Anyone looking for a good example of the impact of seasonal adjustments in general and how rising pump prices can translate into falling fuel prices when the government reports its monthly inflation data need look no further than today’s report on consumer prices.
As noted here earlier, despite the roughly five percent increase in the cost to fill your tank, the Labor Department said it actually cost 1.7 percent less and the table below showing the change in pump prices from February to March over the last few years explains why.
For whatever reason (most likely reduced supply due to the beginning of the winter/summer switchover and spring refinery maintenance), prices usually increase sharply from February to March and the raw data collected by the Energy Department and the Labor Department is consistent in that regard as shown above.
But, the Labor Department then attempts to smooth this data to remove this effect and better see the underlying trend, so, in this case, that results in a downward adjustment of almost seven percentage points for gasoline prices for the month of March.
Interestingly, that doesn’t appear to make the monthly chart look much smoother as shown below, but there’s probably an explanation for that too.
