Year on year

A rate of change measured between a period and the identical period one year before it, expressed as a percentage. Most headline economic releases are reported this way, including the consumer price index and national output. It sits alongside two other conventions that answer different questions: a month on month or quarter on quarter figure measures against the period immediately before, and an annualised quarterly figure restates one quarter as though its pace continued for a full year.

Comparing a month with the same month a year earlier is what makes the measure useful, because anything that repeats on an annual cycle appears in both readings and cancels out of the difference. That matters most where the seasonal pattern is awkward to adjust for statistically, such as a holiday that moves through the calendar from one year to the next. The cost of that property is speed: a year on year rate contains the whole of the previous twelve months of change, so it describes an average of the year rather than the condition of the latest month, and it turns direction well after the monthly series does.

The trip is the base effect. Because the comparison has two ends, a year on year rate moves whenever either of them moves, so a reading can fall sharply purely because the month it is measured against was unusually high, with nothing at all unusual happening in the current month. Revisions to the earlier figure change today's rate for the same reason. Practitioners disagree about which measure deserves more weight when the two diverge: the year on year rate is stable and slow, an annualised three month or six month rate turns faster but is noisier and more heavily revised, and there is no settled convention about which one a central bank is reading.