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DEPARTMENT OF COMMERCE
HERBERT HOOVER, 8BcaJlrilY
Y,5.BUREAU OF THE CENSUS.
W. M. STBuilT, DirM«
HOW TO USE
CURRENT BUSINESS
STATISTICS
PREPARED
BY
MORTIMER B. LANE
Editor, Suri,ey of Cu"ent Buaineaa
PRICE 15 CENTS
Sold only by the Superintendent of Documents, U. S. Government Printing Office
.
Washington, D. C.
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON
1928
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CONTENTS
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Paae
Letter of transmittal. ••• - ••••••••.•. ___ .•.•••• __ ._---·_ .• ___ ·-- - -____
Foreward-·----------·---·-·---·--··--··-----·-------------·----··-
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Chapter 1.-TBE PROBLEM AND ITS SOLUTION
Paae
Summary______________________
1 Controlling the business cycle____
Results of use of statistics ___ .___
Development of statistics________
Need for census data._ •• __ ._ ••• _
Early current statistics _________ •
Statistics and the World War_ _ _ _
Postwar developments _______ •• __
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Results of statistical control.. •• _.
Budgeting _____________________
4
General effects of budgeting______
Business men cite importance· of
statistics•• __ ••• _••• _••• ___ •• _
Difficulties in forecasting________
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Claapter ll.-BOW TBE nGURES ARE USED
. Summary ______________________ Pase
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' Textiles_.---------------------
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Automobiles and accessories.•• ___
Paper and printing______________
Publishing _____________________
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> Metals and machinery____ ____ ___ 19
' Coal and oil____________________ 21
Leather _______________________ 22
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Real estate and construction ____ • 25
Engineering.• _______ • ____ ._ •• __ 26
Lumber and clay products._ ••• _. 26
Chemicals ________________ • __ ._ 27
Food products•••• _____ • _. _. __ • _ 28
Claap&er
m-eow
Public utilities__________________
Transportation_________________
Advertising____________________
Accounting____________________
Banking_______________________
Insurance ______________________
Law __________________________
Pap
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Trade
and commercial organiza- 33
tions ________________________
Education_____________________ 33
Government ___________________ 3t
Miscellaneous___ _______________ 35
TO INTBBPRBT TBB FIGURES
Summary ______________________ Paae
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Statistics of one's own industry__
Production____ _____________
Capacity__________________
Employment _______________
Shipments _________________
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Consumption of materials____
Material stock______________
Finished stock_____________
Orders accepted____________
Cancellations__ .____________
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Pa..
Statistics of one's own industryContinued.
Unshipped orders __ • _______ •
Inquiries ______ - __ - _- _______
Salesmen's calls ___ • __ - _ __ ___
Prices _____________________
Imports ___________________
Exports ___________________
Statistics of material markets____
Statistics of distributive markets__
General business statistics____
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IV
CONTENTS
Chapter IV.-BOW TO COLLECT CURRENT STATISTICS
Summary______________________
Pap
What to gather_________________
Period covered_________________
Preparing the form______________
Collecting the data______________
Compilation___________ _________
Price statistics__________________
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Publicity_______________________ 80
Mode of presentation____ ________ 82
Graphic charts_________________ 83
Improving the reports___________ 86
Joint ,collection with Census
Bureau _________________ -·- - - - 87
Meeting objections to reporting___ 88
DIAGRAMS
Pa&11
1. Average seasonal movement compared with actual for one year________
2. Average business, all firms compared with total for own
3. Production ratio to capacity: Average for all firms compared with own
firm______________________________________________________________
4. Productio11 compared with shipments--~-----------------------------5. Raw-material ratio to product: Average for all firms compared with
own firm_________________________________________________________
6. Composite indexes of production, stocks, and unfilled orders___________
7. Principal business indicators_______________________________________
firm________
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•
LETTER OF TRANSMITTAL
DEPARTMENT OF CoMMERCE,
BUREAU OF THE CENSUS,
W ashi7+gton, February 1, 1~8.
Sm: There is transmitted herewith a bulletin on the use of current
business statistics prepared by Mortimer B. Lane, editor of the
Survey of Current Business. This booklet has been compiled in
response to the demand from business executives for a handbook
describing how business men ca'n make the best use of ourrent
statistics.
The use of current business statistics is so widespread and varied
that a descri~tion of methods must draw its materials from many
sources. While a large number of the instances mentioned in this
booklet have been gathered at different times from individual firms
and trade associations, the bulk of them were secured through a
questionnaire to readers of the Survey of Current Business and from
a compendium o-f the Chamber of Commerce of the United States.
The manuscript has been read and criticized by the following
representative business men and economists, whose cooperation is
gratefully acknowledged:
Julius H. Barnes, former president, Chamber of Commerce of the United
States.
Melvin T. ('.,opeland, professor of marketing, Harvard Gradllate School of
Business Administration.
Ernest F . Du Brul, general manager, National Machine Tool Builders'
Association.
F. M. Felker, managing director, Associated Business Papers.
L. S. Horner, president, Niles-Bement-Pond Co.
Virgil Jordan, economist, N,1tional Industrial Conference Board.
Jurgen Kuczynski, statistician, American Federation of Labor.
E . E. Lincoln, statistician, International Telephone & Telegraph Co.
E. W. McCullough, manager, department of manufacture, Chamber of
Commerce of the United States.
Wesley C. Mitchell, director, National Bureau of Economic Research
George C. Paterson, George H. McFadden & Bro.
Herbert E. Peabody, director, National Textile Research Office.
Robert R. Updegraff, associate editor, A. W. Shaw Co.
Theodore F. Whitmarsh, president, F. H . Leggett & Co.
Clarence M . Woolley, chairman of the board, American Radiator Co.
Paul Wooton, McGraw-HUl Co.
Acknowledgment is also made to the many trade associations and
other organizations which have supplied instances of the use of
business statistics.
Respectfully,
WILLIAM M. STEUART,
Director of the Oensus.
Hon. HERBERT HooVER,
Se<J'retary of O011'llme1'Ce.
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FOREWORD
The past five years have been remarkable for generally sustained
prosperity, without the violent fluctuations which have characterized
most of the previous periods of great activity. In large measure
this has been due to greater knowledge of the current facts of business
and a growing experience in utilizing this knowledge.
The small business man particularly has been benefited through
the use of current statistics, fathered through the collective action
of each industry. In this way he has at his command the resources
and knowledge of business facts which alone he could not hope to
secure. This knowledge has helped him to stabilize his business in
spite of the· intense competition and the lowering price levels of the
past few years.
Mr. Lane has assembled a mass of experience of business men in
guiding their companies with profit by statistical knowledge instead
of guesswork. This volume quotes 283 instances of the sort. The
Department of Commerce in giving wider currency to this experience
hopes to contribute to the further stabilization of the business
community.
HERBERT HOOVER ••
VI
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I
THE PROBLEM AND ITS SOLUTION
SUKllilY.-The busineu man must have information on the trend of bual•
ne11 conditions in order to base his pollcle■ on fact■ inatead of gueuwork.
Current bu■ines■ 1tati1tic1 have provided these fact■ and have enabled Iarce
saving■ to be made by many companies.
Statistics are a natural development of the growth of business and of the need
for greater knowledge of all phases of our national life. Current figures, begun
in a small way before the World War, increased ln volume to show industrial
condition■ for war work. '.a.fter the experiences of 1920 and 19111, trade statistic■ grew at a still greater rate to provide facts to the various industries.
Business statistic■ have helped to mitigate the fiuctuations in busine11, commonly termed the business cycle. Budgeting, based on statistics, has enabled
firms to stabillze their business and secure greater profits. Business leaders
state that large benefits are derived from current statistics.
Predictions from statistics are not always right, because of inaccurate or
incomplete data, inadequate previous experience or lack of knowledge of the
industry, but interpretations are becoming better in the light of more experience.
Statiltics are a■ vital to business as is the compass to the mariner.
"How is business? " This is the question that most business men
have on the tips of their tongues, for on its answer depends whether
they will raise or lower prices, increase or decrease production,
purchase far ahead or only for current needs, expand or liquidate
stocks, buy or sell equipment, increase or decrease advertising, as
well as many other policies of prime importance in the conduct of
their business. The very recurrence of this question, " How is business? "-in the office or in the factory, at lunch or at the club, on
the train or on the street corner-testifies to its importance in the
conduct of every business as well as to the difficulty of securing a
correct answer.
Until recently the average business man, in his quest for information as to the trend of conditions, sought out other business men
in order to check up on his own opinions and the showing of his company, for he realized that the figures of his own company were not
necessarily representative of general business trends, but that his
company would be vitally affected by these trends. But even a few
opinions from outsiders did not solve the problem; they were fo1med
in just the same manner and subject to the same limit!l,tions, and,
besides, they were often contradictory. While such faint straws
might have been acceptable, in the absence of better data, in past
days where business enjoyed comparatively liberal margins of profit,
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HOW TO USE CURRENT BUSINESS STATISTICS
they have proved utterly unsatisfactory in the present day of keen
competition and small-profit margins.
The business world now has a means for providing an answer to
. this question, so that the executive may obtain the precise facts
instead of relying on mere opinions. The solution was foun;i in the
collection and compilation of actual current facts, weekly or monthly,
occasionally even daily, from representative concerns in each important industry or trade,- to form a composite picture of the business
situation therein. With the..,c:e statistics covering the principal industries at his command, the business executive of to-day can answer
the question" How is business¥" in a simple yet correct way. Here
are a few instances of such answers and of the resultant concrete
savings through the use of current statistics:
RESULTS OF USE OF-STATISTICS
A building-supply company, in negotiating for its yearly contract
for cement in 1924, was quoted an increased price by a salesman
who stated that the supply of cement was low and urged that a quick
purchase be made before a shortage developed with spring building
operations. By studying the business statistics as presented in the
Survey of Current Business, the purchasing agent of this company
discovered that cement stocks were 1,500,000 barrels higher than a
year before, and that prices seemed to be on the decline. He furthermore ascertained that with a surplus of over 300,000 idle cars at the
end of 1923, as against a shortage of 68,000 cars the year before, the
railroads could easily deliver his goods promptly should he suddenly
require a larger supply later on. These facts enabled the company
to save 30 cent.a a barrel on a large order of cement, and, through
such study of statistics, it has saved thousands of dollars annually,
according to the purchasing agent.
A sugar-refining company regularly studies the data on import.a,
exports, and meltings of sugar to determine the probable consumption
and to adjust its purchase and sales policies thereto. By August of
1925 ·these statistics had so definitely indicated the trend for that
year that the company was enabled to forecast the unprecedented
consumption of sugar while the year was little more than half over,
so as to take full advantage of its opportunities for increased sales.
A firm of leather exporters formerly had to spend a great deal
of time learning about the leather market through interviews, etc.
Now, they can see the situation at a glance through the leather
statistics as presented in the Survey of Current Business. The results have included not only a great saving of time but, even more
important, savings from 2 to 4 cents per foot on leather transactions
during the past five years through actual knowledge of market
conditions.
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THE PBOBLBM AND I'l'8 SOL-UTI01'
· The various current st.atistics pertaining to the agricultural situation, including business statistics as well as those relating purely
to agriculture, are analyzed regularly by the Kansas State Agricultural College for the benefit of the farmers. This organization
reports that farmers, acting on this information, sold their hogs in
September, 1924, at from $2 to $3 per 100 pounds more than they
would have received had they waited until November, as was the
usual custom. Three wheat farmers are reported by this college
to have made gains of 47, 50, and 60 cents per bushel, respectively,
in their sales of wheat following the sales policies based on statistical
analyses.
While these agricultural results may be somewhat exceptional as
to the amount of profit realized from statisti<:_al information, instances of definite dollars-and-cents savings through the utilization
of business data are available from all kinds of businesses. Illustrations of the use of such statistics, taken from most of the important
industries, are given in detail in Chapter II.
DEVELOPMENT OF STATISTICS
The rise of statistics from small beginnings to a position o:f commanding importance as the "right hand of every modern business,"
as an industrial executive recently expressed it, has been a definite
response to the growing needs of business.
When business was small and orders were given by word of mouth,
the proprietor knew every little detail of his business; records and
statistics were unnecessary. As business expanded, as specialization
was introduced, and as markets at a greater distance were reached, the
proprietor found he had to keep memoranda of his orders and of hi.s
accounts, as well as of price lists. Next he employed a bookkeeper,
whose sole duty was to keep statistics showing the firm's relations
with others. Still later the accountant was called in to prepare
periodically a balance sheet and income account, to show the proprietor the exact standing of the firm or corporation. Finally, in the
growth of business and the attainment of national distribution bv a
large proportion of our products, there came the need for knowledge
of national business trends through a combination of statistics of
concerns in related lines by a central collection agency, such as the
trade association.
The business executive to-day can not have either in his mind or
in the possession of his own concern all the facts necessary for intelligent business judgment. He must not only know how his firm is
doing but must compare his branch of industry with industry as a
whole and must know the buying conditions of his customers as well
as the condition of his material markets. These data he can not get
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HOW TO USE CURRENT BUSINESS STATISTICS
within the confines of his own organization, for they cari be gathered
only by agencies representing or collecting figures for an entire
industry.
NEED FOR CENSUS DATA
The result of this need has been the growth of statistical services.
The United States has the reputation abroad of recording statistically almost every feature of national life from its beginnings, and
there is a good measure of truth in this belief. Statistics of our
population were collected almost from the founding of the Nation
through a regular census; and later manufacturing, agriculture, and
other phases of business and industrial life were added to the census
returns as these features developed into important parts of our
economic being. These statistics were all developed for the general
purpose of knowing how our country was progressing, and thus preparing a foundation of facts upon which both public and private
business policies might be based. Population statistics were inaugurated for the specific purpose of apportioning congressional representation, while from time to time they have served other specific
purposes, such as the setting of immigration quotas; and they are
used extensively by business firms in market research, setting sales
quotas, etc.
The value of census data may well be shown by comparing the
exact knowledge which we possess on manufacturing and agriculture,
as a result of these figures, with the almost complete lack of knowledge of the facts of distribution, such as wholesale and retail trade,
of which no comprehensive census has been taken. The demand
for these latter figures has become so great, however, that Congress
is considering a census of distribution to be taken in 1930.
Valuable as the census returns are in showing a complete picture
of the more important phases of our economic life at certain periods
and the growth which has been made between these periods, they
lack because of their completeness the element of timeliness. A
complete census on the scale of the present decennial censuses can
not be undertaken more than once in several years. The demand for
up-to-date facts, however, has resulted, for instance, in the change
of the census of manufactures, from a 10-year to 5-year interval
and later to an interval of only 2 years.
To bridge the gap between census reports and to give business men
the data required for current business judgments, a system of intermediate reports has been developed, covering some items yearly,
others semiannually or quarterly, but most of them monthly or
weekly. Such a system of current statistics shows the immediate
changes in the economic picture which business executives need to
know in order to plan intelligently for the future. Each series of
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THE PROBLEM AND ITS SOLUTION
current data can be related to the census of manufactures to find out
how representative the figures are and thus to what extent they are
true indicators of the trend of that busin~ or industry. Only these
current data are treated in this booklet, for the census data and other
figures collected annually or less frequently are used in other ways,
chiefly in market research.
EARLY CURRENT STATISTICS
Current business statistics are not new. Price data, for instance,
may be found in commercial papers extending back about a century.
Import and export data of necessity have had to be compiled by the
Government from its early years. Commodity exchanges were also
early entrants in this field. Dealings in such staples as cotton, grains,
and coffee require a fund of accurate information on weather, crops,
receipts, exports, stocks, and so on. Through the exchanges speedy
and complete reports were developed many years ago in these commodities. Most of the early private figures, however, were financial
in character. Few industrial data, prior to the twentieth century,
were available month by month, and such figures as were gathered
were compiled mainly by financial papers or liy the Government in
connection with its obvious needs.
During the first decade of the twentieth century statistics on industrial lines began to be collected. Trade papers collected some of these,
while trade associations also came into the field, at first largely in:
connection with data on credits and general financial conditions.
But about 1910 or shortly thereafter many monthly reports on their
respective industries were inaugurated by various trade associationg,
such as the data on wool-machinery activity, gathered by the National
Association of Wool Manufacturers; on fabricated structural-steel
orders, gathered by the Bridge Builders and Structural Society
(both of which were later collected by the Government) ; on oak
flooring, gathered by the Oak Flooring Manufacturers Association;
and on iron ore, by the Lake Superior Iron Ore Association. The
Government was also brought into the field of collecting monthly
data on articles of prime importance, such as cotton, through the
Bureau of the Census, and coal, through the Division of Mineral
Statistics, originally of the Geological Survey, but recently transferred to the Bureau of Mines of the Department of Commerce.
STATISTICS AND THE WORLD WAR
It remained for the outbreak of the World War to give a real
impetus to the collection of current statistics. Shortly after the war
began there occurred a period of unemployment. Many States, such
as New York, Wisconsin, and Massachusetts, started in 1914 and 1915
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HOW TO USE CURRENT BUSINESS STATISTICS
the collection of monthly statistics on employment to show the true
condition of affairs so that proper plans could be made for the relief
of the unemployed. Then, with the commencement of the huge supply.
program of the Allies in 1915 and 1916 and the rise in prices which
it brought all along the line, came the clamor against the high cost of
living. Various States, the Federal Government, and private organizations began the collection of retail-living costs, based on comparison
with pre-war figures.
