Seasonally Adjusted And Unadjusted Data - Seasonal Factors That Matter
Referring to seasonally adjusted and unadjusted data depends on one’s aim. Not particularly interested with the influences that affect price changes? Then go for the former. Concerned with the “real” price that should be paid? Then pick the latter. Also, it depends on who is asking for such data.
Author:James PierceReviewer:Alberto ThompsonNov 25, 20221.7K Shares114.2K Views
The use of seasonally adjusted and unadjusted datacomes when dealing with the Consumer Price Index (CPI).
The CPIis used by the U.S. Bureau of Labor Statistics (BLS) to monitor and review the changes happening in the prices of goods and services more commonly purchased and availed by consumers.
It can be likewise a reliable reference to calculate inflation rate and to determine the strength of a country’s currency.
The BLS uses seasonally adjusted and unadjusted data when assessing price changes.
What Is Seasonally Adjusted Economic Data?
Seasonality In CPI
November is nearly over and the holiday season is waving around the corner.
The public can expect prices of commodities - more specifically, toys - to increase as the Christmas season approaches. Such prices will eventually go down as soon as the holiday fever, so to speak, recedes.
To encapsulate an idea of what seasonality is, the aforementioned scenario does it.
According to the National Institute of Standards and Technology (NIST), a U.S. government agency under the Department of Commerce, seasonality is all about “periodic fluctuations.”
Going back to the previously given example, sales increase tends to begin in September and continues until December. By January and February, sales start to weaken.
As price changes, seasonally adjusted and unadjusted data are used.
Governments across the globe made a seasonal adjustment on the onset of the COVID-19 pandemic to lessen the impact of the increases in the prices of commodities.
Seasonally Adjusted And Unadjusted Data
The U.S. Bureau of Labor Statistics (BLS) provides the public with the seasonally adjusted and unadjusted data at different levels for the Consumer Price Index (CPI).
Based on the CPI fact sheet of the BLS, when announcing indexes that are seasonally adjusted, not all groups and subgroups are considered.
Only those that show “significant pattern of seasonal price change” at the national level get selected and published.
As for the indexes that are unadjusted, the following are the areas of coverage that are published for the CPI:
- national level
- metropolitan area level
- regional level
Separate discussions about seasonally adjusted and unadjusted data are found in the next two subsections.
Consumer Price Index Seasonally Adjusted
The U.S. Bureau of Labor Statistics (BLS) publishes the Consumer Price Index (CPI) every month based on the data it collects and analyzes monthly. The CPI reflects both seasonally adjusted and unadjusted data.
The U.S. Bureau of Transportation Statistics (BTS) explains that the number of weekdays and weekends of each month influence monthly data.
The days considered holiday and the accompanying seasonal activity (the work that exists when demand is high, such as during the holiday/Christmas season) likewise make an impact on the said data.
Changes in the data may not become obvious because of these influences.
According to the Employment Development Department (EDD) of the State of California, the term “seasonally adjusted” refers to a process where the BLS disregards these influences.
The U.S. Census Bureau maintains a software called X-13ARIMA-SEATS (or X-13) used for seasonal adjustment.
This X-13 seasonal adjustment software uses a seasonal adjustment method to determine seasonal factors. The BLS computesseasonally adjusted data using the seasonal factors obtained from X-13.
Seasonal factors, by the way, are a means to assess data to show periodic changes, according to the journal “How to Use and Interpret Seasonal Factors” (1981).
Here are two familiar examples: prices expectedly go up every December because of the holiday season and accommodation prices increase during the summer months.
A Canadian government agency stressed the importance of using seasonally adjusted data:
“„The seasonally adjusted data allow for more meaningful comparisons of economic conditions from period to period.- Statistics Canada, Government of Canada
The BTS also highlighted its significance by saying that influences can be controlled if seasonal adjustment is used.
The EDD added that if the data to be compared belong from several months, seasonally adjusted data should be the ones used.
Consumer Price Index Not Seasonally Adjusted
Between the seasonally adjusted and unadjusted data, the latter is usually used when calculating “annual average estimates,” according to the Employment Development Department-California.
In addition, when it comes to the prices that consumers “actually pay,” the U.S. Bureau of Labor Statistics (BLS) said that they get more interested with the unadjusted data.
For pension plans and collective bargaining agreements (CBAs; the contract between a union and an employer pertaining to salary and benefits, among other things), the BLS also said that the unadjusted data is the one highly used.
People Ask
Is CPI Year Over Year Or Month Over Month?
Per the U.S. Bureau of Labor Statistics, the CPI is month over month.
What Is The Difference Between Trend And Seasonally Adjusted?
According to Statistics Canada, in seasonally adjusted, the comparisons are made on a “month-to-month or quarter-to-quarter” basis. A trend, however, lasts for several years.
Does Inflation Have Seasonality?
Ekaterina Peneva, Ph.D., an economist in the U.S. in the Federal Reserve (Fed) Board of Governors, said that inflation has seasonality.
In her article published on the Fed website in October 2014, Peneva concluded that in the first half of the year, inflation “tended to be relatively high” and in the second half of the year, it was “relatively low.”
Final Thoughts
Seasonally adjusted and unadjusted data both carry their respective value and necessity as underscored by the U.S. Bureau of Labor Statistics (BLS).
The BLS noted how each group of data suits a particular purpose.
Though seasonally adjusted and unadjusted datadiffer in some aspects, both are useful for economists, statisticians, and the common consumers.
James Pierce
Author
James Pierce, a Finance and Crypto expert, brings over 15 years of experience to his writing. With a Master's degree in Finance from Harvard University, James's insightful articles and research papers have earned him recognition in the industry.
His expertise spans financial markets and digital currencies, making him a trusted source for analysis and commentary. James seamlessly integrates his passion for travel into his work, providing readers with a unique perspective on global finance and the digital economy.
Outside of writing, James enjoys photography, hiking, and exploring local cuisines during his travels.
Alberto Thompson
Reviewer
Alberto Thompson is an acclaimed journalist, sports enthusiast, and economics aficionado renowned for his expertise and trustworthiness. Holding a Bachelor's degree in Journalism and Economics from Columbia University, Alberto brings over 15 years of media experience to his work, delivering insights that are both deep and accurate.
Outside of his professional pursuits, Alberto enjoys exploring the outdoors, indulging in sports, and immersing himself in literature. His dedication to providing informed perspectives and fostering meaningful discourse underscores his passion for journalism, sports, and economics. Alberto Thompson continues to make a significant impact in these fields, leaving an indelible mark through his commitment and expertise.
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