Predicting Total Business Sales using Time Series Analysis

Abstract

Economic activity undergoes 4 phases (expansion, peak, contraction, trough/recession) in which recession is a period of lowest activity and peak indicates the highest activity. Total Business sales is one of the key factors that influence the economic activity of a country. Total sales or gross sales is the grand total of all sales revenues a business generates from normal activities. The frequency of time series sales data can be monthly, quarterly, or annually. Prediction of business sales is highly important as it determines various factors in the market including Gross Domestic Product (GDP). The algorithms or models required for prediction of time series data are different from other machine learning models. Since sales is affected by time, a time series data should be stationary. Only when the data is stationarized, we can apply the algorithms on them. In this paper, monthly sales data is collected and predictions are done using moving average, simple exponential smoothing, Holt’s model, ARIMA, and SARIMAX. Root Mean Square(RMS) is the accuracy metric of time series models and lower RMS indicates higher accuracy. In this paper, a lower value of RMS is obtained for the SARIMAX model.