INDEX OF BUSINESS ACTIVITY
The Index of American Business Activity of the Cleveland Trust Company was originated in 1931. It runs by months from 1790 to date. The bank has published long diagrams showing the monthly changes in business activity and in wholesale prices over this period and these diagrams carry the data of the index. They have been distributed to persons who have requested copies of them, and each year they have been brought up to date and republished. The data of the index are also available in Section D of Basic Statistics published by the Standard Statistics Company. The bank has published and distributed 13 editions of the long diagrams of business activity since 1790 and this total circulation has been 193,500. The following paragraphs give a description of the index which is printed along the lower part of each of these long diagrams.
The index is composed of one set of 10 series of annual data from 1790 to 1855, and of another set of 10 series of annual data from 1855 to 1901. The fluctuations above and below normal were computed for each series separately, and the 10 were then combined in one. Normal values for each series were means between one set of lines running from one prosperity peak to the next, and another similar set of lines running from each depression bottom to the next. The annual figures from 1901 to 1919 are those of the Thomas index of manufacturing production with mineral production added, and from 1919 to date the monthly figures of the Federal Reserve (Thomas) index of industrial production have been used. All the data were reduced to a per capita basis.
The computations of the fluctuations of each of the 10 series constituting the index from 1855 to 1901 were carried through to include 1930, and the coefficient of correlation between each of them and the production series running from 1901 through 1930 was computed. Their deviations were then multiplied through by constants so as to equate their amplitudes of cyclical fluctuation. Each of the 10 series was then given a weight based on its degree of correlation with the production series, and with these weightings they were combined into a single index. The 10 series with those weights are pig iron consumption 15, railroad freight ton miles 15, cotton consumption 14, canal freight ( New York and Sault