"Seasonally adjusted" and "annual rate" — what they mean

I realize that many people understand what phrases like “such-and-such was at a seasonally adjusted annual rate of of 657,000” mean in the real world, but I wasn’t one of them. So at the risk of sounding like a fool, I figured I’d explain it, just in case there are others whose eyes gloss over.

A piece about housing starts begins like this: Privately-owned housing starts in December were at a seasonally adjusted annual rate of 657,000.

What that doesn’t mean: “Construction on about 657,000 homes was begun in December.”

What it does mean: “If every month of the year was like December, about 657,000 homes would be started that year.”

In other words, it’s extrapolating — what if every month was like this? — and adjusting for typical seasonal changes (e.g., up in the spring, down in winter).

For example:

image A violinist plays in the subway every day, and people toss money into his case. At the end of each day he counts his coins and says, “If every day was like today — and considering I don’t work weekends — I would take in $500 a month.”

The next day people might be more generous and he’d say, “If every day was like today — and considering I don’t work weekends — I would take in $1,200 a month.”

That doesn’t mean he’ll take in $500 or $1,200 that month. It’s just a useful way of looking at a small piece of data: What if every day (or month) was like this one?

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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One Response to "Seasonally adjusted" and "annual rate" — what they mean

  1. D. Tucker says:

    Thanks so much for this. I too was not sure what it meant and nobody was lining up to explain it to me, lol, and in my job I needed to know in order to interpret some data. Very grateful!

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