What is the seasonal adjustment process?
The mechanics of seasonal adjustment involve breaking down a series into trend-cycle, seasonal, and irregular components.
Trend-Cycle: Level estimate for each month (quarter) derived from the surrounding year-or-two of observations.
Seasonal Effects: Effects that are reasonably stable in terms of annual timing, direction, and magnitude. Possible causes include natural factors (the weather), administrative measures (starting and ending dates of the school year), and social/cultural/religious traditions (fixed holidays such as Christmas). Effects associated with the dates of moving holidays like Easter are not seasonal in this sense, because they occur in different calendar months depending on the date of the holiday.
Irregular Component: Anything not included in the trend-cycle or the seasonal effects (or in estimated trading day or holiday effects). Its values are unpredictable as regards timing, impact, and duration. It can arise from sampling error, non-sampling error, unseasonable weather, natural disasters, strikes, etc.
For more information, visit the Monthly and Annual Retail Trade website.