. W,ith the entrance of the United States into the great conflict in
1917 came a further step in the development of current statistics~
Our huge resources of materials and supplies were of prime importance in the conflict. The business men drafted by the Government
as advisors on their special industries had to know exactly what
resources were at hand and what could be produced in a given t,ime
in order to meet the war requirements. Immediately current statistics of many kinds were set up, under Government direction, covering
the more staple commodities, such as petroleum, cement, leather,
and vegetable oils. In other cases trade associations were called
upon for figures on their ,industries. Business men, however, were
the ruling spirits in 'this demand for facts upon which to conduct
the war. The resµlt of this great increase in statistical activities
was a knowledge of current conditions ,in various industries never
previously possessed, which proved a factor of the utmost importance in the smooth movement of supplies abroad. Some have even
been bold enough to claim that statistics won the war. At any
event, statistics did their share. They provided the only means of
knowing accurately national conditions of supply and demand in
each industry.
POSTWAR DEVELOPMENTS
After the armistice, industry and commerce longed to get on a
peace basis but found that postwar conditions were as different
from pre-war as they were from war cond,itions. The war had
raised some industries, such. as steel and copper, to undreamed-of
heights. It had greatly depressed other industries, such as building construction and musical instruments, holding them temporarily
as nonessentials. Peace found the war-inflated industries with large
stocks on hand and no market, while the deflated industries had no
immediate facilities for supplying a huge increase in demand which
had been artific,ially dammed up during the conflict.
In this state of unrest the discontinuance of many of the war-time
statistical activities took away the foundations upon which the business men had become accustomed to base their plans for the proper
conduct of business during the war. The new demand for goods
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THE PROBLEM AND ITS SOLUTION
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was unknown, supply statistics in general were unavailable, and
prices bore no relation to the pre-war scale. Business had to take·
snap judgment instead of relying upon proved facts. This was an
important factor in the vicissitudes of the first three years after the
war, comprising a mild depression in the first quarter of 1919, a
sudden boom in the latter part of the year and the early months of
1920, and a collapse and depre$ion extending through 1921..
The need ·for current business facts w.as manifested to an unusual
degree during this period and resulted in the inauguration of statistical data. in many lines of industry immediately following the war,
chiefly through trade associations. Government agencies also started
the collection of data on many lines at the request of the industries
covered. Since the end of the war. there has been a great increase
each year in the.number of statistical inquiries undertaken, as industry after industry has seen the need for prompt facts on its own
business and the success with which other industries have used statistical data to solve their business problems. More than half of the
items now included in the Survey of Current Business have been
developed since the beginning of 1919.
CONTROLLING THE BUSINESS CYCLE
Booms and slumps occurred regularly before 1920, usually in conjunction with financial panics. The Federal reserve system has
proved a great stabilizer of the financial fabric, and the business
fabric seems to have responded equally well to control by statistical
facts.
In past experience the boom has usually resulted from an overdoing of good business. When prices started to rise, many people
saw the chance to make profits by buying more goods to resell on the
rise. The result was an oversupply of goods, and as soon as this
was realized and demand stopped, prices immediately took a tumble,
production ceased, unemployment occurred, and therefore consumer
buying decreased even further. When the minimum demand finally
exhausted stocks on hand, production started to increase, more labor
was employed, consumption increased, and the prosperity part of
the cycle started, usually to culminate later in another boom.
Many studies upon this problem have led to a clear definition of
the succession of events and to methods of elimination of the tremendous losses in this overturning of business. The reader is referred particularly to the Report of the Committee on Business
Cycles and Unemployment of the President's Conference on
Unemployment.
Two factors stand out prominently in the study of this question m
. r~?ent years. The first is the common understanding of the approxi-
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HOW TO USE CURRENT BUSINESS STATISTICS
mate causes of the cycle. From this knowledge the correct remedy
when booms are seen approaching is not further expansion in the
hope of some added profit, but contraction and liquidation of stocks so
as to be ready for the approaching storm instead of being caught in
losses greater than all previous profits.
· The second factor is the recognition that the signs of the trend of
the cycle can best be seen from current business statistics. In 1920,
as noted above, few series of statistical data were available. This
condition led to the establishment, by Secretary Hoover, of the
Survey of Current Business in the Department of Commerce in 1921,
to collect all available statistics under one cover for the guidance of
business executives and to provide a medium for the extension of
these facilities. The public now has the benefit through the Survey
of Current Business of over 1,500 separate indicators of business
trends, and the number is continually increasing. It also receives
more specialized information on agriculture through Crops and
Markets, published by the Department of Agriculture, on labor statistics through the Monthly Labor Review, published by the Depart•
ment of Labor, and on general financial and business data in the
Federal Reserve Bulletin, published by the Federal Reserve Board.
The monthly bulletins of the Federal reserve banks and the publica.tions of the individual trade associations furnish additional information. Technical periodicals and business newspapers not only publish these Government and association figures extensively but often
compile data of their own. Furthermore, these data are extensively
commented upon and forecast from by a host of private business
services and house organs of banks. Not only does the reader have
more figures and in more available form than ever before, but the
data are usually more representative than in the past, better compiled
and better explained.
This knowledge of the business cycle and of statistical data has
been used by business men to accomplish great savings for their own
companies. A brick manufacturer, for instance, saw from the charts
of his association's statistics that overproduction took place in this
industry when ordeni and shipments slackened, thus increasing stocks.
On the other hand, the manufacturers underproduced when orders
increased by filling orders from stocks. The result was an accumulation of stocks produced at relatively high cost which were a financial
strain on idle capital and eventually resulted in liquidation at lower
prices. This firm, instead of stocking while prices were falling,
stocked ahead as soon as demand appeared to increase, which saved
them from carrying idle stocks over depressions and enabled them to
nroduce stocks at the lowest costs when better workmen were avail~ble. Through this method and slight price cuts whenever total
stocks in the industry mounted, this manufacturer's business was
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THE PROBLEM: AND ITS SOLUTION
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always in liquid condition, gaining interest earnings from investments
and profits from low-cost stocks, thus making his capital work both
ways. Moreover, when stocks were liquidated and securities purchased, the latter were usually at a low price and interest rates high,
while iii -starting to stock goods when .business was beginning to
advance, securities would be high owing to low interest rates, and a
profit could be obtained in liquidating them to accumula~ stocks.
RESULTS OF STATISTICAL CONTROL
It is too early to be sure that this increasing use of business statistics has actually succeeded in avoiding booms and slumps, since
hardly six years have passed since the last depression. However,
the statistical data on the intervening period indicate an absence of
large major swings. The upward tendency in orders, production, and
prices beginning in 1922 was abruptly halted in the spring of 1923,
when it was feared that excesses might occur such as took place in
1920. With signs pointing toward another inflation period, buildin~
contracts particularly were laid aside, and instead of a peak boom
and possible calamity thereafter, there resulted a very slight recession
in activity. After a moderate increase in the following winter, business underwent a short period of stagnation awaiting the election
results of 1924, but in 1925 and 1926 the productive activity of the
country, though the largest on record, was the steadiest noted in
modern times. The year 1926 showed an increase over 1925 in most
lines, but the curve was still tending toward a straight line month
by month rather than one zigzagged with peaks and valleys. A decline in productive activity at the end of 1926 was followed by a
recovery to previous levels a few months later and by a recession in
the latter part of 1927, in which the automobile industry was chiefly
·affected.
A close observer of business trends, Dr. Lewis H. Haney, director
of the bureau of business research of New York University, believes
that the business cycle is gradually being brought under control,
though pointing out that the evidence rests on only a short period of
time. This control, he states, is found to be exercised through (1)
statistical information which has reduced ignorance concerning true
conditions of business, (2) hand-to-mouth buying, which keeps in~entories low, production on an even keel and a closer balance between output and retail sales, (3) prompt curtailment of production
when in excess of consumer demand, (4) financial control checking
speculation, (5) recognition of consumer demand and high living
standards through reluctance to ·force wage reductions, and ( 6) adaptation of goods to consumer demand through industrial and market
research. (See Printers' Ink, June 10, 1926.)
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HOW TO USE CURRENT BUSINESS STATISTICS
It is interesting to note that the above methods are closely allied
to the recommendations of the Committee on Business Cycles and Unemployment, which were (1) the collection of fundamental business
data, (2) larger Government statistical service, (3) research, (4)
control of credit expansion by banks, ( 5) control of. inflation by
Federal reserve system, (6) control of business expansion, (7) control
of construction, (8) public utilities control, (9) unemployment
reserve funds, and (10) unemployment bureaus.
BUDGETING
Besides the mere analysis of statistics at different times, many
companies put these figures to work in a comprehensive plan for the
conduct of their business, which is usually made at the beginning of
the year in considerable detail and subject to change later if
conditions warrant.
A large concern manufacturing pipes and fittings keeps forecasting charts for each class of goods which it makes. These forecasters
are each composed of four charts--One shows the gross orders received; the second, the normal seasonal conditions; the third, an
elimination of the seasonal and normal growth, together with a
correlating index; and the fourth, the actual orders as a percentage
those received during the preceding year. The correlating index in
the third chart is composed of the statistics of a number of industries
properly weighted, which are shown by experience to have the closest
advance correlation to the particular product for which the chart is
.made. Each element of this correlating line may be looked to for an
individual forecast, and the combined forecast is used to budget the
probable sales and production of that line for the coming year by
quarters. (The methods in detail are presented in The Economic
Control of Inventory by Joseph H. Barber.) Comparison of the
period since the establishment of budgetary control by this company
with previous periods shows (1) larger average production by the
company, although the users of its products were less active; (2) a
decrease in average employment of 30 per cent, due partly to other
economies; (3) more regular employment; (4) reduced labor turnover; (5) more prompt delivery of orders; (6) profits for 1924,
attributed entirely to the system of budgetary control through its
forecast of the declines and increases in orders.
A large corporation in the automobile field has a definite plan of
financial control through a forecasting program based upon growth,
seasonal variation, condition of general business, and competition.
This estimate of a year's business takes into account not only the
production and price of its products but also such factors as the
earnings on investment and the amount of capital required to handle
of
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THE
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PROBLEM AND ITS- SOLUTION
the business. Production schedules are based upon plant capacity,.
proper accumulation of stocks, and maintenance of reasonably steady
rates of operation. After the year's program is made it is adjusted
from time to time as statistics of retail sales of automobiles indicatethat the trend is above or below the original forecast. Purchases
and ~aterial stocks are apportioned in accordance with the budgeted
production, thus insuring a minimum yet essential stock of materials
on hand. (Further details are presented in the paper by Albert ·
Bradley, assistant treasurer, General Motors Corporation, before
the American Management Association, March, 1926.) This budgetary control through statistics resulted in 1925 in an improvement
of 50 per cent in productive inventory turnover (i. e., total inventory
less finished product), greater regularity in employment, 25 per cent
better turnover of cars in dealers' hands than in any previous year,.
and a larger volume of business with a smaller profit margin per
car without impairing the return on capital invested.
An important metropolitan department store prepares a merchandise budget three months before both the spring and the fall
seasons. The sales of each department are estimated for the coming
season on the basis of its sales for the past two yea rs, projected
according to the trend and modified by general economic conditions
as shown through current statistics as well as by style changes and
other extraneous conditions. On the basis of this estimate of sales
each department's stocks are planned, and its expenses and mark-ons
are determined. The estimates are checked up weekly as the season
progresses, and results have usually come within 1 per cent of the
estimates. Once the merchandise budget has been determined a
financial budget is planned, indicating the estimated income from
sales each week and the estimated expenditures on purchases and
salaries. Similarly, an operating budget breaks down the weekly
estimated expenditures into factors and departments. As a result
the store's operations are stabilized through planning in advance.
(Data furnished by Mr. Ernest Katz, controller of R.H. Macy & Co.
(Inc.), New York City.) By such methods, department stores have
weathered business depressions.
For the past five years a company manufacturing stationery has
been forecasting its sales one year ahead and finding that such forecasts usually come within a fairly close range of the actual sales for
the year. The company analyzes separately (1) the long-time
growth, (2) the seasonal fluctuations, and (3) the effects of business
booms and depressions, as reflected in its sales record. It also compares its sales performance with certain selected economic barometers
of various types, and, by a combination of statistical procedure,
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HOW TO USE CITRRENT BUSINESS STATISTICS
t.empered by judgment, estimates in advance its sales by quarters
and by months for the current year. As a by-prod1,1ct this company
reports that its forecasts have worked so well that they led to a
better control of production as well as sales. The balancing of
production to sales has, in turn, led to a reduction in the amount of
inventory and to an increase in inventory turnover. (See Better
Business Through Research, published by the Metropolitan Life
Insurance Co.)
Probably the most extensive control through budgetary methods
is that exercised by railroads through the car service division of the
American Railway Association. This association has established
regional advisory boards throughout the country, composed of busimen in various lines and divided into committees, each treating
an important commodity in its district. Each commodity committee consults with producers in the district for an estimate of the
cars needed for the coming year, by months, and then prepares a
budget of the car supply for its industry. The totals resulting from
these estimates give a picture of the contemplated production of the
United States for the coming year in terms of car supply, and they
enable the railroads to plan the use of their cars to the maximum
efficiency, to place their orders for new equipment accurately, and to
eliminate car shortages and congestion. More specifically, the dayby-day delivery of grapes from California into New York City was
so scheduled that cars came in regularly instead of at haphazard
intervals, resulting in good average prices to the producers instead
of a famine price one day followed by spoilage of many cars of
grapes the next, owing to a glut in the market from the arrival of
too large a supply for immediate needs. Such statistical control
was also applied to the receipts of livestock at some of the western
markets, when the railroads showed producers that they could stagger their livestock loadings and thus obtain a more stable price for
their animals and at the same time enable the railroads to handle
the traffic with fewer cars. The general results of such plans showed
that car loadings in 1925 increased 5 per cent over 1924, while the
average number of freight cars owned by the railroads averaged only
1 per cent greater than in 1924, and car shortage was almost eliminated. In 1926 loadings were 4 per cent above 1925, while the average number of cars owned by the railroads decreased.
Budgeting on the basis of current statistics has also proved of
~reat benefit in the insurance field. A company covering workmen's
compensation insurance uses the general trend of pay rolls throughout the country as a guide to the amount of premium to be received
on its policies. This premium depends on the employers' pay rolls,
which are difficult to ascertain before the expiration of the policies,
ness
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THE PROBLEM AND ITS SOLUTION
and yet the insurance company must incur expense without knowing
the receipts from its policies, unless for~t from general pay rolls.
This company, therefore, prepares a budget on a forecast pay-roll
eurve, and any differences in the actual data lead to remedial steps,
if necessary.
GENERAL EFFECTS OF BUDGETING
The forward planning of production and purchasing schedules
adapted to probable sales tendencies has had a most salutary stabilizing effect. on the entire business situation. The railroads, for instance,
estimating closely the requirements of the shippers for the coming
year, as previously described, thereupon make their equipment and improvement plans to coordinate with prospective traffic needs and place
their orders at the beginning of the year for the greater part of the
materials needed. The material and equipment suppliers, in turn,
know what they will be required to furnish during the year and can
adjust their production schedules to secure regular delivery of the
goods. Regularity of employment, in its turn, results in better and
more stabilized consumer purchasing, which is reflected through the
retail stores and back again through all the various industries. When
such purchasing policies are adopted not only by the railroads but
by automobile manufacturers, pipe producers, department stores, and
others in many lines of business, the cumulative effect in producing
stable business for all industries can hardly be overestimated.
The greater knowledge of business facts seems to have eliminated
much of the speculation from the ordinary business channels. Speculation still continues in the stock market and in real estate, but the
quick decline in stock prices in the early part of 1926 and the cessation of the Florida real-estate boom at about the same time showed
no effect on business trends. This would indicate the absence of
speculation in business plans through greater knowledge of facts.
In earlier periods such a double-barreled collapse in speculative activities might have caused a sudden decline in business, although easy
credit conditions and falling commodity prices did their share in
preventing serious trouble in 1926.
Greater planning ahead on the basis of facts rather than guesswork
has resulted in cutting down expenses through regularity of operations and mass production. These savings are being regularly passed
on to the consumer in the form of lower prices, and still the producers are making money through their larger volume.
BUSINESS MEN CITE IMPORTANCE OF STATISTICS
The importance of current statistics to business executives was
well expressed by Gerard Swope, president of the General Electric
Co., in an interview upon the program of the newly formed National
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HOW TO USE CURRENT BUSINESS STATISTICS
Electrical Manufacturers' Association, of which he was elected president (quoted in the Eleetrical World, December 4, 1926):
In my opinion the greatest immediate good will result to electrical manufacturers from this association if it brings about the tabulation and diesemlnatlon
of industry statistics and secures the adoption of a uniform ~-accounting
system by all manufacturers. Statisties and cost accounting are fundamental
to the intelllgent conduct of any buslnei;is. An essential requirement for successful management to-day ls prompt and accurate information on available
business and market conditions. Apother essential ls a knowledge of coats of
manufacture. These two business aids arm an executive with the tools for
doing business successfully. An organization such as this permits the melllbers
to cooperate in the compilation of these data for the benefit of all.
