Moving averages and the trend
What this lesson covers
- Average one full cycle at a time.
- Even cycles need centring.
- The result is the trend.
Centring
- A 4-point average sits between two quarters.
- Average two neighbouring values to centre it on a quarter.
Kōwhai Café
- Each 4-point average uses four quarters in a row.
| Quarter | Sales ($000) | 4-point average | Centred trend |
|---|---|---|---|
| Y1 Q1 | 40 | ||
| Y1 Q2 | 60 | 55 | |
| Y1 Q3 | 50 | 57 | 56 |
| Y1 Q4 | 70 | 59 | 58 |
| Y2 Q1 | 48 | 61 | 60 |
| Y2 Q2 | 68 | 63 | 62 |
| Y2 Q3 | 58 | ||
| Y2 Q4 | 78 |
One line in full
- The centred value for Y1 Q3.
- (40 + 60 + 50 + 70) ÷ 4 = 55
- (60 + 50 + 70 + 48) ÷ 4 = 57
- (55 + 57) ÷ 2 = 56
Common mistakes
- Using a 3-point average on quarterly data.Use a full cycle of four.
- Plotting the 4-point average on a quarter.It must be centred first.
Your turn
- 1. Data: 20, 30, 24, 34, 24. Find the two 4-point averages.
- 2. Find the centred value at the third quarter.
Show answer
1. 27 and 28 2. 27.5
What to take away
- Average a full cycle to remove the season.
- Centre it before using it.
More in AS 91580
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