what is seasonality 
seasonality is a characteristic of a time series in which the data experiences regular and predictable changes that recur every calendar year any predictable fluctuation or pattern that recurs or repeats over a one year period is said to be seasonal seasonal effects are different from cyclical effects as seasonal cycles are observed within one calendar year while cyclical effects such as boosted sales due to low unemployment rates can span time periods shorter or longer than one calendar year understanding seasonalityseasonality refers to periodic fluctuations in certain business areas and cycles that occur regularly based on a particular season a season may refer to a calendar season such as summer or winter or it may refer to a commercial season such as the holiday season companies that understand the seasonality of their businesses can predict and time inventories staffing and other decisions to coincide with the expected seasonality of the associated activities thereby reducing costs and increasing revenue it is important to consider the effects of seasonality when analyzing stocks from a fundamental point of view because it can have a big impact on an investor s profits and portfolio a business that experiences higher sales during certain seasons may appear to make significant gains during peak seasons and significant losses during off peak seasons if this is not taken into consideration an investor may choose to buy or sell securities based on the activity at hand without accounting for the seasonal change that subsequently occurs as part of the company s seasonal business cycle seasonality is also important to consider when tracking certain economic data economic growth can be affected by different seasonal factors including the weather and the holidays economists can get a better picture of how an economy is moving when they adjust their analyses based on these factors for example roughly two thirds of u s gross domestic product gdp is made up of consumer spending which is a seasonal measure the more consumers spend the more the economy grows conversely when they cut back on their purse strings the economy will shrink if this seasonality was not taken into account economists would not have a clear picture of how the economy is truly moving seasonality also affects industries called seasonal industries which typically make most of their money during small predictable parts of the calendar year examples of seasonalitythere are many different instances where seasonality can be observed as it relates to the regular transition throughout times of the year for example if you live in a climate with cold winters and warm summers your heating costs likely rise in the winter and fall in the summer you expect the seasonality of your heating costs to recur reasonably every year around the same time similarly a company that sells sunscreen and tanning products within the united states sees sales jump up in the summer as demand for their products increases on the other hand the company will likely see a significant drop in the winter another area affected by seasonality is retail sales retail sales measure consumer spending and demand and are reported every month by the u s census bureau data fluctuates at certain times of the year primarily during the holiday shopping season this period falls into the fourth quarter of the year between october and december many retailers experience seasonal retail sales seeing a big jump in consumer spending around the holiday season special considerationslarge retailers including e retail giant amazon may hire temporary workers to respond to higher consumer demand associated with the holiday season in 2018 the company said it would hire approximately 100 000 employees to help offset the increased activity expected in stores meanwhile retailer target said it would hire 120 000 for the same holiday period like most retailers these decisions were made by examining traffic patterns from previous holiday seasons and using that information to predict what may be expected in the coming season once the season is over many temporary employees are no longer needed based on the post season traffic expectations a lot of data is affected by the time of the year and adjusting for the seasonality means that more accurate relative comparisons can be drawn between different time periods adjusting data for seasonality evens out periodic swings in statistics or movements in supply and demand related to changing seasons by using a tool known as seasonally adjusted annual rate saar seasonal variations in the data can be removed for example homes tend to sell more quickly and at higher prices in the summer than in the winter as a result if a person compares summer real estate sales prices to median prices from the previous year he may get a false impression that prices are rising however if he adjusts the initial data based on the season he can see whether values are truly rising or just momentarily increasing by the warm weather 