Fact Sheet on Seasonal Adjustment in the CPI
The Consumer Price Index (CPI) of the Bureau of Labor Statistics (BLS) is a measure of the
change in prices of goods and services purchased by urban consumers. The CPI publishes
unadjusted price indexes at the national, metropolitan area, and regional levels and seasonally
adjusted indexes for selected groups and subgroups of the CPI at the national level where there
is a significant pattern of seasonal price change.
What is seasonal adjustment?
Seasonal adjustment removes the effects of recurring seasonal influences from many economic
series, including consumer prices. The adjustment process quantifies seasonal patterns and then
factors them out of the series to permit analysis of non-seasonal price movements. Changing
climactic conditions, production cycles, model changeovers, holidays, and sales can cause
seasonal variation in prices. For example, oranges can be purchased year-round, but prices are
significantly higher in the summer months when the major sources of supply are between harvests.
Who should use CPI seasonally adjusted indexes?
Data users who are interested in analyzing general price trends in the economy should use
seasonally adjusted indexes. Seasonally adjusted data are usually preferred in the formulation
of economic policy and for economic research, because they eliminate the effects of changes that
normally occur at the same time and in about the same magnitude every year.
Who should not use CPI seasonally adjusted indexes?
Those who use the CPI in escalation agreements to adjust payments for changes in prices should
typically not use seasonally adjusted indexes. Unadjusted indexes are used extensively for
escalation purposes because they measure the change in actual prices consumers pay for goods and
services. Many collective bargaining contract agreements and pension plans, for example, tie
compensation changes to the Consumer Price Index unadjusted for seasonal variation.
Are areas for metropolitan areas or geographic regions seasonally adjusted in the CPI?
No, seasonally adjusted indexes are not calculated for metropolitan areas or regions. Seasonally
adjusted indexes are published only for those national price indexes where significant seasonal
How are price indexes seasonally adjusted?
The seasonal movement of the all-items index and other aggregations are derived by aggregating
seasonally adjusted component indexes. Each January the seasonal status of every index series is
reevaluated based upon certain statistical criteria. An index could change its seasonal adjustment status from seasonally adjusted to not seasonally adjusted, or vice versa. During mid-February of each year, when January data are released, new seasonally adjusted indexes are published, and new seasonal adjustment factors for these items are available to data users upon request.
The CPI uses X-12-ARIMA (auto-regressive integrated moving average) seasonal adjustment software
developed by the U.S. Bureau of the Census in 1996. X-12-ARIMA was developed as an improvement
over the previously used X-11-ARIMA methodology. X-12-ARIMA uses the X-11 seasonal adjustment
method in conjunction with regression-ARIMA modeling for intervention analysis and data
The technique of intervention analysis also is used in the seasonal adjustment of consumer
price indexes to provide more accurate CPI data. This process offsets the effects that extreme
price volatility would otherwise have on the estimates of seasonally adjusted data.
Intervention analysis is the prior adjustment of an index series before the calculation of the
seasonal factors. Prior adjustment may be called for if a "ramp" occurs. (A "ramp" occurs where
a good or service undergoes a unique, large, and rapid change in price level.) An example would
be a large decrease in the price of gasoline due to the breakdown of an oil cartel. Removal of
the ramp gives a clearer seasonal pattern and lessens the irregular component. When a ramp
exists, intervention analysis helps to calculate more accurate seasonal adjustment data.
For more information on seasonal adjustment
The CPI program has more details on the X-12-ARIMA seasonal adjustment method, the intervention
analysis technique, events treated as interventions, and seasonal adjustment factors. To obtain
this information, write to the Bureau of Labor Statistics, Division of Consumer Prices and
Price Indexes, Room 3615, 2 Massachusetts Avenue, NE, Washington, DC 20212-0001, call the
Information and Analysis (I&A) Section of the CPI at 202-691-7000, or e-mail levin.david.@bls.gov.
For additional BLS-wide information about seasonal adjustment links, seasonal data, and research
papers, please click the "Search" link at the top of this page. Then type the keywords "seasonal
adjustment" in the keyword input field and click the "Search Now" button.
Last Modified Date: February 23, 2010