“People buy weeks in advance leading up to holidays: June kicks off vacation time when people consume more and the 4th is the largest beer consumption holiday. January is the great letdown in sales after the winter holidays, when resolutions take hold, and dry January has now become a big deal.” —Jerry M. Green Jr., CSW, Cicerone Certified Beer Server
Drinking an alcoholic beverage over the December holidays is a common tradition. A less-common, but growing tradition is to abstain the following month in dry January.
These two consumption patterns are supposed to happen regularly at the same time of the year each year, so we want to look at data that are not adjusted for seasonality. Usually, we want seasonally adjusted data to understand what’s more or less than normal compared with other times in the year. But today it’s all about the season.
The FRED graph above tracks sales of alcoholic beverages by wholesalers. It certainly looks like there’s a repeating pattern: a regular spike in December and a corresponding downturn in January. In fact, January habitually has the most-pronounced downturn, perhaps because end-of-year sales start in November, continue through December, and peter out in January. There’s also a spike around June, ahead of the July 4 holiday.
Are these regular fluctuations in alcoholic beverage sales reflected in their prices? Our second graph tracks the relevant sub-category in the consumer price index, again, without any seasonal adjustment.
If you zoom-in on the monthly values, you can see December inflation rates tend to be low and January rates tend to be high. Exactly the opposite of what’s expected from the simple demand and supply analysis that says prices should be higher when demand is higher—in December. It may be the particularly high supply during this month that leads to increased competition and, therefore, lower prices.
How these graphs were created: For the first graph, search FRED for “wholesale alcohol” and be careful to take the series that is not adjusted for seasonality. For the second graph, search for “CPI alcohol,” being careful again. Click the “Edit Graph” button and for the units select “percent change.” Note: You don’t want “percent change from preceding year,” as this would lose any seasonal effects.
Suggested by George Fortier and Christian Zimmermann.
