Unit 05.03: Indexing to a base period

Indexing makes different-sized series comparable in growth, and destroys magnitude.

Base period equals one hundred

Two series thirty times apart in size, raw and indexed.

The code shows both.

SERIES = {"North": [820, 900, 990], "South": [24, 27, 31]}

print("raw values -- North's scale hides South's change entirely:")
for name, values in SERIES.items():
    print(f"   {name:6} {values}")

print("\nindexed to period 1 = 100:")
for name, values in SERIES.items():
    indexed = [round(v / values[0] * 100, 1) for v in values]
    print(f"   {name:6} {indexed}")

print("""
Indexing makes different-sized series comparable in growth terms, which is
often the question. What it destroys is magnitude: the chart no longer says
North is thirty times larger than South.

State the base period in the axis label, and give the absolute values
somewhere -- a footnote, a table, the annotation.
""")

Raw, the smaller series is a flat line at the bottom of the chart and its 31% growth is invisible. Indexed, both growth rates are directly comparable.

What is lost is that North is thirty times larger than South. A reader seeing only the indexed chart may conclude the two are comparable businesses, which is a much bigger error than the one indexing solved.

The mistake this prevents

The mistake is indexing without labelling the base period. "Index (Jan 2026 = 100)" is the whole fix, and without it the chart shows numbers around 100 that look like percentages, values, or anything else.

Takeaway

Index when growth is the question, label the base period on the axis, and put the absolute values somewhere. Indexing hides magnitude entirely.

Mark complete