The collection of industry statistics is one of the great tasks of a trade
association .. These statistics must be made available to the public as well. US'
to members of the association. and must conform to certain restrictions, but
not to a degree where their benefit to the industry ls impaired. Statistics as
to production, quantity produced, shipments, sales, orders received; unfilled
orders on hand, stocks on hand, and of employment can be eollected and
disseminated.
The president of a large hardwood mill recently stated to the
Chamber of Commerce of the United States the following advantages
of such statistics:
Trade statistics gathered by our association are decidedly helpful in the
operation of our business. In fact, they are a necessity.
The two major objectives of stat'stics are, first, that all those engaged in
industry may be as nearly on an equal basis as possible in regard to knowledge_of the basic industrial facts, and, second, that each concern may regulate
not only the prices but its sales and production policy In harmony with
economic conditions.
A man well informed as to the basic facts of his industry can proceed witb
more confidence in ordering the daily affairs of his business; he can follow a
policy wherein there Is a basic continuity as against a policy of opportunism in
which he may find it necessary, and generally does, to feel his way and reverse
himself from time to time.
The following comment by a hosiery manufacturer reflects the
usefulness of statistics to that industry:
The report on production, orders, and stocks of hosiery for the United States
is a marvelous undertaking and is without doubt the greatest step that possibl:,
could have been taken to aid domestic manufacturers.
Similar comments from business men relating to the various current business statistics are being made continually and testify to the
great value being found in such data by business firms, both large
and small, in all lines of trade and industry.
DIFFICULTIES IN FORECASTING
The reader must not imagine that statistics by themselves can
effect any magic transformation. of the Nation's lmsiness ills. The
error~ made by business-~ore~sti1_1g services in predicting the trend
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THE PBOBLBK AND ITS SOL"'UTION
of future events shows that statistics can not of themselves lead to
100 per cent accuracy. But the trouble is not so much with -the
statistics as with the use made of them. The saying that anything
can be proved by statistics has long been familiar and should be a
warning to those using statistical data to be on their guard against
features which might endanger correct conclusions.
The reasons why statistics have not always proved infallible
predictors are not far to seek. In the first place, statistics are often
inaccurately compiled, or they represent such a small percentage of
the industry as not to reflect general trends, or care has not been
taken to make the figures comparable from month to month. A
discussion of the methods used by compiling organizations to eliminate these defects is presented in Chapter IV.
Secondly, the correct interpretation of statistics depends on
reading them in the light of previous experience, and our previous
experience with most statistical indicators in normal times has
been woefully small ; but it is increasing right along, and as our
statistical background broadens we may expect even better results.
Thirdly, predictions as to physical phenomena, like the weather,
are still, after many years' experience, far from perfect; the jokes
about the weather man and his mistakes are legion. How could we
expect better results from a new science, hardly out of sw11ddling
clothes and depending for its data not so such upon measurable
physical forces as upon the whole gamut of human emotions and
actions¥
In the fourth place, proper interpretation of the figures depends
to a large extent upon knowledge of the industry or business involved. For instance, Government receipts for March are not at all
comparable with those for February or April, because they are
swollen by the quarterly income-tax payments, and this circumstance
also affects the important figures on bank debits to a lesser extent.
The severe decline in automobile production which occurred in August, 1925, was due not to a slump in the industry but to a change
of models by an important manufacturer; the curtailment in the
summer of 1927 was due to similar causes. Strikes, weather conditions, crop variations, foreign wars, and many other extraneous circumstances may considerably alter business trends; and unless such
conditions are accounted for, the interpretation may be entirely
misleading.
·
A fifth consideration is that correct interpretations are more necessary than correct predictions. The business man's chief concern is to
know the facts, so that he can base his own policies thereon; and,
though it may be useful to perceive what is going to happen in
the future, the means of improvement are of most practical importancs. The physician needs in each medical case the proper diagnosis
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HOW TO USE CURRENT BUSINESS STATISTICS
of the facts of temperature, pulse, breathing, etc., but he may not
be able to predict with certainty the recovery of his patient; his
diagnosis, however, will be the means to lead to recovery, if possible.
So many extraneous happenings may intervene between the present
and the future, both in medicine and in business, that predictions
are often hazardous, and, furthermore, the perception by a large
number of people of the tendency of business events may actually
nullify the foreseen event. As an example of this tendency may be
cited the failure of the price of securities to advance after the issuance of very favorable news, because so many knew of it in advance
that purchases were made gradually in anticipation thereof, and
when the event took place there was little further buying to advance
the price. In fact, securities often decline when good news is published because those who bought in advance wish to take their
profits, and thus the selling orders may outweigh the buying orders.
Any inability to predict the course of future business with certainty
should not be charged against statistics but against our use of them.
Because past generations of physicians did not correctly predict the
outcome of their cases or because our early engineers could not make
the steam engine or the telephone do what can be done to-day, was
that cause to stop the ascertainment of further facts along those
lines? In the physical sciences inability to predict has meant merely
the further collection of data until the problems were solved, and,
similarly, the present inability to predict the future business correctly should not be taken as an indication that statistical data are
useless and should be scrapped, but that more data should be gathered
so that more interpretations and better predictions can be made.
Statistics are not the whole cure for business ills or the whole force
of business progress any more than the compass can make the ship
sail. But the information which the compass gives of the ship's
course is vital to its proper navigation, and, similarly, statistical
information on the course of business is becoming more and more vital
to the proper steering of the course of each industry. Rule-of-thumb
methods and guesswork may have been useful in past generations,
but those industries and concerns which still cling to antiquated
methods because "Grandfather made money this way, and I guess
I can," are being pushed aside by twentieth-century ideas, just as the
sailboat was pushed off the ocean, the horse car off our city streets,
and the candlelight from our homes.
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HOW THE FIGURES ARE USED
8Ul[KAB.Y.-Speci1lc examples ot the uses ot business statistics, gathered from
actual experience, are presented here, classi1led inio the following industries or
businesses: Textiles, metals and machinery, coal and oil, leather, automobiles
ud accessories, paper and printing, publishing, real estate and construction,
engineering, lumber and clay products, chemicals, food products, public utilities,
transportation, advertising, accounting, banking, insurance, trade and commercial organizations, law, education, Government, and miscellaneous.
Concerns may apply to their own industry the principles used by other industries. .The most popular usage is the comparison ot the company's :figures with
the 8gures tor the industry as a whole, to see it the concern is gaining or losinar
In the competition.
Besides the concrete savings mentioned in the previous chapter,
many uses of statistics have been reported which can not be expressed
in terms of savings in dollars and cents. Instances of these uses have
been collected largely from requests sent out by the Department of
Commerce to readers of the Survey of Current Business and from
information gathered by the Chamber of Commerce of the United
States from trade associations and their members. The most concrete
examples of such uses are classified below by the general nature of
the industry, so as to give suggestions to others in the same or related
lines as to how to utilize current business statistics to the best
advantage. Other specific instances, relating principally to the boom
period of 1920, are presented in the Report of the Committee on Business Cycles and Unemployment of the President's Conference on
Unemployment.
It is suggested that the reader examine not only the data relating
to his own industry, as shown below, but also those for other industries,
because the uses of statistics made by other industries often suggest
methods which can be applied to one's own industry. One business
executive, for instance, in reviewing the manuscript of this chapter,
jotted down many hints for his own use from the examples not only
of his own industry but of others scattered through the chapter.
After all, the business principles used by one industry are applicable
to most other industries, whether they refer to statistics or selling or
purchasing or accounting, and this is well proved by the frequency
with which business men are reaping the benefits from policies suggested by the experiences of other industries.
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HOW TO USE CURRENT BUSINESS STATISTICS
TEXTILES
Figures on raw cotton are used extensively by those interested in
this commodity in studying the underlying conditions and comparing
the price fluctuations. A cotton firm uses the figures to examine
business tendencies of other years where the problems and conditions
,are somewhat similar to those under consideration. A cotton-finishing concern finds that keeping track of the consumption of various
-commodities is useful in purchasing materials and plant supplies.
A cotton manufacturer reports using the statistics to obtain indications of the sectional trends and of the activities of the industries to
which he sells. Another manufacturer uses these data to control
purchases, dispose of stocks, and plan the rearrangement of classes
of production.
A firm of wool dealers finds that a study of production, imports,
-exports, and consumption of wool places its operations on a. more
stable and less speculative basis. A rug-manufacturing firm uses the
various current figures in planning its purchases and regulating its
stocks of finished goods, while another rug manufacturer uses the
-statistics to check business throughout the country and to get a
genei:al idea of business conditions. Custom tailors report using to
advantage the statistics on silk and wool. A manufacturer of hats
-compares his own business with the various totals by means of charts
-and index numbers and attempts to forecast the probable production
and sales of the industry. A firm of wholesale clothing dealers sends
·salesmen to those communities where industries are located which are
shown by current business statistics to be in the best condition.
A manufacturer of cotton underwear uses data on employment,
:food costs, general production, and business as guides for his own
bus.iness. A knitting company not only keeps informed of general
business conditions through current statistics but uses them particularly as a guide in its purchases of woolen and cotton yarns. A firm
~f selling agents for underwear and sweaters watches particularly
the data for other businesses, owing to their direct connect.ion with
the ability of labor to consume these products; this is done through
-charts and percentages. A trade association in the knitting field
uses these figures in solving members' problems of buying, employment, production, and advertising.
In the silk industry current statistics are used constantly, as
-evidenced by frequent inquiries to the compiling association for.dates
of publication of the figures, for duplicate copies, and for general
statistical data, as well as general comments throughout the trade.
Textile jobbers report valuable information gleaned from bu$iness
-statistics. One firm studies the position of the business cycle from
data on production, money, etc., to anticipate business conditions.
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HOW THE FIGURES ARE USED
Another representative of a large jobbing and retail dry goods house
summarizes for his customers the market conditions as to prices,
material stock, finished atock, and their comparisons with previous
years.
Although· no data especially relating to millinery are available at
the present time, a firm in this line compares its sales with the production and prices of various textiles, particularly .in chart form,
over a long period of time. Lace manufacturers report using the
figures to study production and expansion programs. A suspender
manufa.;turer in this manner schedules his purchases of raw materials,
such as metals, leather, cotton, and silk.
An important firm manufacturing artificial leather through spreading pyroxylin upon textile fabrics compares its own business not only
with the totals for pyroxylin-coated textiles but also with about 20
different business series. These data are charted as moving averages
on a 12-month basis, and often defin.i te sequences have been found
which have helped in forecasting the company's business.
METALS AND MACHINERY
A great range of statistical data is used by steel manufacturers
in planning their business policies. One company, for instance,
watches particularly the statistics of agriculture, building construction, automobiles, railroads, and exports in order to see how the
consumption of steel may be affected, while prices, wages, and living
costs are watched as bearing on wage questions. A manufacturer
of sheet-steel products compares his new orders with those of allied
industries to find out and improve his weak points. A fabricator
of structural steel watches the figures on building construction and
the trends of the various industries to ascertain their prospects for
expansion, which would mean larger sales of structural steel. Sales
campaigns are conducted in the more prosperous industries. A manufacturer of steel barrels uses the monthly steel-barrel statistics as
publicity material in his monthly price bulletin to companies using
steel containers for shipment or storage. This manufacturer also
determines regularly the proportion of the total business that he is
getting, as well as the proportion in each territory, so that weak
spots in the sales organization can be picked out. Another firm in
this line compares its productive capacity with that for the industry
as a whole by months for three or four years, and it has found that
its business is becoming more stabilized each year. This company
also finds out whether it is getting more than its share of certain
weights and types of product. Statistics of the iron and steel industry are also extensively used by another firm in planning its
sales programs and in checking up on the results.
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HOW TO USE CURRENT BUSINESS STATISTICS
A manufacturer of coal-handling machinery watches the growth of
industries, mines, and railroads by means of current figures, so as to
gauge the opportunity of his firm for sales in these lines. A maker
of oiling devices uses building construction and automobile production
as barometers with which to compare his business. A company manufacturing tools and hardware finds that the curve of its sales ii;
preceded by construction figures 3 months ahead, by speculation 9 to 12
months ahead, and by money rates inverted 12 to 15 months ahead.
A manufacturer of centrifugal pumping machinery finds that the
curve of his business lags about 6 months behind the curve of building construction, and he estimates building programs in advance from
indicators of the activities of the various industries. In a pump-manufacturing plant the various current statistics shown in the Survey
of Current Business are passed to about a dozen officials who use them
in different ways. Information on the trend of industries and agri('.Ulture is obtained from such statistics by a manufacturer of agricultural equipment as indicating opportunities for sales. A manufacturer of twist drills and reamers, who operates his plant on a quarterly
budget for production and finances, checks his figures by charts of general business statistics. A firm making electrical switches charts the figures for ooth residential and industrial building contracts each month,
using the monthly figures and also a three-months moving average
from which it can anticipate the trend of demand for switche!> for
both classes of buildings. The number of machines made in each
industry is used by a bearing manufacturer as indicating maximum
_sales possibilities, and his own sales are charted against the total
for the industry to show the efficiency of his organization. Study of
the proportion of the individual business to the machine-tool industry, as a whole, led two managers in this field to determine the cause
for the reduction in their proportionate share of the total business
although gaining in actual value. This study led in one case to a
reconstruction of the designing department and in the other to a reconstruction in the selling department, these being the respective
weak points in the organizations. Other manufacturers in this same ,
line found from figures of stocks, shipments, etc., that they had locked
UP. a larger amount of capital per unit sold than had their competi•
tors as a group. This led to revamping their production system,
installing better methods of process and inventory control, and the
liquidation of stocks, resulting in the accumulation of interest-bearing investments. The sales manager of a machine-tool company uses
the trade statistics to concentrate his efforts in the prosperous cente1·s,
and a distribution of the business statistics throughout the sales department has been found to produce new confidence in business.
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HOW THE FIGURES ARE USED
In the gold-mining industry a concern reports using current statistics to show the trend of conditions as they affect plans for improvement. A manufacturer of copper and brass compares the
orders accepted by his company with similar data for the iron,
plumbing, and other basic industries in order to forecast the conrern's business. A mining concern in the lead and zinc field balances
the statistics showing production with those indicating a demand
for ore as a guide to its policies in selling or holding its ore and in
rontracting for supplies. A firm dealing in household enameled
ware compares its own volume of business with general indexes, such
as sales of department stores, hardware stores, mail-order houses,
and chain stores, while data on wholesale prices and on imports and
exports are also used in evaluating the condition of business. A
wholesaler of silverware observes particularly the various retailtrade figures as forecasting the trends in this line of business. A
manufacturer in this line states that the statistical reports of his
as.sociation are worth all the money his company has paid in dues,
while other manufacturers often ask that the statistical reports be
forwarded to them on the road.
Among electrical manufacturers reporting uses for current statistics, one prepares business reviews for house organs and direct-bymail copy to customers. Another uses them to inform its salesmen
on business trends, while another finds in them a guide to the production of the various industries and their consequent need of parts.
Another concern in the electrical line has established definite relationships between its business and the steel and building industries.
COAL AND OIL
An official in a coal-mining company uses current business statistics to check the stocks and consumption of commodities and the
peak of seasonal demands in order to anticipate price movements,
insure deliveries, and place business in the less active periods. Another coal-mining company watches the consumption of coal in the
various industries, such as iron and steel manufacturing, machine
shops, etc., to see the relative amount of coal consumed, which is
figured from the production trends in the diagrams of those industries. Other coal-mining companies report using figures on living
costs and on building costs as aids in their business and watching the
trend of the coal business in order to formulate operating and sales
policies. Another mining company reports that the business facts
presented in the Survey of Current Business are passed all along the
line to mine superintendent, store manager, and mining engineer for
useful facts on their particular lines of work. A concern of wholesale coal dealers uses current business statistics as a basis for credits
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HOW TO USE CURRENT BUSINESS STATISTICS
to · various industries in accordance with their current condition,
to forecast future coal production, and to base prices on future contracts through knowledge of past reports.
A company engaged in refining petroleum uses as indicators of its
business the index numbers of the cost of living and the various data
on petroleum, tin, lumber, automobiles, and rubber. Another concern
in th.is field uses the figures on bank clearings to construct business
curves by districts to compare with the national situation.
LEATHER
Manufacturers of leather belting reported to their association that,
by comparing their own volume of business with the totals of the
industry and their own prices with the averages of all firms, they
could figure accurately how their firm was progressing in compariron
with the entire industry.
AUTOMOBILES AND ACCfflSORIES
A manufacturer of automobiles reports that bank deposits, bank
transfers, and automobile registrations, when corrected for seasonal
variations, are particularly watched for trends of business. A manufacturer of trucks uses the var,ious data presented in the Survey of
Current Business to show by means of charts the position of truck
manufacturing in the business cycle. Another truck manufacturer
finds that the various business data enable the company to find the
peak-buying period for each industry, and thus it can get its directmail literature to ,its customers at the period of greatest demand.
The sales department of an important automobile manufacturer
compares its sales with bank clearings outside of New York City and
watches such barometers as pig-iron production, wholesale prices,
stock markets, and especially farm prices. A motor company finds
that the statis~ics for replacement parts are indexes to business trend,
followed later in turn by original equipment, service equipment, and
accessories.
