After dividing actual by the seasonal index, you get , which reveals the true trend and cycle.
[ \textActual = \textTrend \times \textSeasonal \times \textIrregular ] seasonal index
(We’ll skip full arithmetic for brevity – but you’d smooth the data.) After dividing actual by the seasonal index, you
| Year | Q1 | Q2 | Q3 | Q4 | |------|----|----|----|----| | 2022 | 80 | 120 | 100 | 140 | | 2023 | 90 | 130 | 110 | 150 | Step 4: Adjust So That Average = 1
This ratio represents the combined effect of seasonality and random noise. Group all ratios by month (or quarter, etc.) and calculate the median or mean (median is less sensitive to outliers). Step 4: Adjust So That Average = 1 If the average of your raw seasonal indices is not exactly 1, adjust them: