THE Index of Trade, presented in the folded chart opposite this page, is designed to give a view of the combined fluctuations of trade, transportation, manufacturing activity, and industrial employment in the United States, month by month since I903. The Index is based upon representative statistics, but certain statistics are not available throughout the entire period and others, being expressed in terms of dollars, do not accurately reflect fluctuations in the physical volume of trade since the war. Consequently, it has been necessary to use somewhat different selections of statistics for the intervals I903-I5,9I5-I9, and I9I9-23, and all statistics expressed in terms of dollars have been excluded since I9I4. The actual overlapping curves for I9I5 and I9I9 are shown on the chart, the initial years of the intervals I9I5-I9 and I9I9-23 being plotted as dotted lines. All the statistical series utilized throughout were adjusted for long-time trend and seasonal influences before averages were taken, so that the resulting index depicts the percentage deviations from normal of the combined figures for trade, transportation, manufacturing activity, and industrial employment. The Index is an average of the corrected figures of diverse statistical series, such as bank clearings outside New York City, the value of imports of merchandise, gross earnings of leading railroads, production of pig iron in tons, and the relative number of wage earners employed in industrial establishments. The justification for combining such diverse series into a single average is twofold: economic and statistical. The economic reason for averaging the series is that together they reflect wholesale and retail transactions, domestic and foreign trade, the volume of transportation of all classes of goods, the activity of railroads, the volume of manufacture, and the purchasing power of wage earners. In other words these particular series are selected from the available data because they are themselves indices of economic conditions in trade, transportation, manufacture, mining, and agriculture, and then they are combined because, taken together, they touch business at many more points than does any one series alone. The statistical reasons for combining the series are: First, the major movements accompanying the ebb and flow of industrial activity of these series are very similar as to the timing of advance and recession2 and, therefore, the average fluctuates in a manner representative of that of each constituent series. Second, the minor irregular variations accompanying strikes, transportation congestion, and the like of the various series are very much moderated when a number of corresponding items are averaged. The average, therefore, may be expected to soften or iron out minor variations and to throw into relief the general ebb and flow of trade. For the period since the outbreak of the war in I9I4, as has been said, we have not included in the Index of Trade statistical series expressed in terms of dollars bank clearings, for instance -although we did include such series previous to I914. The reason for this difference of treatment of the two periods is to be found in the nature of price fluctuations before and after the war: previous to I914 fluctuations in the dollar amount of transactions reflected (approximately, not exactly) corresponding fluctuations in the physical amount of trade, but after I9I4 the violent rise and fall of commodity prices destroyed this correspondence. It is possible to utilize as the material for a continuous index of the physical volume of trade for the last eight years of violent price changes only such series as are expressed in physical units. For the intervals I9I5-I9 and I9I9-23, therefore, only such series are selected for the Index. In the choice of the current group of series still another criterion has been used: since promptness is essential, only those data are utilized which become available for each month by the middle of the following month.

W pi THEN, in i919, the post-war Index Chart IV Vof General Business Conditions was constructed, the following statements were made: In order to interpret current data it was found necessary to estimate the level of prices.... The trend thus found is, frankly, a forecast which will be revised as new data become available. 1 . . . the readjustments from the extraordinary war period continue, it is necessary to repeat the cautionthat the conclusions to which the index points, rest upon a narrower basis than those for pre-war years, and are provisional and subject to revision. 2 The index constructed in July i919 was published in the Harvard Economic Service until May i9, I923. Since that date a revised index has been published currently, instead of the index constructed four years ago. The revised index chart, printed on page I79, is constructed according to the same principles as those used in the chart it displaces. Identical or similar statistical series are utilized; the same sequence of movements obtains; and the same methods of interpretation are applicable. The changes in the base lines, or lines of trend of the constituent series, and the use of units of measurement depending upon post-war fluctuations have resulted in a more convenient arrangement of the curves. The amplitude of the fluctuation for all three revised curves is approximately between -2 and +2 units of standard deviation. This. facilitates comparison of the direction and extent of movements of the curves a comparison which is of primary importance in making forecasts of business conditions.3 The data which have become available since the end of the war make it possible to determine base lines or lines of secular trend of the constituent statistical series with more confidence than was possible in i919. Especially in the cases of commodity prices and money rates, new data and a novel and effective device for eliminating secular trend (and yet preserving the cyclical fluctuations) give us confidence in our results. Further, the influence of income tax paymentsa non-business element which augments bank clearings and bank debits four times a year can now be appraised and allowed for.4 The statistical series utilized in our revised index chart include only bank debits, stock prices, commodity prices, and money rates. Curve A, speculation, is based upon New York bank debitsand industrial stock prices; 6 curve B, business, upon outside bank debits and commodity prices; and curve C, upon commercial paper rates. The constituent curves of each group are given in Chart i. Other loans (chiefly commercial) of reporting member banks of the federal reserve system are presented in that chart with money rates, but this series does not enter the average because it has become available only since i919, and there is not, as yet, sufficient evidence of the persistent similarity of its fluctuations with those of money rates to warrant its inclusion in curve C. Chart 2 shows the three volume-series plotted together and, in the lower section, the three priceand money-rate series. Asummary statement of the data and methods used appears in Table 2, page I93, and the adjusted items may be found in the Supplement for June I923, page i67. The revised index for i900-I4 constructed in the same manner as that for I919-23 is given in

Journal Article Taylor's Principles of Economics Get access A. W. Flux A. W. Flux London Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 38, Issue 1, November 1923, Pages 140–145, https://doi.org/10.2307/1885772 Published: 01 November 1923

THE purpose of the present study is to revise our index of the yield of io railroad bonds by correcting certain defects which have become apparent, so that it will more accurately register the fluctuations of pure long-time interest rates. Table X presents the maturity dates and other data for the bonds included in the old index.' The wide variation in maturity dates, ranging from I927 to 236i, and the fact that the bonds do not at present represent high class investments in railroad securities are obvious reasons for the construction of a new index.