Among manufacturers 1.•f motor accessories, one uses current statistics to keep a check on future tendencies in the industry and to compare its own shipments w,ith those of the industry as a whole.
Another company determines from the figures whether it is gaining
or losing ground from month to month. In a third; the statistics
are passed from desk to desk among its executives after the general
auditor has superimposed over the curves of the industry s_imilar
curves of the company's business.
A company manufacturing rubber goods compares its own shipments with the totals for the industry to find out its relative position
month by month and particularly its proport,ion of the export of
rubber goods to the various countries.
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HOW THE FIG'IJRES ARE USED
PAPER AND PRINTING
A manufacturer of paper bases his yearly contracts ·for materials
on studies of current statistical data, and his prices are checked
against the various data available. Another paper manufacturer
uses the pr.ice indexes as guides to his purchasing and also watches
manufacturing activity. A firm of bookbinders watches the statistics
on fine paper and on leather production in judging when to purchase,
while its sales are compared with those for steel furniture.
A firm engaged in packing waste paper gauges its market possibilities by statistics on production, operation, unfilled orders, and
stocks of raw materials. A manufacturer of abrasive paper uses the
data on the production and salf's of industries consuming his product
to check his sales program and to keep in touch with his markets. A
manufacturer of paper boxes obtains through the Survey of Current
Business information as to what individual businesses are thriving
and the reasons therefor. Another manufacturer in this line checks·
up from his association's charts whether his sales are running in
proportion to the industry as a whole and whether his pay roll is
out of proportion to these sales; he also finds that statistics help
to save money in purchasing.
A printing concern watches the variations in its figures from the
averages for the industry, which leads to study of causes. If sales
are lower, it endeavors to remove the cause; while if sales are higher,
increased efforts may be -made along the lines shown to be causing
such increases. Another printing concern uses current business data
as information for printing and sales advice, and excerpts are reprinted in its house organ. Another printer uses the figures primarily in deciding policies as to purchasing paper stock. A firm
of lithographers uses current business data in its manufacturing,
distribution, and financial policies. The various industries are
studied as prospective markets in which to sell and are also analyzed
as markets for their customers. Another firm of engravers estimates
from current business statistics the returns which may be had from
certain lines of business, in order to plan its expenditures. Manufacturers of sales books report that statistics are depended upon to
see whether they are obtaining their proper proportion of the
business.
PUBLISHING
Study of current business statistics has been found a necessity by
editorial writers connected with periodicals. In the newspaper field
study of these data has been found useful in writing interpretativt>
editorials on business conditions. Managers of newspapers also find
the data useful in general management as well as for publication,
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HOW TO USE CURRENT BUSINESS STATISTICS
one newspaper using charts of such data to get an idea of future
business fluctuations and to base supply calculations thereon. Another newspaper manager compares cost-of-living figures with wage
scales and advertising campaigns. In the advertising departmentt
one newspaper uses charts of the principal business indicators for
the benefit of advertisers and advertising salesmen and also to answer
inquiries. A financial daily uses the business statistics for general
publication, the indexes of production, stocks, and unshipped orders
being particularly useful to their readers. A press bureau reports
redistribution of the business information in news style, while
another press bureau uses current business information for general
magazine and newspaper publicity and articles.
Current business information is especially vital to trade papers
which must keep up to date on the conditions within their industry.
A trade paper in the coal field checks through this means the market
conditions affecting coal. A paper in the automobile field not only
publishes the data extensively but also uses them for research and
merchandising. A lumber paper uses the business statistics for editorial work in marketing analyses. A trade paper in the chemical
field gauges business progress, makes market studies, and plans
business campaigns on the basis of such current statistics. An educational trade paper analyzes business conditions influencing educational matter and construction of educational buildings as related to
the sales of school materials. In the building field a trade paper uses
the statistics on construction volume and cost and checks with other
business items. In the laundry field a trade paper finds that income
data enable estimates to be made as to the funds available for
laundry work. A drug paper compares its own advertising with
the total magazine advertising and also with the sales of drug chains.
Other trade papers use these statistics for editorial comment, for
rerun articles, and for trade information. A farm paper uses current
business data to compare agriculture with other businesses, while
another paper in this field analyzes the market for its advertisers, for
editorial use, and for charting purposes. Still another farm paper
keeps its salesmen informed on business conditions in this manner,
preparing charts with basic information. A farm news service compares conditions for commodities used and produced by farmers.
Another trade paper points out through current reports the growing
markets and opportunities to the retailer through the increase in consumption of various products. Another publishing association in
the automobile field finds that its advertising normally follows in
volume the production of automobiles, and it can thus usually check
its advertising volume and predict its future course through the output of automobiles.
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HOW THE FIGURES ARE USED
A publishing firm bases its advertising solicitation upon the current data for various industries. A publisher's representative follows
the trend of commodity advertising in national publications and also
wholesale prices. A publisher's association watches the trend of
various industries and particularly the changes in printing paper,
while general trends are used for wage adjustments. A magazine
publisher uses basic business data in a graphic service. A firm of
book publishers studies mail-order sales, employment, and retail sales
by districts in order to find the most active retail trade districts to
check the activities of branch offices. The production and use of
paper is particularly watched for purchasing. A publishing firm
uses business data in preparing a monthly review of economic conditions for distribution by banks to their patrons, while another firm
puts up these figures in chart form for the business pages of newspapers; Still another concern compiles the figures into an annual
reference book. A firm engaged in business charting computes from
current statistics the seasonal movements for business-control charts.
REAL ESTATE AND CONSTRUCTION
A real estate firm uses current statistics to determine investment
possibilities by watching the trend of the business cycle. Another
real estate firm uses data on money rates, prices, etc., to chart for
the purpose of predicting future conditions through extrapolations.
Another firm in this line compares building costs with the general
price index to indicate the relative value of land. A firm of real
estate subdividers uses the current data on pay rolls to check against
the population of each city to obtain data as to the prosperity of the
wage earner. A mortgage company computes property values
through studies of costs of building materials and labor.
A firm of building contractors finds cost comparisons of great
value in appraising and comparing past and present trends. Another
finds that data on prospective prices for material and labor obtained
by study of current statistics are great aids in bidding on contracts.
Another building firm uses data on migration, movement of goods,
and failures to ascertain prospective trends in building. A contractor uses data on construction volume in preparing a buildin~
index, and the general construction costs are compared with his
own costs. A firm of engineers and builders prepares charts, showing the volume of production and of new construction by industries,
to anticipate the need of building in each industry.
An association of building owners uses data on financing to correct abuses in bond issues secured by real estate. A close check is
found by dealers in plumbing materials between their own ·sales and
the data. on ena.meled iron products and brass faucets. A manu-
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HOW TO USE CURRENT BUSINESS STATISTICS
:facturer of ventilating equipment judges its probable sales and measures the efficiency of each territorial and domestic division of the
sales department through current statistics.
ENGINEERING
.An engineer in the industrial field uses current statistics for reports
on proposed factories, especially labor costs and their relation to
material costs. .Another industrial engineer prepares composite
index numbers of business facts, while another determines through
such studies the economic cycle for his clients. A civil engineer uses
business figures to prove the prospective demand for a product, such
as steel beams for residential construction, by comparing data on
population, residential construction, lumber cut by regions, retail
price of lumber in the East, and wholesale price of steel beams. An
architectural engineer uses current statistics for making estimates of
the cost of future work, while a concern of engineers and builders
charts the data on particular industries and the relation between their
production, stocks, orders, etc., to estimate the potential demand for
uew factories and offices.
A consulting engineer uses current statistics to show the trends of
sales and production quotas, while another compiles data on general
conditions for reports to clients. Another consulting engineer checks
through such data the estimates on construction and on valuation
work and determines the economic position of utility properties.
Another engineer uses these statistics in testimony and valuation
cases, and an engineer specializing in valuation work checks the reasonableness of inventories through the record of current prices. Another engineer checks appraisal values with past and expected trends,
while an engineer in the consulting field keeps his cost indexes up
to date through use of 'c urrent business statistics.
LUMBER AND CLAY PRODUCTS
A firm manufacturing lumber, sash, and doors finds especially useful in its business the statistics on lumber production, building contracts, softwood price indexes, food index, freight loadings, and
bank conditions by districts. A hardwood lumber manufacturer
finds that his statistical reports enable him to discontinue making
such grades and thicknesses as are flooding the markets and to make
such as are scarce, to determine inventory values, to guide pri'ce quotations, and to give ·proper cutting instructions to the mills for the
various kinds of lumber. A manufacturer of upholstered furniture
finds that reports of the lumber and textile industries indicate the
best time to purchase materials. A retail lumber dealer watches the
figures on production and shipments of roofing, flooring, and other
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HOW THE FIGURES ARE USEP
similar products. A dealer in hardwood lumber makes no purchases
without first inspecting his association's statistical report, and in
selling he est4n,ates his cost of raw materials on the average prices
shown therein; he finds that stock figures guide him as to the probable course of the market. Lumber manufacturers in the Great
Lakes region report using average prices to obtain better knowledge
of the actual market for lumber in order to get more business by
underselling the market.
A manufacturer in the cement field studies all figures relating to
cement and highways. A manufacturer of clay products watches
the coal market, while car loadings are studied as indicating the best
·use of railroad cars. A brick manufacturer uses a chart of his association's statistics as a guide as to whether to stock brick. A manufacturer of refractory brick compares his own stocks with unfilled
st.eel orders as an indicator. A manufacturer of fire-clay brick uses
the wholesale price index of all commodities to adjust semiannually
the price of his products over a 30-year contract. A manufacturer
of paving brick always investigates the cause whenever his company's activities are below the average for the industry.
CHEMICALS
A firm of manufacturing chemists finds that current business statistics indicate new fields that can be solicited for business. A manufacturer of linseed oil watches the statistics on linoleum, artificial leather,
printing ink, paints and varnishes, margarine, and mayonnaise dressings for indications of the condition of these consumers of linseed oil.
Paint and varnish manufacturers watch and record the data on lead,
linseed oil, flaxseed, turpentine, and rosin. A firm engaged in the
business of dry colors finds that building statistics give it a good
estimate of the future requirements for colors, while charts showing
employment and prices aid in forecasting business trends. A manufacturer of shoe polish watches particularly the statistics of tin,
turpentine, and glass.
An alkali manufacturer obtains data on the trend of materials for
future purchases through current statistics. He finds that the trend
for burlap bags, for instance, depends on crops, such as jute, cotton,
and sugar; also that the price of cotton is affected by rayon, while
the amount of black cotton in a crop is also important, as Osnaburg
may be low in price, though the total cotton crop is short. A manufacturer of carbide finds that general business statistics forecast the
trend of wages and labor supply. A manufacturer of industrial
gases finds that his business follows the general manufacturing index
with a lag of about six months. He compares his data also with
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HOW TO USE CURRENT BUSINESS STATISTICS
figures on steel, automobiles, and railroads. A manufacturer of
licorice finds that his business is closely allied to the movement of
tobacco.
FOOD PRODUCTS
A flour miller finds that milling trends can be. ascertained from
statistics on wheat grindings, on the proportion of the capacity of
flour mills operated, on stocks of wheat, and on milling yields per
barrel. Another flour miller finds that cotton statistics are important
factors in this industry, since they affect the supply of bags for flour
and also because the prosperity of the Southern States is greatly
affected by cotton, and thus the.sales of flour to that section depend
largely up~n the state of the cotton-growing industry. Another
flour miller finds that the cumulative flour production for the crop
year to any particular date shows how much of the wheat crop has
been milled, and with this cumulative figure the company's own
operations are compared to find out if they are up to the average.
A bread company watches the trends of retail trade and prices for
indicators of its business, while a bakers' supply association uses
statistics of food products, grain crops, etc.
An association of milk producers watches the various statistics
of the general business trend in order to forecast future milk prices,
while a concern dealing in dairy products finds comparisons of milk
prices at the various cities useful. A firm of ice-cream manufacturers
makes comparisons on a percentage basis as a guide to costs and salesA meat packer finds that statistics on the activity of wool manufacturing tend to forecast changes in the price of raw wool, while
unfilled steel orders tend to forecast changes in steel prices.
A firm of fruit growers compares prices with trade prices of their
products and the prices of other commodities. An agricultural
statistician finds that current business statistics are useful in furnishing data to newspapers for farm readers. A State agricultural department uses the data in the barometric section of its crop reports.
An agricultural experiment station uses the statistics on general business conditions for discussion at farmers' meetings and also in
research work; in the latter connection the exchange rate of the
pound sterling has been found valuable for an index in forecasting
apple prices. A farm bureau uses the statistics to show farmers
how other industries keep tab on their business and how the farmers
could apply the same principles to their own work. A firm of food
brokers watches crop conditions, food production, yields, and bank
reports in order to get an idea of business prospects in their field.
Another food-products broker distributes the statistics on foodstuffs
to the wholesale trade in concise form with comments. A grocery
chain uses current data especially to compare costs in different cities;
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HOW THE FIGURES ARE USED
while another grocery chain bases its future purchases on statistics
of crops, stocks, consumption, and supply, finding that high living
costs affect luxury buying but not necessity food. A restaurant
watches statistics of food costs and labor conditions as affecting its
current operations, while another restaurant also watches statistics
of general business conditions. A hotel uses statistics on various
foods to compare the cost of its food sales and of the ingredients
going into its candy business. It also uses statistics on railroad
operations and particularly of passengers carried in preparing forecasts of its rooming business.
A sugar-refining company estimates the distribution of sugar
from the various statistical indexes of general prosperity. A company engaged in constructing beet-sugar plants estimates the cost
of plants to be built by using known costs of similar plant:, in other
years and estimating production costs in stated years. A candymanufacturing company not only watches statistics of sugar production and prices but also more general data as indexes of prosperity,
such as transportation statistics, stock sales and prices, mail-order
sales, bank clearings, employment, interest rates, failures, steel production, and building construction.
PUBLIC UTILITIES
A telephone company makes up a business curve of its Ioeafity
from data on retail sales, prices, and production of grains and livestock, employment, financa, and industrial production. Other telephone companies report the preparation of similar indexes on local
business trends in order to gauge the probable growth of the telephone business of the community and thus make provision for expansion of facilities, etc. The plant employment superintendent of
a telephone company uses data on wages and living conditions as a
help in employment questions. A telegraph company correlates tha
revenues of telegraph companies with those of railroads, telephone
companies, and the post office in order to discover the relatiYe increases of these various lines of business. A cable company uses the
figures on foreign trade to the countries which it reaches as indicators of their financial condition and general situation.
A gas company uses current business data in forecasting its coke
and by-product business and in gauging the proper time for making
its financial arrangements. The engineering department of a power
and light company finds that current business statistics are helpful
in predicting the prices of building materials, while an electric
power company uses price indexes to value equipment retired from
service. A public-utility company compiles various indexes of business by geographic divisions according to the location of its con-
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HOW TO USE CURRENT BUSINESS STATISTICS
stituent concerns in order to make its budget estimates and to check
current work. Another public utility uses statistics on living costs
to compare with its rates, while still another keeps track of industrial developments through the various business indexes. Another
concern in this line uses the material not only to show the growth of
industries but also for use in speeches by its executives and for
general reference. A company engaged in public-utility appraisals
uses the statistics to get an idea of probable future prices and business trends.
TRANSPORTATION
The commercial development department of a railroad finds that
current statistics help in the preparation of agricultural and industrial development work as well as in various reports. A railroad
freight agent checks his own traffic against the totals for all railroads and forecasts traffic trends. The valuat~on department of a
railroad compares its own unit costs with those for the country as a
whole. The claim division of a railroad association compares the
·amount of damages with the volume of business shown for each
commodity handled. A railroad statistical bureau finds the compilations of current data, such as the Survey of Current Business,
save a great deal of time in the preparation of data for Government
compilations. A railroad rate committee uses the current business
statistics in considering proposals for rate readjustments. A canal
, company uses statistics on cost of living, on transportation, and on
raw materials.
A concern engaged in foreign trade uses the statistics of imports
and exports classified both by commodities and by regions to study
trends in foreign trade. An automobile export concern forecasts
world economic conditions 90 days ahead by tabulations of foreign
crop production and other data.
ADVERTISING
An advertising agency uses current industrial statistics for suggestions of possible outlets for products to be advertised. Another
agency reports using the statistics to determine the consumption of
a product and the relation of its clients' business thereto, while
another agency uses this same relationship to plan its sales and
advertising campaigns. Another advertising agency fixes sales quotas
and advertising appropriations on the extent and trend of various
industries, as shown by current statistics. Agricultural reports are
used by an agency to guide advertising in farm districts, while
another firm in this line gets a picture of general business trends
from automobile production, bank clearings, trade advertising: life
insurance, and security sales.
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HOW THE FIGURES ARE USED
An advertising bureau uses current business statistics as the basis
for market surveys and business promotional matter for manufacturers and advertising agencies. An advertising solicitor finds SU(;h
figures aid in talking business conditions with clients. A bureau
engaged in trade extension and advertising by means of current
statistics interprets the results of advertising and trade-extension
efforts.
