Seasonal Adjustment in the CPI

Each year, with the release of the January CPI, seasonal adjustment factors are recalculated to reflect price movements from the just-completed calendar year. This routine recalculation may result in revisions to seasonally adjusted indexes for the previous five years.

Basic information on the use of seasonal adjustment may be found in our Fact Sheet on Seasonal Adjustment

For a more technical discussion of seasonal adjustment methodology, see the following excerpts from the BLS Handbook of Methods:

• Seasonal Adjustment in BLS BLS Handbook of Methods, Appendix A
• CPI Seasonal Methods BLS Handbook of Methods, Chapter 17

Seasonal Data and techniques for Data for January 1999-December 2003, Issued January 2004:

• Revised seasonally adjusted indexes and factors 1999-2003

(Files containing adjustments calculated in earlier years are available from our FTP server.)

• Series changing seasonal status January 1999-December 2003

• 2003 Seasonal factors table (PDF)

A Note on the Use of Seasonally Adjusted and Unadjusted Data

Because price data are used for different purposes by different groups, the Bureau of Labor Statistics publishes seasonally adjusted as well as unadjusted changes each month.

For analyzing general price trends in the economy, seasonally adjusted changes are usually preferred since they eliminate the effect of changes that normally occur at the same time and in about the same magnitude every year--such as price movements resulting from changing climatic conditions, production cycles, model changeovers, holidays, and sales

The unadjusted data are of primary interest to consumers concerned about the prices they actually pay. Unadjusted data also are used extensively for escalation purposes. Many collective bargaining contract agreements and pension plans, for example, tie compensation changes to the Consumer Price Index unadjusted for seasonal variation.

Seasonal factors used in computing the seasonally adjusted indexes are derived by the X-12- ARIMA Seasonal Adjustment Method. The updated seasonal data at the end of 1977 replaced data from 1967 through 1977. Subsequent annual updates have replaced 5 years of seasonal data, e.g., data from 1999 through 2003 were replaced at the end of 2003. In January 2002, dependently seasonally adjusted series were revised for January 1987-December 2001 as a result of a change in the aggregation weights for dependently adjusted series. For further information, please see "Aggregation of Dependently Adjusted Seasonally Adjusted Series" (PDF) 

The seasonal movement of All items and 54 other aggregations is derived by combining the seasonal movement of 73 selected components. Each year the seasonal status of every series is reevaluated based upon certain statistical criteria. If any of the 73 components change their seasonal adjustment status from seasonally adjusted to not seasonally adjusted, not seasonally adjusted data will be used for the last 5 years, but the seasonally adjusted indexes will be used before that period. Note: 47 of the 73 components are seasonally adjusted for 2004.

Seasonally adjusted data, including the All items index levels, are subject to revision for up to five years after their original release. For this reason, BLS advises against the use of these data in escalation agreements.

Effective with the calculation of the seasonal factors for 1990, the Bureau of Labor Statistics has used an enhanced seasonal adjustment procedure called Intervention Analysis Seasonal Adjustment for some CPI series. Intervention Analysis Seasonal Adjustment allows for better estimates of seasonally adjusted data. Extreme values and/or sharp movements which might distort the seasonal pattern are estimated and removed from the data prior to calculation of seasonal factors. Beginning with the calculation of seasonal factors for 1996, X-12-ARIMA software was used for Intervention Analysis Seasonal Adjustment.

For the fuel oil, natural gas, motor fuels, and educational books and supplies indexes, this procedure was used to offset the effects that extreme price volatility would otherwise have had on the estimates of seasonally adjusted data for those series. For the Nonalcoholic beverages index, the procedure was used to offset the effects of labor and supply problems for coffee. The procedure was used to account for unusual butter fat supply reductions, decreases in milk supply and large swings in soybean inventories affecting the Fats and oils series. For the Water and sewerage maintenance index, the procedure was used to account for a data collection anomaly and dry weather in California. For Dairy products, it mitigated the effects of significant changes in milk production levels and higher demand for cheese. For Electricity, it was used to offset an increase in demand due to warmer than expected weather, increased rates to conserve supplies, and declining natural gas inventories. For New vehicles, New cars, and New trucks, the procedure was used to offset the effects of a model changeover combined with financing incentives.

For a complete list of series that used Intervention Analysis Seasonal Adjustment, see "Intervention Analysis Seasonal Adjustment" (PDF)

Last Modified Date: February 18, 2004

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