Using seasonally adjusted data has a number of advantages over using the year-on-year movement of the non seasonally adjusted data. It is a more sophisticated process, and can succeed in the removal of calendar effects and better detection of turning points.
Comparability of data over time is enhanced through the application of seasonal adjustment methods. The Bank conducts regular reviews of the seasonal adjustment settings of its data series to ensure these remain satisfactory.
The Bank of England seasonally adjusts its data using X-13ARIMA-SEATS. The Bank uses the X-12-ARIMA functionality within this package.
The Bank seasonally adjusts approximately 400 published series, the majority being of monthly periodicity. The following considerations are taken into account when adjusting a series:
- Type: Flows series that are derived from levels (stocks) series are not seasonally adjusted directly, but are instead derived from the seasonally adjusted levels series as described below. And the treatment for seasonally adjusting a levels series differs slightly to that for seasonally adjusting a pure flows series;
- Frequency: Where possible, the seasonally adjusted quarterly series are derived from the corresponding seasonally adjusted monthly series, but in some cases the monthly equivalent is not available or is only available over a very short time span, in which case the quarterly series is seasonally adjusted directly;
- Length: X-13ARIMA-SEATS requires a minimum of three years of data to seasonally adjust though a longer span of data is preferred to obtain reliable results;
- Detection of seasonality: Before seasonally adjusting, various diagnostics are examined to decide whether the series requires seasonal adjustment. Footnotes are placed on series that do not show sufficient seasonality to indicate that they have been considered for seasonal adjustment, but are currently not seaso
- Aggregation considerations: Aggregate time series can be adjusted directly or indirectly, as a sum of their components. The method chosen is whichever is shown to give a better seasonal adjustment of the total aggregate.
When the seasonal adjustment of a particular series is being reviewed, the Bank considers various diagnostic tests to assess the quality of potential seasonal adjustment to ensure that the final seasonal adjustment is of as high a quality as possible. Some series may be reviewed more frequently.
The Bank conducts annual reviews (split into three separate phases each year) of the settings used for seasonal adjustment of published series, and publishes the results via a Statistical article. Any significant methodological changes are also documented.
Seasonally adjusting stock series
Some monetary statistics series are reported naturally as flows (e.g. number of mortgage approvals for house purchase) and they should be seasonally adjusted as flows in their own right. Other flows series, however, are initially compiled in terms of amounts outstanding at the end-month reporting dates. These levels (or stocks) series are on a point in time basis, and for these series, users may also be interested in the derived flows and growth rates (see the Changes, flows, growth rates Explanatory notes for further information on how these are derived). For such series, both seasonally adjusted levels and flows are derived by first seasonally adjusting a break-adjusted levels series (see also Break-adjusted levels data).