ACCOUNTING
An accountant reports that current statistics enable him to determine the relative size and importance of various businesses, while
another uses the figures in bu'd~ting mail-order business. An
accountant connected with institutions uses the figures to compare per
capita costs and commodity costs, while another 11,ccountant makes
constructive suggestions to his clients on the basis of current statistics
of industries and his own audits.
A business statistician finds that current statistical data aid him
in determining advertising appropriations, while an investment consultant follows the economic status of various industries from the
investment viewpoint through statistical data. A county auditor
judges the trend of land values through statistics on interest rates,
commodity prices, and real-estate transfers in order to give data
for· equalizing the assessment of buildings as between different years
and also to fix the rates of capitalization of income to capital value
through the market rate of money.
BANKING
A national bank charts the statistics on pig-iron production and
stock and bond averages to keep in close touch with conditions, while
another national bank uses figures on wholesale prices as comparisons
when large concerns are fixing wage increases. The economist of
a. national bank follows the indexes of production and distribution
and examines them in detail for the trends of particular industries.
A national bank in the agricultural region watches statistics of
livestock and grain receipts and stocks of agricultural commodities
as indications of the trend of prices. A State bank gives advice to
farmers based on statistical reports of crops, stocks, etc., whiie a
firm of private bankers compares particularly the production indexes,
investment holdings of insurance companies, and automobile production. Another banking concern attempts to forecast the trends of
orders, profits, purchasing power, money rates, and commodity and
security prices.
A trust company uses current statistics to forecast the probable
demand for funds and the probability of steady employment of pur-
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HOW TO USE CURRENT BUSINESS STATISTICS
chasers of articles on the partial-payment plan. Another trust company determines trends in prices and other business items, correlating
them with financial statements in connection with determining lines
of credit. The economist of a trust company uses current statistical
data in giving advice relating to the shaping of bank policiesi in
helping customers, and in the bank's house organ. Current statistics
are used by many Federal reserve banks in computing their various
indexes of trade, etc. A savings bank prepares analyses of financial
conditions through current statistics, especially to obtain trend of
bond prices. A building and loan association watches the progress
of building of various types. Statistics of fundamental conditions
are used by a financial reporting concern as the bases of analyses of
individual companies.
In the investment-banking field, a concern analyzing the securities
of a particular company watches closely the statistical conditions of
the industry concerned. Another house in this line follows closely
the course of business through statistical data to forecast the market
for buying and selling securities, while a firm of investment counselors finds charting bond prices useful in this connection. An
investment-banking firm watches business conditions particularly
relative to the demand for cap.ital and the activity of industries.
Charts are prepared by an investment banker to indicate comparison
, of general business conditions with security prices and interest rates.
Another investment-banking concern uses current statistics to determine its policies as to inventories and as to the marketing of new
issues, while a firm in this line also analyzes production, prices, distribution, and stocks in various industries as related to the values of
securities in those industries. Another investment-banking ·concern
compares the statistics of various industries as a means of directing
its capital into profitable channels, while an investment and brokerage
house studies business trends in order to make recommendations for
investment and speculation. The investment department of a trust
company uses as indicators of prospective net profits of companies
the statistics of general business activity and the differential between
production costs and selling prices of the commodities produced;
these data, together with money rates, are used as indicators of the
prices of investment securities.
INSURANCE
A life insurance company watches rental advertisements to see
whether or not cities in which the company is lending money are overbuilt, while statistics on agricultural products indicate the conditions
.in the agricultural section where the company places loans. Another
life insurance company plans its sales campaigns according to the
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HOW THE FIGURES ABE USED
statistical trends of the various industries and localities, while
another USeJ3 statistics to disprove the alibis of unsuccessful salesmen.
The volume of business of a fire insurance company has been found
to vary directly with general prosperity, and its losses vary inversely
thereto. General business trends are studied by an insurance company from data on savings deposits, distribution, construction, money
in circulation, etc. Another insurance company uses figures on automobile production to forecast the probable business in automobile
insurance, especially for finance companies; jn industries where many
failures are seen to occur, investigators are mstructed to take special
care.
LAW
Business trends, as shown by current statistics, are watched by a
lawyer in order to see whether it will pay to wait several years before
obtaining judgment on a case or to settle for half the amount immediately and be able to bank the proceeds at once. Another lawyer
watches current business statistics to ascertain whether the fluctuations in the business of a particular firm are due to general conditions, conditions within the industry, or conditions within the
particular firm. A firm of lawyers watches the growth of various
businesses for indications of new financing requirements.
TRADE AND COMMERCIAL ORGANIZATIONS
A chamber of commerce uses current business statistics as chart
material and to compare with data for its _locality or district.
Another chamber of commerce prepares statistical analyses of business trends over a period of time, while a third uses such data to
publish regularly in bulletin and magazine form. A real-estate
board uses current figures in estimating the progress of business for
its members, while a young men's association finds statistical data
useful for distribution in its reading rooms.
A trade association in the coal field judges coal consumption
through statistics of employment and production in industries which
are large consumers of coal. An association of manufacturers of
sales books finds that their data can be advantageously compared
with statistics of newspaper production and with various classes of
retail trade. Another trade association uses comparative business
figures in reports for tax legislation, while a typographical union
makes frequent use of living costs, wholesale prices, and building
statistics.
EDUCATION
In a graduate school of business administration the students analyze
various series of business statistics in order to obtain trends, seasona1
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HOW TO USE CURRENT BUSINESS STATISTIOS
variations, etc., for theses. Another college of business administration
uses the current statistics to keep its wall charts and textbook material up to date as well as for general reference in classes. A college
of commerce uses such figures in teaching industrial organiiation and
movement, while another such college uses them in problems assigned
to students. A college bureau of business research uses such statistics
in the preparation of indexes of production, consumption, etc., while
another computes trends of various industries. The department of
economics and sociology\ in a college uses statistics extensively in
courses in economics, business cycles, etc.
An agricultural college uses current statistics in planning farm
programs on the college farm; while another finds them valuable as
material for faculty speeches, as the basis for graphic charts by
students, and as data for research work. Another university uses
these data in courses on agricultural economics, while a university
extension division utilizes them in the preparation of business bulletins and in answering requests for information.
In the department of education in a college, business statistics are
used in classes training teachers for high-school positions, as sources
of information and as illustrating the use of graphs and the methods
of gathering data. A library also finds that collections of curreut
statistics, such as the Survey of Current Business: supply the demand
of readers for examples of business graphics. A large library places
current copies of periodicals such as the Survey of Current Business
in magazine racks, while duplicate copies are loaned to business men
for more leisurely reading.
A school superintenden t uses statistics on business costs to keep in
touch with the school-building program and uses statistics on living
costs in order to measure the fairness of teachers' salaries. A correspondence school in the electrical field reconciles through statistical
data the business trend of industries affecting electrical work, while
a correspondence school finds current statistics of value in selling
its educational services.
GOVERNMENT
Collections of current statistics, such as the Survey of Current
Business, are used by various officials in the Department of Agriculture for bulletin material on the agricultural situation, for informing
farmers about industrial conditions, and to judge the trend of industry and its effect upon agriculture. The effect of the business situation on highway construction is studied by the Bureau of Public
Roads of the Department of Agriculture.
The Treasury Department is enabled to forecast income and other
tax returns from data on current business conditions, while the Post
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HOW THE FIGURES ARE USED
Office Department compares its figures with those of other business
indicators. Changes in manufacturing and construction costs are
det.ermined through current statistics in appraisal work in the
Treasury Department, while the General Accounting Office watches
business trends in connection with its audit of the money-order
business.
Officials of the Department of Commerce make constant use of
business statistics to follow the trends of various industries in connection with studies on simplification, foreign trade, domesti<' distribution, transportation, marketing problems, utilization of materials and products, and general business conditions. The Secretary
of Commerce uses these data regularly as the basis for remarks on
business conditions at Cabinet meetings, press conferences, and inter- ·
views with business executives.
The War Department charts various business indexes and distributes them to the different supply branches to indicate commodity
price trends, while the Navy Department uses the figures in purchasing and in preparing a catalogue of property. The Interstate
Commerce Commission watches the effect of economic trends on the
railroads. A Congressman reports using such figures for legislative
purposes and the Department of Labor compares the trends with its
monthly industrial surveys. A Government employee reports using
figures on business trends as indications of the most advantageous
time at which to. buy or build a home.
MISCELLANEOUS
A piano-manufacturing concern prepares a cost index of department-store sales, chain-store sales, and savings deposits as a forecaster for the output of the piano industry. A manufacturer of
insulation materials checks business trends to find out if business
expansion is due to the normal increase, to work previously deferred,
or to speculative operations. An optical manufacturer correlates his
own business not only with that in optical goods but with data on
automobile production, iron 'production, and unfilled steel orders.
A fur manufacturer correlates his business with general index numbers and chain-store and mail-order trade. A mail-order house circularizes where current statistics show conditions are best. A geologist found that a study of general economic conditions actually
influenced him to buy stocks for personal investment at low points
and to sell them at high marks. A physician watches production,
unshipped orders, and interest rates as guides to business trends and
the security markets. A manufacturer of abrasives watches the statistics on automobiles, machinery, furniture, and stone and glass goods
to find the best markets for his goods, and studies of those industries
influence his policies in expansion and retrenchment.
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HOW TO INTERPRET THE FIGURES
SUJDIAB.Y.-The statistics of manufacturing are most nearly complete and can
be applied, with variations, to agriculture, mining, and wholesale and retail
trade. l!'or one's own industry, many possibilities of interpretation are presented
for production, capacity, employment, ahipmenta, consumption of materials, stocks
of materials, stocks of Anished gooda, orders accepted, cancellations, unahipped
orders, inquiries, imports, exports, and prices. The application of theae principles to statistics of material markets and distributive markets ts described,
as well as the general businen indexes and statistics usually considered in
studying the general businen situation.
The principal current business statistics collected by trade associa•
tions, Government departments, or other organizations for an industry or commodity are those relating to production, capacity, ship•
ments, stocks, orders accepted, cancellations, unshipped orders, employment, imports, exports, and prices. Each of these may be further
classified into details, which will be treated separately under the
individual items. The :figures are generally of the greatest usefulness if given in quantity units, such as tons, barrels, pieces, etc.,
instead of in values, which fluctuate widely with price changes and
thus often obscure the real movement of the commodity.
STATISTICS OF ONE'S OWN INDUSTRY
Most of the available current statistics relate to manufactured
goods and are compiled from reports of manufacturers. This is due
not only to the large part which manufacturing plays in our economic
life but to the organization of manufacturers into many industrial
groups, facilitating the collection of statistical data. On the other
hand, difficulty has been experienced in securing adequate statistics
by commodity lines once the articles have passed beyond the manufacturer's door and have entered into wholesale and retail trade.
Furthermore, the statistics used in manufacturing industries include
practically all the items found in any other lines, and so the principles employed in the utilization of manufacturing statistics can
well be applied to other branches of commerce. Therefore, in the
discussion of the interpretation of statistics, manufacturing is generally thought of, but the reader can easily apply these· principles
to his own line, with the special applications noted below.
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HOW TO INTERPRET THE FIGURES
Producers of raw materials, such as farmers, st:ock raisers, lumbermen, and those engaged in extracting minerals from the earth, can .
apply to themselves the principles set forth for the use of manufac'.'. ,
turing statistics of one's own industry, so far as they relate to finished '
goods, for their products, though raw materials for the manufacturers, are finished goods so far as they are concerned. The rawmaterial producers themselves do not have to consider their supplies
in most cases, because they are already present, to be taken from the
ground whenever necessary; neither do they have statistics relating to
new orders, unshipped orders, and inquiries. Farmers, however, do
have to provide their crops and can decide which crop to plant, but
this is done once a year, and when done can not be changed until
another planting season comes around. In crop farming there is no
monthly production, the output being available annually.
At his planting time the farmer can study the supply of and
demand for the crops which he normally plants, on the basis of statistics of production, consumption, stocks, prices, etc. The Department
of Agriculture issues reports on " intentions to plant " for some crops
which show the farmer what the rest of the country is expecting to
plant, just as orders accepted show a manufacturer what other manufacturers may be expected to produce. With these various data at
hand, the farmer can estimate which crops will net him the greatest
return for the coming year. The consideration. of economic conditions, as well as soil, weather, and crop-rotation conditions,
tend to prevent oversupplies in some crops and undersupplies in
others and to secure a more stable price year by year.
In wholesale and retail trade, sales figures alone are usually available, though data on stocks are now compiled for department stores
and wholesalers. As the trade figures are on a value rather than
on a quantity basis, the data for these .lines are not as satisfactory
as for manufacturing. Sales figures in wholesale and retail trade
represent a combination of orders, production, and shipments as
applied to manufacturing, for the ordering and shipment of goods
in trade are usually simultaneous. These data are discussed under
"Shipments." The sales figures thus represe:dt both the demand of
consumers and its fulfillment. This lack of advance orders precludes the forecasting of shipments of goods from conditions in the
particular trade, although these figures are of great value in showing
the changes in that trade. So the wholesaler looks primarily to
retail trade for his advance indicators, and the retailer looks to
general prosperity indicators.
will
PRODUCTION
Production statistics of an industry show what is being added to
the general supply of its products. They represent the actual meas-
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HOW TO USE CURRENT BUSINESS STATISTICS
urement of operations and generally reflect the prosperity of the
industry. The proper regulation of production plays an important
part in the success of a business, since too large production may
leave unsold stocks on hand, which can only be disposed of at a
sacrifice, while too small production will result in loss of opportunities for sales and profits. Through production statistics, the proper
adjustment of a firm's production can be made.
Current production figures are sometimes presented merely as a
total, but in many instances are classified according to the principal
types or classes of product or by geographical divisions. Occa•
sionally, where the product is highly diversified, as in the textile
industries, production is measured by the consumption of raw materials or by the activity of the machinery rather than by actual
quantities produced. Production statistics have been used by manufacturers in the following ways:
1. Comparing present production with previous months or with
monthly averages of previous years, the trend of production is discerned for the industry, and its course is studied for evidences of a
change in direction. Seasonal changes, such as occur in cement
manufacturing or flour milling, where the normal output varies considerably according to the season of the year without regard to business conditions, must be allowed for in such studies. In such cases
the true trend of the industry is best seen in comparison with the
corresponding month of the previoll'l year or an average of such
corresponding months.
2. The normal seasonal movement of the industry averaged over a
series of years is often plotted on a chart and the current year's output plotted against it. Thus, any divergence from the normal seasonal trend may be seen at a glance. Many trade associations, in
industries where seasonal conditions predominate, show their production figures in this manner. (See diagram 1.)
3. The percentage which the production of one's particular firm
forms of the total for the industry shows at a glance the firm's position in the industry, and any change in that ratio will show whether
the firm is gaining or iosing in proportion to the rest of the industry.
This relationship is often shown by plotting on a chart the grand
totals in comparison with the individual company's production, the
latter being adjusted in accordance with its normal percentage relationship to the total, or else both being shown as relatives of some
comparable period. This is a very popular use of production figures
by executives, as it tells them exactly how they stand as compared
with their competitors. Many trade associations, such as the American '\Valnut Manufacturers Association, furnish their members with
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HOW TO USE OUBBBNT BUSINESS STATISTICS
5. Comparison of the production figures with those of competing
lines will show which are forging ahead in the race for popular favor.
The more swiftly advancing line will be encouraged to develop its
resources, while the slower lines will need further efforts to hold their
share of the business or will require changes in production or merchandising policies.
6. Production statistics are also used to measure the effect over a
period of time of such influences as cooperative advertising. A case
in point is their use by the paint manufacturers as a measure of the
success of the "save-the-surface" campaign a few years ago. Similarly, the effects of tariff changes, price changes, particular legislation relating to the commodity, etc., are shown by comparing the
period before the change with that after it, provided seasonal influences are allowed for and no great changes in general business have
vitiated the comparisons.
7. Except where stocks are being accumulated or depleted to a
large extent, production indicates the magnitude of shipments to be
made in the near future. Similarly, production reports indicate
prospective employment conditions, owing to the general practice of
producing as much as possible with present forces ~efore hiring new
employees.
8. Where production is shown by grades, as in the lumber industry, the percentage each grade forms of the total can be compared
for the individual plant and for the industry as a whole. As there
is a wide variation in the possible proportion of grades in a log, any
company finding that its percentages of the higher grades are not
measuring up to the average of the industry knows that this is a
weak spot demanding immediate attention.
9. Where production is shown by sizes and grades, a basis is
afforded for a study of simplified practice, through the elimination
of those sizes and grades which are produced in small quantities.
The industry can then concentrate on the goods which can be
made in greater volume and thus reduce manufacturing costs and
inventories.
CAPACITY
Capacity figures are closely related to production, for they measure the possibilities of production. The management of every plant
should know its capacity, based on a uniform definition for its particular industry, as discussed in Chapter IV. In this manner proper
comparisons between its efficiency and that of the remainder of the
industry can be made. These figures have been used as follows:
1. The relationship between production and capacity at any given
time indicates the extent to which production can still be increased
without resorting to plant expansion. An individual firm may be
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HOW TO INTERPRET THE FIGURES
working its plant at capacity and may be desirous of expanding, but,
if the industry as a whole were shown by statistics to be busy at only
a fraction of its capacity, individual expansion might not be
warranted.
