Business Volumes During Periods of Decline and Recovery

QNLY a few statistical series measuring the volume of business are available for a long enough period to make possible satisfactory comparisons of a considerable number of past cycles with the present. Monthly (or at least quarterly) figures are necessary, and most of the prewar statistics relating to business volumes are on an annual basis. For the measurement of physical volumes, a satisfactory series for pigiron output has been developed by Professor Warren M. Persons, going back as far as I877 in quarterly form, and to I884 in monthly form.' For the measurement of dollar volumes there is the series for bank clearings in seven selected cities outside New York City compiled by Doctor Edwin Frickey, and published in this REvIEw for May and August I930. These figures go back, on a monthly basis, to i875. For the postwar period, bank debits of certain selected cities (again excluding New York, and also certain other cities especially affected by speculative transactions) are used to measure the dollar volume of business. Fluctuations in bank debits paralleled very closely those in the clearing figures for the post-war years, and the differences between the two series are probably less than the inaccuracies unavoidable in comparisons of such series over a long interval of time. This discussion will give chief attention to the clearings or debits figures. Such statistics are, of course, only one way of measuring fluctuations in business activity; but they have the advantage of covering a great variety of payments and are expressed in dollars, in which we are accustomed to reckon business transactions. On the following page, there is presented a chart of the adjusted figures for clearings or debits during periods of business decline and recovery.2 The low points of the indexes have been plotted on the middle line of the chart; when more than one low point appears, the last low point falls on the middle line. The period of d cline (except for I875-79) is from the last significant high point of the preceding period of activity to the low point; the period of recovery, from the low point to normal (in most instances). In i888, and again in I89I, when the fluctuations were mostly or entirely above normal, six months of recovery are shown. In I895, normal wa not reached, though closely approached, on the recovery. The pre-war figures are corrected for trend (as well as seasonal movements). Consideration is now being given to the determination of a trend line (or normal) for the past few years. Until such a normal has been satisfactorily ascertained, it is necessary to show I929-30 without correction for trend. The years I92-22 are likewise shown without such correction. The application of trends would tend to increase the amount of declines, and decrease the amount of advances; but over the short periods for which the figures are shown, such periods embracing wide fluctuations, the correction for trend would form a small proportion of the actual movement. For the I922 recovery, the final point is approximately at normal. The curve for debits in I929-30 is placed on the chart to facilitate comparison with the two declines which appear to resemble its movement most closely those of I920-2I and I883-84. The high point is placed on a level with that shown for I883, and twenty months (the duration of the I920-2I decline) from the middle line. This placing of the curve is not to be regarded as an expression of opinion as to the precise extent of possible further decline, or the exact length of time until the curve turns up. The twenty-month interval is the longest shown on the chart except that of the late seventies, which is not regarded as comparable because of the peculiar movement of the clearing figures in these years, attributable at least in part to the