Quite difficult to find an appropriate room for my inquiry, but given that this is my first post, I guess I'll forgive me! I'm checking money growth (ever heard M1, M3, MZM, and so on?) whose data is released by the Fed. According to this valuable source, M3 seasonally adjusted data for the end of May was 8683 (billions of dollars), with a 1.48% change on three months ago. But if I take the "Not-seasonally adjusted" data for M3 at the end of May, I get 8659, with a null (+0.03%) variation with respect to the month of February. Needless to say, the two data are quite different! Despite the continuous efforts by Greenspan, money growth was irrilevant in the latter case! So my question is: according to your experience, which of the two version - namely, SA or NSA - are preferable, and, above all, WHY? I figure that if the Fed show NSA data, it should be respectable, isnt'it? But if it's true, than the money machine didn't work anymore... Greetings
Lots of economic indicators have seasonal adjustments. For most purposes you should use the seasonally adjusted amounts to get a picture of the true underlying trend. For example, the 4th quarter unemployment rate might be down from the 3rd quarter, but seasonally adjusted, the unemployment rate might be up. The difference is that lots of temporary employees are hired for the Christmas shopping season. So while more people happened to be employed, if you want a picture of the health of the labor market, you would look at the seasonally adjusted number (that subtracts out the temporary Christmas employees) and conclude that unemployment is trending higher. I'm sure there are similar season factors in the money supply measures: Perhaps people hold larger checking account balances prior to paying taxes on April 15th (in the US). Or perhaps people hold larger cash balances for summertime travel. Maybe the summertime uptick in homesales affect the money supply measurements.
It's helpful to use the unfudged numbers when comparing year over year - so compare May `03 to May '04 to get a big picture idea of how much the Fed is growing the money supply. As I recall, you'll see M3 up over 6%.
Thanks guys. Also, I don't know if this is verbotten or not but here is a link to another board that has a nice discussion of the subject and some useful links http://www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=53221 Please edit moderator if posting a link to another discussion forum is not kosher.