PX index versus inflation over 20 years

We will look at the development of the PX index in comparison with inflation over the last 20 years (2000 to 2019). Here is a graph comparing inflation with the PX index over the last 25 years. Data on specific inflation are available from the Czech Statistical Office for the last 20 years (ie from the beginning of 1999 to the end of 2019).

source: tradingeconomics.com

The graph was obtained from the PX index by selecting the menu: Forecast / 25Y / Compare / Pick country: Czech Republic / Pick indicator: Inflation Rate.

The average growth rate of the PX index

The PX index as of 4 January 1999 had a value of 395.30 and as of 30 December 2019 it had a value of 1115.63, see PSE: PX. This is an increase of 182% over the last 20 years, see the following calculation.

$$\begin{gathered} \frac{1115,63}{395,30}\times 100=2,82 \times 100=282 \% \\ 282 \% – 100 \% = 182 \% \end{gathered}$$

Using the geometric average, we calculate the average growth rate of the PX index over the last 20 years, which is based on 5.3% per year.

$$\begin{gathered} \sqrt[20]{2,82=}1,053 \\ 1,053–1 =0,053 \\ 0,053 \times 100 = 5,3 \% \end{gathered}$$

Average rate of inflation growth in the Czech Republic

Now we will play with inflation and calculate its average amount over the last 20 years, again with a geometric average from the individual values of the years 2000 to 2019.

$$\begin{gathered} \sqrt[20]{1,039\times 1,047\times 1,018\times 1,001\times 1,028\times 1,019\times 1,025\times \\ \times 1,028\times 1,063\times 1,01\times 1,015\times 1,019\times 1,033\times 1,014\times \\ \times 1,004\times 1,003\times 1,007\times 1,025\times 1,021\times 1,028} \\ =\sqrt[20]{1,5526} = 1,0222 \\ 1,0222 – 1 =0,0222 \\ 0,0222 \times 100 = 2,22 \% \end{gathered}$$

My calculation shows that over the last 20 years, the average annual inflation rate in the Czech Republic was 2.22%.

PX Index beats inflation by about 3%

As the PX index has grown faster than inflation over the last 20 years (ie from the beginning of 1999 to the end of 2019), it has been able to cover inflation and bring an appreciation higher than inflation by about 3% per year (5.3% − 2, 22%). In a similar way, you can compare any stock market index with a country’s inflation.

Czech version