement came from that particular item
- Year-on-year change
- How many percent something changed compared with the same month a year earlier
- Bank of Japan: Bank of Japan, Outline of the Services Producer Price Index (2020 base)
- Bank of Japan: Bank of Japan, Services Producer Price Index (preliminary, September 2026)
Economic news presents published statistics and outlooks. It is not investment solicitation or trading advice. Figures are as of publication and may be revised.
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.