2. The capacity figures are used to clarify production statistics by
showing the relationship of present to possible production. Steel
production at present, for instance, is very much larger than before
the war, but the steel manufacturer is more interested in its relation
to the war-increased capacity of the industry. With that relationship
established, be can compare present activity with past activity on a
more adequate basis. The American Iron and Steel Institute has
recently made available such capacity figures, both for a theoretical
capacity and for a practical capacity. (See diagram 3.)
DIAGUK 3.-PBoouoTION RATIO TO CAPACITY: AVE&AOE Fo& ALL Fraxs CoxPAllD> WITH OwN Fmx
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3. Capacity is related not only to actual production but to the dema.nd for an industry's products. Production may be near capacity,
but demand may be either at about the same level as production, in
which case any increase in capacity may not be warranted, or demand
ma.y be greater than capacity, because of supplies being obtained from
other sources. In this latter case expansion might be advisable. On
the other hand, demand as shown by consumption of the commodities
by consuming industries might be far below capacity, and this would
indicate to the manufacturers of the product that the high-coi;t plants
had better be scrapped or put to other uses, since they would have no
cha.nee to operate except under the most favorable conditions.
4. Relationship to capacity is used extensively by trade associations
and by their members to compare production statistics for two differ-
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HOW TO USE CURRENT BUSINESS STATISTICS
ent periods when a varying number of firms report. If 20 manufacturers report one month and only 15 the next month, with some of
the 15 firms not reporting among the 20 in the previous month and
thus precluding a comparison based upon identical concerns, a comparison of the total production in each month would mean little.
The reported totals might show a decline, whereas the actual condition might be the reverse. By obtaining the total capacity of all
reporting firms each month a percentage relationship of production to
capacity is established for correct comparison of the trend of productive operations.
EMPLOYMENT
The employment of labor is carefully considered by business men,
for it must be large enough to produce or handle the goods properly
and small enough to leave a margin of operating profits. Wages form
one of the heaviest items of expense in most lines of business, and
thus their proper regulation is essential to business success.
Employment is usually indicated either by the number of persons
employed at a certain pay-roll date in the month or, where more
detail can be given, by the number of man hours, representing the
total time of employment of all wage earners during the period.
Data as to the total pay-roll payments for the period are often
presented. The principal uses of employment figures are as follows:
1. The general trend of employment in an industry shows whether
it is taking on or laying off workers and particularly whether employment trends are following production trends, as is normally the case.
Seasonal conditions should, of course, be allowed for. In localities
where a particular industry predominates, such as rubber manufacturing in Akron, Ohio, the employment figures of that industry give
merchants an indicator of the prospective buying power of the community in the near future.
2. Where production and employment are reported by the same
firms and these firms produce only one kind of goods, dividing
quantities produced by men employed gives the approximate average
output per man. This average not only gives a line on the increasing efficiency of output for the industry over a period of time but,
in comparison with similar data for competing industries or for
the individual firm, has been used to reveal the weak spots in the
productive organization.
3. The seasonal variation of employment in a particular plant is
compared with the entire industry by reducing each month's employment to a percentage of the year's employment. It may be found
that the particular firm's employment is at too great a peak at certain
seasons and too low at others, thus resulting in too great a labor
turnover and capital investment. Some manufacturers in distinctly
seasonal industries have looked around for other products which
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HOW TO INTERPRET THE FIGURES
could be made in the dull season. The suitability of such products
is determined by examination of the seasonal trend of production
and of employment over a period of years. If these seasonal trends
are about opposite to those of the present product, their combination
would give the plant a stable business the year round.
4. In locating manufacturing plants with seasonal employment
the seasonal trends of employment in the industries already located
in a particular city or section are considered. By choosing places
where the predominant seasonal employment is different from its
own trend, the new firm can escape bidding for labor at the peak of
the rush season and leaving the wage earners in a precarious position
in the slack seasons.
5. Pay-roll data divided by units of product determine roughly
the pay-roll cost per unit. With this ratio, individual manufacturers
can compare their own operations in this respect with those of the
industry as a whole, and thus determine the relative efficiency of their
plants. These data are extensively used by the members of the
National Association of Paper Box Manufacturers to check up on
their efficiency in this respect.
SHIPMENTS
While production figures measure plant activity, statistics of shipments show the disposition of the products, since goods shipped from
the plant are on their way to consumers, whether for use in further
manufacture, in storage, or in wholesale or retail distribution. As
consumption is usually fairly regular, shipments in most industries
are more regular, month by month, than production, which may often
outrun demand for a short period and then have to recede until
demand catches up. Large and regular shipments are desired by
managements, since in this manner goods are billed and payment can
be received, while stocks are kept down.
Like production, shipments may be classified geographically and
by types or classes. The classification by districts in which the
goods are produced, which is the only geographical classification
possible for production statistics, is not nearly so important in shipments as the classification by district of destination of the goods
shipped. Sales of wholesalers and retailers correspond to shipment
figures of manufacturers, since in trade the goods are usually ordered
~nd shipped simultaneously. Data on shipments present the followmg uses:
1. Shipments indicate the consumption of a product better than
production, because they are nearer to the consumers, and they disregard production for stock. The shipment data are therefore
studied as showing the consuming power of the country for the
product in question, particularly in comparison with previous periods.
91~28-4
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45
goods. The American Walnut Manufacturers Association, for instance, issues a quarterly summary dividing the United States into
25 or 30 market areas and showing the exact quantities of their product shipped into each market. As an official of the association
remarks: " This information in a general way keeps us posted as
to the tendency in the various localities and promptly advises us
if our material is gaining ground, standing still, or slipping."
• 5. Comparing the shipments by districts gives an indication of
the relative importance of each district, so far as consumption of
the particular product is concerned. The more important districts,
thus revealed, are usually made the basis of the most intensive sales
campaigns. In using these statistics by districts great care should
be taken that they be representative of all sections of the country,
for otherwise they will be misleading. If, say, 20 per cent of an
industry's capacity is lacking from the statistics~ this would have
little effect on the trend of the total, for 80 per cent of the industry
would be quite representative. However, if the missing 20 per cent
included most of the manufacturers in a particular district, who
would naturally ship heavily into their immediate neighborhood,
the shipments into that district would be shown as relatively much
smaller than the actual amount.
6. Shipments by districts not only allow comparison of the actual
shipments into each section of the country, as pointed out above, but
are used to show the relative progress of the various sections in the
use of the particular product. The largest consuming district
might, for instance, be the least productive of extra sales effort,
because of being closest to the saturation point, and a chart comparing the relative progress of each district might show that some of
the smallest consuming districts were making the best progress.
Furthermore, such statistii::s, read in the light of other information,
might show temporary conditions of especially good or bad busine,s
in particular sections which would be useful in planning sale<;
campaigns. .
7. Manufacturers and distributors haYe used these shipments
figures by districts to compare with their own figures to ascertain
what proportion they are obtaining of the business of their own
districts in which they are most favorably situated, and to whnt
extent it might be advisable to concentrate more on those districts.
8. Shipment, or occasionally production, statistics are often used
by trade associations as the basis for dues, in order that the dues may
be proportionate to the business done by each member.
9. Comparison of production figures on various items with the
relative distribution of those items, as shown by shipments, indicates
to which items manufacturers may devote their attention as undersup-
•
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HOW TO USE CURRENT BUSINESS STATISTICS
plied. The manager of a softwood lumber mill, for instance, watches
these statistics to find out what items are running beyond consumption and does not take a chance of sawing such lumber and allowing
it to go into stock because of lack of demand.
10. The sales of retailers, which correspond to shipments of
manufacturers, indicate the buying habits of consumers, and any
changes in retail buying. habits will be immediately reflected in the
orders of retailers from wholesalers. Seasonal trends in retail sales
should, of course, be allowed for in such comparisons, just as in the
seasonal manufacturing lines.
11. Competition between retailers of various lines can be seen
from the x:elative sales of those lines, such as between tobacco and
candy, for instance. Present statistics, however, are not usually
classified into enough detail to permit comparisons by particular
commodities but only by large groups of articles sold by the same
class of stores, such as drugs, dry goods, shoes, etc., although a
beginning has been made in the classification by lines in departmentstore trade by the Federal Reserve Board. Care should also be taken
in comparing chain-store statistics to allow for the addition of new
stores, which would increase the totals more than the actual increase
in business. An average per store is often the best means for overcoming the effect of this artificial increase.
CONSUMPTION OF MATERIALS
As mentioned above, production of goods is often measured by the
consumption of the principal materials used in their manufacture,
but occasionally both production and consumption statistics are
available for an industry. In such cases additional information has
been made available to manufacturers through figures on consumption. Naturally, a manufacturer wants to consume as little as possible to cut down expense and to consume the cheapest materjals consistent with proper quality of his product. In this endeavor manufacturers have used consumption statistics as follows:
1. Consumption of materials compared with production will show
the ratio of raw materials used to each unit of product, such as the
number of bushels of wheat used per barrel of flour or tons of waste
paper used per ton of box board produced, etc. Any change in these
ratios will show the extent to which the industry is becoming more
or less efficient.
2. Any individual manufacturer can compare his own ratio of
material to product with the industry's ratio and thereby test the
efficiency of his plant. A chart showing both ratios over a period
of time will show up his progress in that direction in a concise
manner. ( See diagram 5.)
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resale does not want to tie up any more money than is necessary in 1
carrying stocks of raw materials, and yet enough must be carried to
insure continuous operation of the plant or sales agency. This
adjustment of stocks has been obtained by many business men
through the following uses of these statistics:
1. Figures of manufacturers' stocks of materials indicate the exte1,t
to which an industry is supplied with its raw material. These data. "
taken in connection with figures on unshipped orders, give an idea as
to whether there is likely to be a large demand from this industry for 1:
materials in the near future. Such a demand would be likely to bid L
up prices, while large stocks on hand would mean that manufacturers 1·
would be out of the market for some time. Allowance should 1 of :'
course, be made for seasonal influences on the amount of stock carried, !;
particularly in the case of crops, such as sugar cane and wheat, the
bulk of these being received at the mills or refineries in a few months
following harvest. In such cases comparisons can be made with corresponding dates of previous years.
2. Where consumption figures are available, the amount of material
stock divided by the average daily consumption by th~ industry
indicates the number of days' supply of materials on hand. Any
changing practices in purchasing, such as the adoption of "hand-tomouth " buying, can be shown by comparisons of these data over a
long period, while the stock figures alone might not give this indication, owing to the gradual growth of stocks to take care of the increased production of the industry.
3. Any manufacturer may compare his average day's supply of
material stock with the average for the industry and see whether
his policies in this regard are conservative. He can also by this
method of comparison over a period of time check up on whether he
has done better or worse than the rest of the industry in stocking up
in the past in anticipation of price increases.
4. Material stock may often have an influence on the output of the
manufactured product. For instance, production may be increased
at times beyond the proper demand merely to work off large material
stock while production costs are cheap and to replenish the manufacturer's supply of materials at the low prices induced by the large
outstanding supplies. In this case the addition of low-cost goods
may compensate the manufacturer for the additional storage of his
finished products, especially if he believes demand will increase later
and he desires to keep his force fully employed.
FINISHED STOCK
While material stocks held by manufacturers are largely under
their control, being increased through purchases and decreased
through production into finished goods, finished stocks can not be
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HOW TO INTERPRET THE FIGURES
decreased at will, as this depends upon shipments resulting from
sales. Particularly since 1921, when unsalable stocks overhung the
market for a long time, stock accumulation has been watched by
manufacturers with trepidation. On the one hand, too large stocks
are feared not only because of the extra carrying charges and tied-up
capital but also because of the possibility of losses through price
slumps, while too small stocks, on the other hand, will prevent a
manufacturer or dealer from giving the service which customers
require, and will thus result in loss of both sales and good will. In
many lines the stocks held by the industry will not tell the whole
story, because dealers' stocks might show a different condition. This
fact-0r is discussed further under" Statistics of distributive markets."
Stock statistics are often divided as between grades, classes, etc.,
and, in general, have been used as follows to obtain the delicate
adjustment necessary for proper inventory control:
1. Increasing stocks at a high level indicate lessened demand for
the product, or at least a demand less than the production. In such
a situation manufacturers will naturally try to cut down their production schedules until the overhanging stock is disposed of. On
the other hand, if stocks in the industry are low, manufacturers will
increase production in order to have goods on hand to share more
fully in the indicated increased business, particularly if such stocks
can be accumulated at low cost. Any regular seasonal tendencies
should, of course, be allowed for in calculating the trend of stocks.
A manufacturer of paving brick who acted on stock statistics according to the above principle found that he secured additional business
from being in a position to supply what other manufacturers were
out of. Woolen manufacturers who, previous to the inauguration of
statistics, believed that practically no stock was carried in the industry discovered after statistics were inaugurated that large stocks
were being held; and they immediately took effective measures to
decrease stocks to a modest figure.
2. Stocks divided by average shipments will show the average
time in months required to work off present stocks at the normal rate
of consumption and in this form can be more readily compared with
data for prior years for industries in which there has been a greatly
enlarged production, such as the petroleum industry. In such a case
the large increase in stocks would not necessarily be dangerous, unless
the average stocks, expressed in days' or months' consumption, were
greatly increased. But when, as was revealed by the statistics of a
trade association some time back, stocks in the manufacturers' hands
are equal to two years' consumption at the current rate of shipments,
a danger signal is given at once that prices are likely to fall and
that large production is inadvisable. The zinc industry has found its
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HOW TO USE CURRENT BUSINESS STATISTICS
stock statistics invaluable in reducing stocks to a point where they
are, to say the least, not endangering the price factor, according to
the American Zinc Institute.
3. As in the case of material statistics, the data on finished stocks
for the industry as a whole, when divided by shipments; are used by
individual manufacturers for comp&rison with their own averages.
In this way each manufacturer can tell whether he is overstocking, as
compared with the rest of the industry, or understocking. He can
also, as in the case of raw materials, check his own past guesses on
stock control with later events, such as prices and consumption, and
see whether his own or his competitors' policies were best.
4. If available by geographic divisions, stock statistics often show
how conditions in a particular district differ from those in the country at large. Knowledge of such conditions is especially valuable
in the case of a relatively heavy commodity, such as brick, which
can not be moved economically from one section of the country to
another, owing to the high freight rates in relation to its manufacturing cost. Manufacturers on the Pacific coast, for instance, might
have low stocks and an incentive for greater production, while Eastern producers might face the reverse conditions.
5. Stock figures by grades and sizes are of great value in disclosing
excesses of supply that might occur in one grade and not in another.
For certain sizes of rubber tires, for instance, relatively large stocks
might be available, which would tell the manufacturers to go slowly
on production of those sizes for the time being and to concentrate on
the sizes of which stocks were low, relatively to the demand. The
rubber-tire statistics, classified by sizes, have, in fact, been given
credit for the recovery of the tire industry from the overproduction
in 1922. Similarly, in the lumber industry, many firms report that
they modify their manufacturing practice when they see that certain
items are overproduced.
6. If stocks are divided as between sold and unsold, the exact
amount of surplus goods which must be disposed of can be ascertained. The proportion of stocks unsold can also be compared over
a period of time to ascertain the industry's progress in this respect
and the extent to which manufacturers have produced merely for
stocks as against production on actual order.
7. Stocks of department stores show the extent to which these
stores are stocked with goods on a value basis. Here, again, seasonal
conditions must be taken into consideration and the principal com•
parison made with the corresponding month of the previous year.
Department-store stocks in October and November of each year,
for instance, show the preparations being made by retailers for
Christmas trade, while stocks at the end of December show the ex-
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HOW TO INTERPRET THE FIGURES
tent to which the holiday buying came up to expectations and also
indicate the probable purchases from wholesalers during the forthcomjng months.
ORDBBS ACCBPTBD
The previous items have covered the physical aspects of the manufactured goods or their raw materials, but before goods can be produced plans are made for their production, and these plans depend
upon orders. Orders are what business thrives on, so every firm tries
to increase its accepted orders unless it finds that it is unprofitable to
obta:in them through too high selling costs, too high production
costs, excess costs of distribution, or unsound credit conditions.
Statistics of orders accepted during the week or month have helped
business firms to regulate their policies better through the following
uses:
1. As production must precede shipments, and thereby the production curve in a measure forecasts the shipments of finished goods
into consupmption, so the receipt of orders anticipates and in a
measure forecasts the output of goods. The figures on orders, however, will vary more widely than those on production, just as production generally varies more than shipments; and thus orders become a sensitive barometer of future output. Many executives wait
for an upturn in accepted orders after a decline before stocking up
with finished goods, in order to make sure of increased demand for
their product.
2. Orders accepted are probably the best business barometer now in
general use, because they reflect business sentiment exactly. Production figures for any particular month may reflect orders accepted
some months previously, and shipments, in turn, may comprise goods
produced at some previous time, but orders register immediately the
thoughts of consumers that it is time to buy. Furthermore, production and shipments in any one month are practically limited by plant
capacity and railroad facilities, respectively. There are, however,
no limits on orders, unless individual companies refuse to accept
bookings after having filled their productive capacity for several
months ahead; but, even in this case, the orders are likely to go to
other companies and still appear in the combined totals for the
industry. Thus, order figures give executives a feeling of the pulse
of demand for their products, indicating the policies to be pursued
as to price changes, sales methods, etc.
