SEASONAL INDICES

A seasonal index is a measure of how a particular season compares

with the average season.
Consider the monthly seasonal indices for unemployment given in the table
below:

Seasonal indices are calculated so that their average is 1. This means that
the sum of the seasonal indices equals the number of seasons. Thus, if the
seasons are months, the seasonal indices add to 12. If the seasons are quarters,
then the seasonal indices would add to 4, and so on. January has seasonal index
of 1.1which means, Januarys unemployment is 10% above average.
Septembers unemployment is 15% less than average.
Deseasonalising is the process that is used to remove the seasonal
effects from a set of data. This allows any underline trend to be made
clearer.
We can use seasonal indices to deseasonalise time series. To calculate
deseasonalised data, each entry is divided by its seasonal index as follows.

Deseasonalising data
Example: Deseasonalise the quarterly sales gures of Summer Year1 using the
data and seasonal indices tables below.

Solution: Deseasonalised data for Summer 1 = Summer 1 data

920 = 893

Summer seasonal index

1.03

Calculating seasonal indices

Example: Mikki runs a shop and she wishes to determine quarterly

seasonal indices
based on her last years sales, which are shown in the table below.

Solution: Using the above formula to find the seasonal index

seasonal index = value of the quarter
quarter average
Find the quarter average
quarter average = 920 + 1085 + 1241 + 446 = 923
4
Find the seasonal index of each season
seasonal index Summer = 920 = 0.997
923
seasonal index Autumn = 1085 = 1.176
923

seasonal index Winter = 1241 = 1.345

923
seasonal index Spring = 446 = 0.483
923
Calculating seasonal indices (several years data)
Suppose that Mikki has in fact three years of data, as shown. Use the data to
calculate seasonal indices, correct to two decimal places.

Solution: The seasonal average of year 1 was found previously

Find the quarter average for year 2
quarter average year 2 = 1035 + 1180 + 1356 + 541 = 1028
4
Find the seasonal index of each season
seasonal index Summer = 1035 = 1.007
1028
seasonal index Autumn = 1180 = 1.148
1028
seasonal index Winter = 1356 = 1. 319
1028
seasonal index Spring = 541 = 0.526
1028

Find the quarter average for year 3

quarter average year 2 = 1299 + 1324 + 1450 + 659 = 1183
4
Find the seasonal index of each season
seasonal index Summer = 1299 =1.098
1183

seasonal index Autumn = 1324 = 1.119

1183
seasonal index Winter = 1450 = 1.226
1183
seasonal index Spring = 659 = 0.557
1183

To find the seasonal indices of the 3 years we need to find the average
seasonal index of each season.

QUESTIONS
1 The table below shows the monthly sales gures and seasonal indices (for January to
November) for a product produced by the U-beaut company.
a Complete the table by calculating the missing seasonal index.

b Interpret the seasonal index for

i February
ii August

2 The table below shows the quarterly newspaper sales of a corner store for Year 1. Also
shown are the seasonal indices for newspaper sales for the rst, second and third quarters.
Complete the table.

3 Each of the following data sets records monthly sales ($000s). Use the data to determine
the seasonal indices for the 12 months. Give your results cor rect to two decimal places.
Check that your seasonal indices add to 12.

4 The number of waiters employed by a restaurant chain in each quarter of one year, along
with some seasonal indices which have been calculated from the previous years data, are
given in the following table.

a What is the seasonal index for the second quarter?

b The seasonal index for Quarter 1 is 1.30. Explain what this mean in terms of the average
quarterly number of waiters.
c Deseasonalise the data.

5 The following table shows the number of students enrolled in a 3-month computer systems
training course along with some seasonal indices which have been calculated from the
previous years enrolment gures. Complete the table by calculating the seasonal index for
spring and the deseasonalised student numbers for each course.

6 The following table shows the monthly sales gures and seasonal indices (for January to
December) for a product produced by the VMAX company.
a Complete the table by:
i calculating the missing seasonal index
ii evaluating the deseasonalised sales gures
b The seasonal index for July is 0.90. Explain what this means in terms of the average
monthly sales.

ANSWERS
1a1.0
biIngeneral,inFebruary,monthlysalesare 30%morethaninanaveragemonth.
IiIngeneral,inAugust,monthlysalesare 30%lessthaninanaveragemonth.
2

bInQuarter1therestaurantchainemploys30% morewaitersthanthenumberemployedin
an averagequarter.
5

cInJulytheVMAXcompanyrecords10%fewersalesthaninanaveragemonth.