For everything there is a season

Weekly Updates

Economic data need to be seasonally adjusted. Comparing frantic Black Friday US consumer spending with marginally less frantic October spending gives a distorted picture of hedonistic excess. The change of French economic activity between July and les grandes vacances of August might suggest an economy in terminal decline.
Smoothing the regular seasonal patterns in data creates a clearer picture of what is happening in an economy. But, seasonal adjustments can mislead investors.
Seasonal adjustment, by definition, distorts reality. The actual lived inflation experience of a household is not the same as seasonally adjusted price changes. There can be a mismatch between the reported (seasonally adjusted) change from the previous month and the consumer’s experience at the checkout. The unreality of reported numbers, disguised by seasonal adjustment, may conceal problems with sentiment and consumer behavior.
Seasonal adjustment depends on a regular rhythm. The seasonal distortion in one year is supposed to be replicated the following year. But there are moveable feasts. In the Western hemisphere, Easter can make a mess of seasonal adjustments. In Asia, the movement of the Lunar New Year adds a distortion that seasonal adjustments cannot smooth away. Given Asia’s role as the global manufacturer, that distortion spreads to countries that do not even acknowledge a lunar holiday cycle.