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General Topics

Data concepts that are critical to understand how to interpret and analyze economic indicators in general

Definitions of General Topics

Indexing Data To Starting Point: Indexing data to a common starting point helps economists make comparisons of the growth rates for multiple series.  The indexed series also allow for comparison of data with different magnitudes.

Annualizing Data: Annualizing refers to the process of adjusting a growth rate to reflect how much the variable would have changed over a year’s time if it had continued to grow at the given rate.  This is useful because it makes monthly or quarterly growth rates comparable to annual growth rates.  For example, if visitor arrivals increased 0.5% in a month, it would have grown at an annualized rate of 6%. (Actually a bit more because of compounding.)  Annualized growth rates are generally calculated for seasonally-adjusted data to avoid the effects of seasonal swings.  

The percentage changes presented on the UHERO tables calculate the percentage change from the same period one year ago.  These changes are not annualized as they already reflect the growth on an annual basis.

Seasonal Adjustment: One problem with analyzing data collected over time is that particular series may have swings that occur at the same time every year.  For example, visitor arrivals to Hawaii spike in July every year.  Therefore, it becomes difficult to separate whether an increase in visitors over the summer months is caused by a real trend or simply a result of the seasonal tendency.  UHERO uses a seasonal adjustment procedure to adjust for these seasonal patterns.  

Some data collected by UHERO, such as GDP, CPI, and housing starts, is seasonally adjusted by the reporting agencies.  UHERO performs its own seasonal adjustment for tourism and employment data.

Deflating Nominal Values To Real: Price fluctuations over time—caused by inflation or deflation—distort data that is measured in dollar terms.  Generally, economists are interested in the actual movement of the indicator, independent of price changes.  This allows for clearer comparisons over time.  Therefore, data is adjusted from nominal values (actual dollar values measured at a point in time in terms of its price level) to real values (with the price change effects removed).  UHERO uses the Honolulu CPI to deflate income to real values, and the Construction Cost Index to deflate the value of permits.

Growth Rate Vs Levels: A level is the value of an economic indicator at a point in time.  Levels and changes in levels are useful for comparing similar indicators.  For example, the level of visitor arrivals may be 560,000 in a given month, and the change in the level may be an increase of 30,000 from the previous month.

Growth rates measure how quickly an economic indicator has changed over time.  Economists generally use growth rates to compare entities that are not similar in size.  For example, growth rates for visitor arrivals by county may be more meaningful than the changes, because the visitor markets of each county varies from about one million visitors annually on Kauai, to over four million visitors annually on Oahu.  

Year On Year Change Versus Month To Month: The year on year change computed on UHERO tables represents the change from the same period one year ago.  We do not report month to month changes because not all of the monthly data have been seasonally adjusted. The same is true for growth rates.