## What is a 'Seasonally Adjusted Annual Rate - SAAR'

A seasonally adjusted annual rate (SAAR) is a rate adjustment used for economic or business data, such as sales numbers or employment figures, that attempts to remove seasonal variations in the data. Most data is affected by the time of the year, and adjusting for the seasonality means more accurate relative comparisons can be drawn between different time periods. For example, the ice cream industry tends to have a large level of seasonality as it sells more ice cream in the summer than in the winter, and by using seasonally adjusted sale rates, the sales in the summer can be accurately compared to the sales in the winter.

Next Up

## BREAKING DOWN 'Seasonally Adjusted Annual Rate - SAAR'

To calculate SAAR, take the unadjusted monthly estimate, divide by its seasonality factor and multiply by 12. Alternatively, take the unadjusted quarterly estimate, divide by its seasonality factor and multiply by four.

## How Does SAAR Help With Data Comparisons?

SAAR helps with data comparisons in a number of ways. By adjusting the current month's sales for seasonality, a business can calculate its current SSAR and compare it to the previous year's sales to determine if sales are increasing or decreasing. Similarly, if a person wants to determine if real estate prices are increasing in his area, he can look at the median prices in the current month or quarter, adjust those numbers for seasonal variations and convert them into SAARs that can be compared to numbers for the previous years. Without making these adjustments first, the analyst is not comparing apples with apples, and as a result, cannot make clear conclusions.

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 being momentarily increased by the warm weather.

## How to Calculate and Use the Seasonality Rate

To calculate the seasonality rate, analysts start with a full year of data, and they find the average number for each month or quarter. The ratio between the actual number and the average determines the seasonal factor for that time period. Imagine a business earns \$144,000 over a course of a year, and \$20,000 in June. Its average monthly revenue is \$12,000, making June's seasonality factor 1.67.

The following year, revenue during June climbs to \$30,000. When divided by the seasonality factor, the result is \$17,964, and when multiplied by 12, that makes the SAAR \$215,568, indicating growth.

## What Is the Difference Between Not Seasonally Adjusted and Seasonally Adjusted Rates?

While seasonally adjusted (SA) rates try to ameliorate differences between seasonal variations, not seasonally adjusted (NSA) rates do not take into account seasonal ebbs and flows. Concerning a set of information, NSA data corresponds to the information's annual rate, and SA data corresponds to its SAAR.

RELATED TERMS

A statistical technique designed to even out periodic swings ...
2. ### Earnings Season

Earnings season refers to the months of the year during which ...

Adjusted earnings are the sum of earnings and increases in loss ...
4. ### Quarter - Q1, Q2, Q3, Q4

A quarter is a three-month period on a company's financial calendar ...
5. ### Periodic Interest Rate Cap

A periodic interest rate cap refers to the maximum interest rate ...

An adjusted closing price is a stock's closing price amended ...
Related Articles
1. Investing

### How Seasons Impact Real Estate Investments

Here is how the seasons of the year impact the housing market.

Seasonal businesses face particular challenges. Find out how they survive through the cold months.

### The Seasonality Of The U.S. Dollar

The long-term history of the U.S. dollar suggests that it is often stronger earlier in the year.

### How to Start a Seasonal Business

Starting a seasonal small business isn't as hard as you think. With the right planning, you can have a successful business that operates seasonally.
5. Personal Finance

### The Cheapest Times To Fly To Australia

The time you go and how you book are the keys.

### The Best Stocks to Own in December (UL, SO)

See four of the best performing stocks in December over the last 26 years.
7. Managing Wealth

### How to Use Earnings Season to Make Better Decisions

Earnings season reflects the state of the stock market, but also demonstrates how the overall economy is performing.
8. Investing

### Stock and Flow Variables Explained: A Closer Look at Apple

The difference between stock and flow variables is an essential concept in finance and economics. We illustrate with financial statements from Apple Inc.

### These ETFs Tend to Do Well in June

These ETFs have moved higher in June at least 82% of the time.

### How To Calculate The Tax You Owe

Learn the basic information you need to calculate the taxes you'll owe the government this tax season.
RELATED FAQS
1. ### When should I use seasonally adjusted data from the consumer price index (CPI)?

Learn what seasonally adjusted data is, how it is determined and when it should be used to evaluate the information gathered ... Read Answer >>
2. ### Is the banking sector subject to any seasonal trends?

Explore the unexpected seasonal trends that can be discerned regarding the banking industry and the financial services sector ... Read Answer >>
3. ### When is earnings season?

Earnings season is the period of time during which a large number of publicly traded companies release their quarterly earning ... Read Answer >>
4. ### How to calculate a stock's adjusted closing price

When the day's trading is done, all stocks are priced at close. The adjusted closing price accounts for any distribution ... Read Answer >>
5. ### What is an adjusted cost basis and how is it calculated?

Learn what adjusted cost basis is, how it is calculated, and why this metric is important for investors, business owners ... Read Answer >>

Hot Definitions
1. ### Economies of Scale

Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
2. ### Quick Ratio

The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
3. ### Leverage

Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
4. ### Financial Risk

Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
5. ### Enterprise Value (EV)

Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
6. ### Relative Strength Index - RSI

Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...