3. Figures on orders accepted are particularly useful in foreseeing
times of crisis. Unshipped orders may be high, owing to a large
accumulation of old orders, and stocks low, a normally good condition; but the first decline in accepted orders may be the signal for a
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HOW TO USE CURRENT BUSINESS STATISTICS
depression, as in 1920. Stocks would then increase on account of
the cancellation of orders.
4. Comparison of the individual firm's orders with those of the ,
industry will show immediately whether it is obtaining its proper
share of the business, based on output in the previous year, or an
average of earlier years. If a firm's orders should decline for a few
months but still maintain their proper relationship to the combined
totals, the decline can not be attributed to any defect in the firm's sales
force or policies, but rather to general conditions. In the face of such
i,tatistics, indicating that little business was available anyhow, many
executives are restrained from price cuts which otherwise might be
made if it were thought that others were getting more than their
share of the business. A decline in the combined orders but a gain
in the firm's orders would give warning of possible general declines
for the industry which the temporary gain in the firm's own figures
would not reveal. On the other hand, an increase in business, at a
slower rate of increase than for the industry as a whole, might give
cause for investigation of sales and price policies. This ratio, lik~
the ratio of the individual company's production to the total, is often
plotted on a chart to give a clear conception of this important relationship at a glance.
5. Accepted orders for an industry can be compared with production and shipments to ascertain whether demand is above or
below productive activity or consumption deliveries. Care i;,hould
be taken, of course, to allow for seasonal conditions in the receipt of
orders which might be different from the movement of production
and shipments, as in the case of certain steel products, where heavy
contracts are usually closed with the railroads at the beginning of
each year. Charts comparing orders with production or orders with
shipments, using contrasting types of shading to indicate the respective excesses, show such conditions in a graphic way, as does the
chart suggested for comparison of production and shipments.
6. Total accepted orders for the industry each month are also used
by sales managers as the basis of an effective sales quota, the firm's
quota being based on its normal share of the total for the industry.
By using such a varying total as a quota, which will fluctuate according to business conditions, good salesmen are not penalized when
business in the industry is poor. Furthermore, inefficient salesmen
are not allowed to slacken their efforts when business can be obtained
easily, for in such good times the quota automatically rises.
7. In a few industries, where accepted orders are presented by geographic divisions-that is, the districts in which the buyers are
located, not necessarily those where the manufacturers or distributors
are located-a picture of demand by districts can be obtained and
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HOW TO INTERPRET THE FIGURES
plans may be made immediately to push sales into those districts
showing the most progress. Although order figures, being more
irregular, are a less reliable measure of consumption in each district
than shipments, their early availability, through anticipating shipments by a month or more in most cases, enables the manufacturer
to use them to foresee changes in trend at the earliest possible
moment.
8. The distribution of accepted orders by districts helps to check up
on the activities of salesmen. The American Walnut Manufacturers
Association presents such figures and its secretary thus comments on
their use: " It destroys the alibi of incompetent salesmen in certain
territories. Before this report was made a distant salesman would
explain failure to obtain business by reporting that there was absolutely no buying in his district. To-day, if he comes in with such a
story and his home office discovers that buying has been active in his
district, there is strong probability that an incompetent salesman will
be looking for another connection."
.
9. Where accepted orders are given by grades or sizes, it is also
possible to foresee changes in demand or style before goods get into
production, thus enabling the manufacturer to concentrate on the
lines which are shown to be most popular throughout the entire
industry.
CANCELLATIONS
Under ordinary conditions cancellations are likely to be light,
being merely incidental deductions from new orders, due to changes
of plans or correction of slight overordering, and are similar to
returns of shipped goods which have proved unsatisfactory. With
remembrance of the heavy cancellations in 1920 and 1921, however,
which indicated a sudden lack of confidence in the business future,
many industries are compiling these figures to avoid repetitions of
such conditions. These statistics have been used as follows:
1. Cancellations by themselves will indicate, by any marked increase, the tendency of customers to restrict purchases through lack
of confidente in business conditions. These figures, taken together
with declining orders, may give the signal for avoiding commitments
and restricting production.
2. An even better picture may be obtained by relating cancellations
to orders. Increasing business may tend to increase those cancellations normally met with in the course of ordinary business transactions and, standing alone, such an increase might appear dangerous.
However, the ratio between cancellations and orders accepted will
show the situation in its tr1Je light.
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HOW TO USE CURRENT BUSINESS STATISTICS
3. Any individual manufacturer may compare the percentage
which his own cancellations form of his orders with the corresponding percentage for the industry at large and determine whether his
cancellations are larger than they ought to be.
UNSBJPPBD ORDERS
As the physical stocks carried at the end of any month show the
current result of the productive and shipping operations of the plant,
so unshipped orders at the end of the month show the net result of
the acceptance of orders and their fulfillment through shipments.
As one commentator puts it, "They constitute the index of unsatisfied
demand." Industries aim to have a good amount of unshipped
orders on hand so as to keep production continuous even if accepted
orders should slump temporarily. On the other hand, too large
unshipped orders in relation to the productive capacity of the plant
may mean inability to deliver goods on time and therefore loss of
business to co:r,npetitors. Statistics of unshipped orders have been
used as follows in the effort to regulate the flow of business
systematically :
1. Unshipped orders indicate the extent to which the production of
the industry is contracted for in the future. Large unshipped orders
generally show that the industry is in healthy condition and that in
many cases manufacturers can afford to take on new business only
at an increase in prices. On the other hand, if an individual manufacturer's books are well fi.Hed with forward business, but the industry as a whole is not so fortunate, he can not increase his prices, as
the other manufacturers would underbid him to secure the business
which they greatly need. A decline in unshipped orders usually
signals greater competition for business.
2. Unshipped orders, when compared with accepted orders and
shipments, often present a. better picture of conditions, for, if they
are high and accepted orders and shipments low, as was the case in
the steel industry early jn 1921, the unshipped orders are merely
book orders with shipping instructions purposely delayed or awaiting cancellation. On the other hand, steel unshipped orders in the
latter part of 1926 were lower than in early 1921, but accepted orders
and shipments were at a high level, the result of hand-to-mouth buying instead of buying ahead.
3. Unshipped orders divided by average shipments may be compared for different periods to show changes in the industry expressed
in monthly shipments. Such a percentage applied to locomotive
manufacturers in the early part of 1923 showed that unshipped orders
on hand represented over eight months' work ahead, indicating that
new business would probably have to wait that long before being
delivered.
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4. The individual manufacturer can compare his own average of
the ratio of unshipped orders to shipments with the corresponding
ratio for the industry and see how he is situated in relation to forward business as compared with the industry as a whole. He can
thus measure in terms of days' or months' shipments the exact
difference between himself and his competitors.
5. A comparison of unshipped orders with stocks on hand at the
end of the same month will show whether there is an excess of
demand or of supply to carry over into the next period. If there
is an excess of unshipped orders over stocks, then the industry can
generally operate without price cuts or increases in new business, but,
with an excess of stocks, more business than the current unshipped
orders will be necessary to enable the industry to take up the overstock. In many cases, of course, unshipped orders could not be filled
from stocks, owing to differences in sizes, grades, specifications, or
location. Similarly, an individual manufacturer may determine his
own situation as to the ratio of unshipped orders to stocks in comparison with the entire industry. This may show the necessity of making
concessions to put his business in better condition.
INQUIRIES
Although for most industries the receipt of new orders is the earliest indication of business trends, in certain lines a still quicker
recording of the business pulse is available through statistics of the
inquiries which manufacturers receive or the quotations which they
make to inquirers. In such lines, especially those covering heavy
equipment, inquiries are made by purchasers in advance of the placing of orders, sometimes by as much as a month. Such statistics
have been used as follows:
1. By anticipating orders by about a month in many lines the
trend of business can be ascertained through inquiries a month ahead
of orders. If inquiries begin to slacken, the manufacturer can figuratively start to pull in his sails with this first sign of storm signals,
while a sudden increase in inquiries can encourage him to carry more
canvas, to continue the nautical analogy. If he waited until his figures on accepted orders came in, his preparations might be too late.
The necessity for early danger signals is particularly great in the
equipment field on account of the large amount of capital tied up in
machines and the length of time necessary to change designs, etc., to
meet new conditions.
2. The ratio of inquiries to orders accepted also has a definite interest. Inquiries will naturally be considerably more numerous than
accepted orders; because the same buyer may send inquiries to half a
dozen firms, but only one will get the order. In g:ood times, where
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HOW TO USE CURRENT BUSINESS STATISTICS
buyers are not so careful about the prices of their purchases and where
service may be the prime consideration, the number of inquiries per
order is likely to be small; whereas in dull times not only will buyers
shop around more before placing orders, but many propositions on
which inquiries go out to the trade may be abandoned and no orders
develop for any one.
3. The individual firm can compare its own ratio of inquiries per
order with that for the entire industry to see whether it is getting
its share of orders proportionate to the number of inquiries, indicating whether its prices, service, sales, follow-up) etc., are up to the
standard of its competitors. The firm can also determine from such
data whether its goods are well enough known to obtain the proper
share of the total inquiries.
SALESMEN'S CALLS
Statistics along the same lines as inquiries are those covering number of salesmen's calls. A company that has kept records in this
respect finds that when many calls are made by salesmen the indications point to more severe competition, lower prices, and increased
productive activity.
PRICES
Price data are available on practically every line: since every tradP
usually has some place where its quotations are listed, whether it be
an exchange, a trade association, or a trade paper. Prices need to bP
adjusted with the same care ~s production and stocks, since no longer
is a high price considered the business man's chief objective. A high
price may kill off much good business and result in lower profits than
if a lower price had been fixed. The principal uses made of price
data are noted below:
1. Prices are effects of conditions reflected in other statistics rather ,
than causes;• but price changes by one competitor will influence
prices of others, and prices in one industry will influence prices of
competing industries and of those using that industry's product. '
While higher prices are usually synonymous with profits, many industries have prospered by lowering prices, the automobile industry being
an outstanding example. In such cases mass production, new processes, cheaper raw materials, etc., have come into play, enabling the
manufacturers to lower their prices profitably.
2. ·Any firm can compare its own prices with the regular market
to see if it is getting the general average for the industry. If competitors, or competing industries, are regularly underbidding a firm 1
the price differential should be the signal to examine costs, so that
prices may be quoted at the same level as those of competitors.
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HOW TO INTERPRET THE FIGURES
3. If prices are given for various grades, changes in the differentials between the grades will indicate where demand is increasing
most and where least.
4. Prices can be plotted against accepted orders, the relationship
of the two curves being used to show whether in any particular industry the trend of orders correctly predicts the trend of prices and by
how many months.
5. Prices can be compared with the general price curve of all commodities to see whether the industry is giving the public the benefit
of reductions better than other industries, thus showing the extent
to which greater efficiency in operation, management, or technical
skill has been used for the benefit of the consumer. The electric
light and automobile industries have used such charts in publicity
work.
6. A comparison of prices of one's own industry with competing
products will indicate the levels at which it is profitable to go after
consumers and at which levels the competing lines will have such a
price advantage that a campaign in that direction would be merely
wasted effort.
IMPORTS
Import figures can be obtained on practically all commodities
through the official figures of the Department of Commerce, which in
each case represent the total quantities imported. Import figures are
used by manufacturers as follows:
1. Imports show the competition in a particular line coming from
abroad and which countries are gaining and which losing in their
e:fforts to secure a foothold in the .American market.
2. Imports compared with domestic shipments of the industry (the
latter prorated to 100 per cent where necessary) will show the exact
proportions of a product supplied from domestic sources and from
abroad.
3. Imports of competing articles can be ascertained and their progress viewed in competition for .American trade.
4. Imports of raw materials show the extent to which raw-material supplies will be plentiful and give an indication of price trends
if the imported quantities are a large enough proportion of the total
supply.
EXPORTS
Export figures as compiled by the Department of Commerce also
show quantity data now in nearly all lines, with an increase in the
details from time to time. Export trade has proved of great benefit
in increasing business in many lines, especially when domestic trade
was dull, so that a firm with an export trade to different countries
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HOW TO USE CURRENT BUSINESS STATISTICS
may be able to make up in sales to prosperous countries what it might
lose temporarily in the domestic or other foreign markets through depressed business conditions. These figures present the following
uses:
1. Export data show the amount of business done abroad in each
line and, compared with the total shipments of the industry (the
latter prorated to 100 per cent where necessary), the extent to which
foreign business consumes the product. In commodities where the
export trade is predominant, such as cotton or copper, the volume
of exports gives a clue to the price situation by revealing the foreign
demand.
2. Data by countries show where the principal export business is
being done and may give suggestions for cultivation of the export
field in other countries situated similarly in respect to uses of the
particular product.
3. Comparison of one's own exports with the total for the industry
will show whether the individual's foreign business is gaining or
losing in proportion to the industry as a whole. Such comparisons
can also be made by individual countries.
4. Data on exports of competing lines show the degree of progress
each is making in the foreign field. Countries where competing lines
are finding good markets might prove valuable fields of endeavor for
the other lines.
5. Manufacturers of seasonal lines may find in export trade a I
means of balancing their production. For instance, items like tennis I
rackets, awnings, and bathing suits find a market in this country
almost exclusively in the summer, but in the Southern Hemisphere,
where the seasons are the reverse of ours, the demand for such articles j
is in our winter months, while in equatorial countries a year-round
market may be found.
·
1
STATISTICS OF MATERIAL MARKETS
Besides knowing the situation in his own industry, the manufacturer needs to know conditions in the industries from which he
obtains his materials. Materials may be not only agricultural, forest,
or mineral products but partially manufactured goods, such as wood
pulp or pig iron, which are used in further manufacture, or even
completely manufactured products, such as batteries or tires for ·
automobiles. Furthermore, the wholesaler purchasing from the manufacturer or the retailer from the wholesaler can use these same
principles in the purchase of what is essentially his material, since,
though it experiences no physical change between his purchase of it
and the sale to the consumer, it undergoes the economic service of
being brought to its actual sphere of usefulness. Where materials
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HOW TO INTERPRET THE FIGURES
come from abroad, foreign conditions must be watched also. Not
only must specific data for the commodity be examined, such as production, stocks, etc., but the general financial and business conditions
in the producing countries are of prime importance. In this connection allowance must ·be made for restrictive measures often imposed
by various governments, such as those on sugar by Cuba, on coffee
by Brazil, or on rubber until recently by the British Empire, which
can not be shown up statistically.
The purchaser of raw materials1 besides watching his own supply
and consumption statistics, the uses of which were shown under
"Statistics of one's own industry," finds it useful to look at the
following information concerning the industry from which he buys:
1. Production and shipment figures of his materials will indicate
the trend of supplies to be immediately available.
2. Production and shipment data on competing materials will
tend to show changes in their relative positions, and thus determine
which may be more affected by growing demand in the future.
3. Stocks of materials .held by their producers will indicate the
actual supplies on hand and the extent to which prices may be raised
or lowered, according as the supplies are low or excessive.
4. Orders accepted will indicate any changes in demand for the
materials and enable the purchaser to see in advance possible changes
in supplies or prices.
5. Unshipped orders may be compared with stocks as a further
indicator of the condition of the industry supplying materials, in the
same manner as described under" Statistics of one's own industry."
6. Prices of materials can be compared with prices of finished
products to see the spread between them. This comparison indicates
when to purchase and at what prices to sell. Similarly, the spread
between the prices of materials in foreign countries and those quoted
in the United States, with allowance for freight, insurance, and other
costs, will show the best markets in which to purchase and whether
stocks should be bought here or abroad.
Furthermore, if the data on materials are segregated by localities
or grades and sizes, the same principles may be further applied to
these specific cases, along the lines indicated under " Statistics of
one's own industry."
STATISTICS OF DISTRIBUTIVE MARKETS
Besides watching one's own industry and one's sources of supplies, the business nian needs to make careful analysis of the classes
of people or industries to which his goods are sold. Such market
statistics are used by raw-material producers regarding the industries to which they sell, by manufacturers regarding the finished91698-28----5
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BOW TO USE OUBBENT BUSINESS STATISTICS
goods producers or wholesalers, by wholesalers regarding the retailers, and by retailers regarding the general public, the latter cl~
applying, the principle in a slightly different manner, which will
be discussed under " General business statistics " in the following
section. In general, manufacturers, raw-material producers, and
wholesalers selling directly to another industry use the following
information concerning the industries to which they sell :
1. Production and shipment statistics show the extent to which
that industry is producing above or below consumption demands,
and thus indicate the possible trend of future production and therefore of that industry's demand for materials. Consumption data
are better than figures on production or shipments for this purpose,
on account of the improvements made in manufacturing. For instance, the constant increase in electric power obtained per ton of
coal has materially lessened the amount of coal which would normally be supplied for this purpose.
2. Large stocks of finished goods carried by a consuming industry
will indicate a prospective small demand for materials in the immediate future and small stocks indicate an active demand. Industries
where stock statistics are available both for manufacturers and for
dealers are able to stabilize their inventories better, owing to the
knowledge of stocks at all points. One side of the picture might
not tell the true story. For rubber tires, for instance, data are available monthly as to manufacturers' stocks and semiannually as to
dealers' stocks. Similarly, stocks of canned goods are being compiled both from canners and from grocers.
