Understanding the difference between M/M and Y/Y data (2024)

Learn how to familiarizeyourself with the time periods in data reports

Economic reportsare given in a number of different formats. Many economic data releases arereported in a month on month format (m/m) and also in a year on year format aswell (y/y). A y/y reading might be represented by the characters, YoY.

Similarly, a m/mreading may also be represented by the format MoM. Regardless of the format ofthe report, they both mean the same thing. In many instances, both m/m and y/yreadings are reported as percentages which allows for easy reporting andcomparisons.

At first, theseconventions can be confusing, so this article is designed to help explain themand point out the key differences between the readings and, most importantly,how they help investors get a handle on the key data.

m/m or MoM data

The m/m readingsare changes in data with respect to the previous month. So, for example, onFriday March, 9 German January factory orders showed a m/m reading of -2.6% vs.a prior reading of +0.9% m/m. This meant that the factory orders for Januarywere down -2.6% on December's figures. As such, this indicated a m/mcontraction. For simplicity, the chart below illustrates this trend:

m/m data and a fewthings to be aware of

One of the mostimportant things to mention is that m/m readings are vulnerable to a number ofvariables. Is there a major holiday in a month? Take Christmas, Thanksgiving,and lunar New Years for example.

When these events occur,they can impact m/m readings. Similarly, one-off events can impact m/mreadings. In the last football World Cup, UK retail sales were positivelyimpacted as England made it through to the Semi-finals of the World Cup.

Many newtelevisions were bought, more food and drink and, as a result, retail salesenjoyed a spike in the report. In a similar way, m/m readings can also beimpacted by natural disasters and other one-of disasters.

Other lessdramatic variables can be things such as days in the month and months whenpeople typically take holidays. All of these types of factors mean that m/mreadings can vary considerably from month to month. This is why m/m figures areoften reported with the more stable y/y figures.

y/y or YoY data

The y/y readingsare changes in data over the course of one year in comparison with the previousyear. So, as an example, in June 2018 Japanese preliminary machine tool ordersreported +11.4% y/y reading vs +14.9% prior y/y reading.

This means thatthe data, at this point in time, shows only a +11.4% y/y increase as opposed tothe previous year's increase of 14.9%. See the chart below.

Calculating y/ydata with a working example

To calculate yearon year growth you perform the following calculation. Let's simplify this witha fictional example by comparing the sales of a watch company. Say a companysells 200 watches in one year and 220 watches in the following year. How do wecalculate the growth rate? You can calculate this as follows:

1. Take away lastyear's sales from the most recent number e.g.

220 - 200 = +20

The company sold20 more watches in the present year

2. Then dividethat number of 20 by the previous sales and multiple by 100 to get apercentage.

20/200 x 100 = 10%

So, in the listedexample we can see that there is a year on year growth rate of +10%.

y/y data and a fewthings to be aware of

If a companyexperiences a period of negative growth over one year then the next period thatreports strong growth may be more an emphasis on the period of weakness than aparticular period of strength.

The worse theprior year, the better the present year will seem. Therefore, it is alwaysprudent to be aware that if a y/y reading is reported that appears very strong,just check what has happened in the previous year.

However, y/yanalysis does generally help to smooth out the inherent volatility that you getthrough reporting m/m data. This is probably the biggest advantage of y/y data;all the ups and downs of m/m reporting (one-of events, seasonality, holidays etc.)are balanced out allowing for simpler comparisons.

A final word onQ/Q data

While covering m/mand y/y data it is also worth covering q/q data. This stands forquarter-over-quarter and these figures compare the previous financial quarter.Each year is broken down into four quarters and the first quarter of the yearis referred to as Q1.

There are a numberof reports that are broken down into m/m and y/y readings. However, some veryimportant indicators, like Gross Domestic Product (GDP) are broken down intoquarters. In terms of volatility q/q data will be more volatile than y/yfigures, yet less volatile than m/m readings.

So, there you haveit, a quick rundown on understanding the difference between m/m readings andy/y readings.

This article was submittedby the ADSS Research Team.