The Treatment of Seasonal Products

22.1 The existence of seasonal commodities poses some significant challenges for price statisticians. Seasonal commodities are commodities which are either: (a) not available in the marketplace during certain seasons of the year, or (b) are available throughout the year, but there are regular fluctuations in prices or quantities that are synchronized with the season or the time of the year. A commodity that satisfies (a) is termed a strongly seasonal commodity, whereas a commodity that satisfies (b) is called a weakly seasonal commodity. It is strongly seasonal commodities that create the biggest problems for price statisticians in the context of producing a monthly or quarterly consumer price index (CPI) because if a commodity price is available in only one of the two months (or quarters) being compared, then obviously it is not possible to calculate a relative price for the commodity and traditional bilateral index number theory breaks down. In other words, if a commodity is present in one month but not the next, how can the month-to-month amount of price change for that commodity be computed? In this chapter, a solution to this problem is presented which ‘‘works’’, even if the commodities consumed are entirely different for each month of the year. 22.2 There are two main sources of seasonal fluctuations in prices and quantities: (a) climate, and (b) custom. In the first category, fluctuations in temperature, precipitation and hours of daylight cause fluctuations in the demand or supply for many commodities; for example, summer versus winter clothing, the demand for light and heat, holidays, etc. With respect to custom and convention as a cause of seasonal fluctuations, consider the following quotation: Conventional seasons have many origins – ancient religious observances, folk customs, fashions, business practices, statute law . . . Many of the conventional seasons have considerable effects on economic behaviour. We can count on active retail buying before Christmas, on the Thanksgiving demand for turkeys, on the first of July demand for fireworks, on the preparations for June weddings, on heavy dividend and interest payments at the beginning of each quarter, on an increase in bankruptcies in January, and so on (Mitchell (1927, p. 237)).