3. The production curve in a consuming industry often foretells the
production in the industry supplying raw materials. The · curve
of clay fire-brick production, for instance, has been a good indicator
of the output of pig iron, while building-construction figures have
proved accurate indicators of the demand for furniture six months
later. The National .Association of Wood Turners found that the
curve of operations of the textile mills precedes the demand for
bobbins and spools, while pig-iron production has been found to
forecast the wood turning for the hardware trade. Similarly, retail
trade in a certain line can indicate to the wholesaler his prospective
sales in that line, and wholesale trade may foretell to the manufacturer his productive output.
·
4. Just as orders in one's own industry give a quicker reflection of
demand than does production, so orders in the consuming industry
will give that reflection even sooner. The brick manufacturer, for
instance, need not wait for the receipt of order statistics on his own
industry to get a line on conditions, but he can look at the trend
of building contracts with the knowledge that their· ups ·and downs
should shortly be reflected in his own business.
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5. Those who sell to different businesses must watch them all,
so that if a slump is foreseen in one industry in the near future the
manufacturer can swing his production to the goods desired by the
other industries and not be caught with unsalable material. Thus,
the steel manufacturer watches the statistics of the railroads, the
automobile producers, the building industry, etc., for the first indications of change in the demand for his output. Similarly, the wholesaler can watch the sales of various lines by retailers as indicators
of the best sellers in the near future.
6. Large unshipped orders of a consuming industry will indicate a
good demand from that industry for materials, unless it is shown
to have large material stocks on hand.
7. Inquiries arranged by localities are useful to sellers in planning
their work. The Asphalt Association, for instance, compiles monthly
a tabulation of States, counties, anq cities that are either contemplating, authorizing, or selling bond issues for paving work. This is
distributed to their members, so that they may know the localities
contemplating paving and where money is available for such work.
8. Wholesale trade compared with retail trade in the same line,
such as shoes or dry goods, will indicate to what extent wholesalers
are gaining, losing, or maintaining their ground in comparison with
direct sales by manufacturers, which with the wholesalers' lines make
up the goods bought by retailers.
GENERAL BUSINESS STATISTICS
Thus far we have dealt with the current statistics of particular
industlies-one's own industry, the industries supplying its raw materials, and the industries consuming its products. It has been shown
in the preceding section that the retailer must watch for his consumers the entire business population rather than one or two industries, but the manufacturers, the raw-material producers, and business
men in other lines should also go beyond their own related industries
to look for future trends. When a depression comes along, as in
1921, almost all industries topple like a house of cards when a severe
push is given to the industrial fabric. One's own industry may seem
secure, just as a ship at sea on a calm day, but squalls or hurricanes
will not find it unprepared if it has weather reports indicating their
approach. The principal uses of general business statistics are like
those relating to particular industries, for in most instances these
statistics are merely composites of the figures of the various individual trades or industries combined into a total number with each
item given its proper weighting according to its importance. Thus,
the composite index number reflects the trend of general conditions
as the individual industry's statistics reveal the status of that indus-
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HOW TO USE CURRENT BUSINESS STATISTICS
try. Some of the more important index numbers and other general
business data are noted below, with their uses :
1. The Department of Commerce and the Federal Reserve Board
issue composite index numbers on various phases of production, and
certain private agencies have also compiled such indexes. The index
number of production, whether of manufacturing or raw materials,
shows the extent of productive activity as compared with previous
periods, and any particular product or industry can be compared
to this general index to see its comparative progress. This comparison will also show over a period of time whether a particular industry
normally precedes or follows the curve of general production, thus
establishing its position in the business cycle. Some industries, like
silk, have been found to be leaders in showing the trend of general
business, while others, like machine tools, have found that their curve,
though being one of the first to ~xperience the slump, is one of the
last to respond to the rise. The establishment of such relationships
in an industry enables the executive to forecast the possible effect of
general trends on his own industry.
2. The index of stocks on hand, prepared by the Department of
Commerce, shows the extent to which industry as a whole has stocks
of goods on hand when allowance is made for seasonal conditions.
Excessive stocks held generally, due regard being taken for the
volume of production, would tend to indicate an overbalanced condition, as was the case in the middle of 1924, while small stocks would
indicate that an increase might be expected in demand for goods
as a whole. However, at the peak of a boom, as in the latter part
of 1919, stocks may be low and not rise until heavy cancellatioDi come
in; in such cases orders, inquiries, and cancellations will bear the
most watching.
3. The index of unshipped orders, prepared by the Department of
Commerce, though not covering industry generally, owing to lack
of data, has been an important indicator of the general trend of
production. Since 1920 this index has generally foreshadowed the
trend of the production curve, and these two curves, together with
the stock curve, are used quite extensively by business men to watch
the trend of general business. The unshipped-order index also shows
the extent to which hand-to-mouth buying has prevailed during the
past few years and, largely for this reason, has not proved as accurate an indicator of production since 1926. (See diagram 6.) A
manufacturer's association in New England complies an index of
unfilled orders from over 200 members representing all the more
important industries of its State.
4. Indexes of employment, compiled from data collected by the
Department of Labor and by many States, show the extent to which
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TO USE CURRENT BUSINESS STATISTICS
'7. Price indexes have been compiled on wholesale and retail prices
(the latter total also called the cost of living) by the Department of
Labor and by private organizations, 'While an index covering prices
received by producers of farm products is compiled by the Department of Agriculture. A comparison of these indexes sets forth the
trend of relative purchasing power as between farmer, manufacturer
or other business man, and consumer. These relationships are useful
in watching for changes in the trends, as well as in preparing arguments for legislative or other action which would affect general price
trends. The wholesale price index on the old pre-war base is also
used extensively to deflate the postwar values to a pre-war base for
comparison, as division of the postwar figures in dollars by the wholesale price index based on 1913 as 100 brings the data to 1913 values.
8. Indexes of wholesale and retail~trade, the latter covering chain
stores, department stores, and mail-order houses, have already been
touched upon in their significance to distribution problems. These
index numbers, compiled by the Federal Reserve Board, also denote
general business prosperity and consumer buying, though the chainstore data must be carefully considered in the light of the number of
stores operating, owing to the great expansion of this line of business.
Furthermore, the mail-order houses reflect in large measure the pur. chasing power of the agricultural communities, from which these
houses obtain the bulk of their business. The recent opening of
urban retail stores by these houses may tend to modify this indication.
9. Indexes of stock prices, compiled by various financial journals,
have in the past proved fairly reliable prognosticators of business, as
the stock market has been found to anticipate business conditions by
several months. Recently, however, with the better stabilization of
business, the stock-price index has not foreshadowed business trends
as well as in the past.
10. Indexes of bond prices can be compared with the stock-price indexes, particularly by those concerned with investments, to see. the
relative price advantage enjoyed at a given time by either class of
securities. When the bond index is reduced to terms of 11 particular
rate-say 4 per cent--then the yield of various classes of bonds can
be compared with commercial paper and other rates to show their
relative advantages in regard to yield as investments.
11. Life-insurance, savings-bank, and new-security statistics give
an idea of the savings of the country and the extent to which ne1v
capital is being created. These items all have a bearing on the market
for securities.
12. Advertising linage and postal receipts are used as indicators of
sales campaigns, and thus of the thought of business men as to favor-able sales conditions.
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HOW TO INTERPRET THE FIGURES
13. Check payments, as shown. by bank clearings or debits to individual accounts, are the most inclusive measure of the volume of
husine.,ss, as they measure payments of all kinds. They are, however.
subject to considerable seasonal fluctuations, particularly at the time
DIAG&Alll 7.-PRINCIPAL BUSINESS !NDIC.A.TOBS
RILATIVI TO I Ill AS I 00
10
10
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DEFAULTED LIABILITIES
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1922 1923 1924 1925 1926
~
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1922 1923
1924 1925 1926 30
of the quarterly income-tax payments. Comparison of data for individual cities or districts with the grand total will indicate their relative progress and therefore their general sales possibilities.
14. Statistics of the number of freight cars loaded present a measure of the total physical volume of goods passing into consumption,
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HOW TO USE OURRENT BUSINESS STATISTICS
but as freight-car shipments are mude after the goods are produced
these figures are not barometers but rather thermometers of industrial activity and trade. These data are also early indicators.of the
relative prosperity of the railroads.
15. ·statistics on banking conditions, such as the loans, discounts,
reserves, etc., of the Federal reserve banks and of their member banks,
indicate the tendency of industry to call upon the banks for loans and
the extent to which further credits might safely be granted.
16. The rate of exchange on foreign currencies is carefully watched
by those dealing with foreign countries, either importing or exporting. Actual prices in a foreign country may fall but may be neutralized by a rise in the exchange rate. Usually the general price ]eve.I
of a country ·will fall if the value of its currency rises, but in 1927
French prices did not fall correspondingly to the rise in exchange, 1
and thus France became easier to sell to and harder to buy from.
The rate of credit insurance is also of value to exporters as indicating
the stability of business conditions abroad.
17. Interest rates and the Federal reserve ratio are important ,
indicators of the cost of money and of the prospects influencing
business expansion and the securities market.
18. Building contracts show the extent of building operations in
the immediate future. .As the building industry gives the impetus
to a great variety of other industries, such as lumber, steel, cement,
brick, furniture, enameled ware, draperies, linen, electric lights, '
plumbing, roofing, etc., its course is of particular importance to
business in general.
19. Consumption statistics of electric power and of coal are used
as indicators of general industrial activity, owing to the general use
of power among all kinds of industries.
There are other general business indicators available in the Survey of Current Business and other collections of business data, but
the above are those generally recognized as the most important indicators of business trends. With these as a basis, the executive can
put his finger on the pulse of business and plan his own policies on
the facts disclosed in surveying the field in this manner.
In conclusion it should be emphasized that the statistics must be
secured and used promptly to be of the utmost benefit. Difficulties
in the business situation should be foreseen as far ahead as possible
in order to be guarded against or even prevented. With indicators
at hand covering conditions for business in general, for consuming
markets of one's product, for the industry itself, for other industries
or products whose activity has been found to correlate therewith, for
the raw materials needed, and for the individual firm's operation,
the business executive is supplied with a chart of business to guide
him intelligently in planning forward-looking policies.
1
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HOW TO COLLECT CURRENT STATISTICS
SUID[A.RY.-In inaugurating a statistical program, decision must be reached
as to the items to be gathered, the period covered, the de1lnitions of the terms,
etc. Kethods employed by trade associations in collecting and compiling the
data are desoribed, a1 well a1 methods of publicity and of presentation. The
collection of 4ata outside of trade-association members by the Bureau of the
Census is described, and answers are presented to the usual objections to
reporting statistical data.
Most compilations of current statistics outside of Government
departments are prepared by trade associations or similar organizations. The preparation of statistics can therefore be best discussed
from the viewpoint of the trade association. The following discussion has been taken, with slight changes, from the chapter on statistics of the bulletin, Trade Association Activities, recently published
by the Department of Commerce.
WHAT TO GATHER
The organizat.ion of statistical work in a trade association is usually intrusted to a committee. This committee, with the assistance
of the secretary, studies the statistics needed by the industry and the
methods of obtaining them. It reports its findings to the entire
association and leads the discussion on the subject among the members. Once a statistical program has been adopted, the work of
carrying it out falls almost entirely upon the secretary or manager
or a statistician in his office.
The value of trade association statistics depends in a large measure
upon the manner in wh.ich they are collected and presented. Statistics
gathered and prepared without care or without attention to the best
statistical practice may often be misleading rather than helpful.
A trade-association secretary should therefore familiarize himself
with the accepted principles of current statistics, it often being
advisable to secure expert assistance on this matter. Misleading
statistics are worse than no statistics at all. Well-organized statistics,
like a smooth-running machine, give ample returns in earning power
through uses which executives make of them.
Of prime importllnce to the future utility of association statistics
is the decision as to what to gather. The results can show no more
than the ,items to be asked for on the blank. The importance of each
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item to the industry, therefore, should be carefully weighed. Those
items should be included which there is reason to believe will prove
useful to the industry and which may be readily obtainable, but
this list should not be expanded too far, owing to the possible lack of
available records by smaller concerns and to the danger of making
the blanks too cumbersome. Other items or details can be added later
as demand develops.
Before deciding definitely upon the items to be covered, investigation should be made of the current statistics already available on
the subject, which inquiry of the Department of Commerce will
probably disclose. This procedure will, in the first place, prevent
pos.sible duplication of data already being gathered. Secondly, it
will enable any trade association to make its blanks conform in
classification to statistics of imports and exports on the commodity
in question, to the production figures shown in the census of manufactures, and to any other related current figures. If the items are
made comparable with these other figures, association members can
readily find out the exact relation which their figures bear to the
census production figures, can calculate the percentage of their
product exported each month and compare their progress, item by
item, with competing or consuming industries. ·
The particular items to be gathered will vary as between different
industries according to the special requirements of each industry,
but, in general, the five figures considered essential are production,
shipments, finished stock, c,rders accepted, a.nd unshipped orders, or
such modifications as may be necessary to meet the particular requirements of the industry or trade under consideration.
Among the associations covering all these five items in their reports
are the National Association of Sheet and Tin Plate Manufacturers,
the Oak Flooring Manufacturers' Association, the Maple Flooring
Manufacturers' Association, the Tight Barrel Circled Heading Manufacturers' Association, the Illuminating Glassware Guild, the Glass
Container Association, the Paving Brick Manufacturers' Association,
the Paperboard Industries Association, and the National Association of Finishers of Cotton Fabrics. All these associations, except
the three covering wood products, also show their figures as percentages of capacity. In some lines stocks are not generally carried,
and such statistics are thus of no importance, while in others production and shipments or production and orders may occur at approximately the same time and may thus be combined. In certain
lines machinery activity is used as an indicator of production, as
in the reports on silk machinery by the Silk Association of America,
and on printing activity by the United Typothetae of America. The
Locomotive Crane Manufacturers' Association and the Electric Overhead Crane Institute secure data on inquiries, which in the equip-
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69.
ment field anticipate orders by a considerable period and thus show
the first indications of changes in business sentiment.
Many associations need further details on their statistics, such as
the expression of certain data in dollars as well as in quantities,
the segregation into types, sizes, grades, etc., and segregation of
orders and shipments by geographical districts. The tire figures compiled by the Rubber Association of America are classified by kind
(cord or fabric), by size (regular, heavy, or balloon), by shape
( clincher or straight-side), and by the many different tire mea~-·
urements.
The figures on hardwood lumber, compiled by the Hardwoo'd
Manufacturers' Institute, are classified by species (red gum, sap gum,·
oak, etc.); by grade (No. 1 common, etc.); by district (southern or
eastern) ; and by the various dimensions. The Tubular Plumbing
Goods Association and the Association of Cotton Textile Merchants
of New York also present reports in great detail.
Many associations have found that State or district totals a1'e!
particularly advantageous in studying Jocal conditions which may,
be entirely different from the national situation. As examples of
geographical segregation may be cited the Paving Brick Manufa:c:...
turers' Association, which presents its shipments l;ly State of destin-a'tion; the Common Brick Manufacturers' Association, classifying its·
figures by State of production; the Life Insurance Sales Research
Bureau, presenting its new insurance business by States; the National
Association of Real Estate Boards, classifying its data by cities; a:nd
the American Ra~lway Association, with data divided into railwayoperating districts.
Reports in dollars are not generally so valuable as those in quantities, owing to price fluctuations, but in some lines, where the sizes of
the items differ materially, such as the machinery statistics collected
by the Foundry Equipment Manufacturers' Association, the pump
statistics collected by the Hydraulic Society, and the office furniture
statistics collected by the National Association of Steel Furniture
Manufacturers, dollar amounts have up to the present time provided
the only means of totaling their data. A rather novel classification
is that presented by the National Machine Tool Builders'· Association, where the firms are grouped according to size, and relative
numbers are presented on that basis.
The details asked for on the blanks should not be so minute that
their segregation would reveal the operations of individual concerns.
For instance, if it were known that only two members were making a
certain grade of goods, the segregation of that grade from the others
would permit each firm to know what the other was doing. Such
details should be eliminated from the forms.
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PERIOD COVERED
When the items to be collected are decided upon, the period of time
covered by each report must be determined, whether daily, weekly,
semimonthly, monthly, quarterly, etc. As a rule, monthly reports
have proved the most popular. They are less susceptible than weekly
returns to temporary influences, and thus can be compared with
greater confidence. On the other hand, some industries want figures
more often, and in certain cases daily reports are made on some items,
such as orders, shipments, and prices. The issuance of more frequent
reports, however, puts a heavier burden on the members as well as on
the clerical staff of the association.
PREPARING THE FORM
With the above questions decided, the schedule or form for obtaining the reports can be set up. It should be simple and clear. Experience has shown that even in the reports given most careful
consideration, questions are misunderstood, and as a result the figures
sent in are not those desired. There should be a meeting of minds on
the exact definition of the terms, and to that end all items should be
clearly defined, or explained in a footnote if necessary. Some associations, for instance, require reports only on stock goods, like the
National Association of Steel Furniture Manufacturers, or on standard grades, like the Paving Brick Manufacturers' Association, and
omit special ware entirely from the compilations, but if this definition is not clearly stated on the blanks, many firms may include the
special goods. Even the definition of the commod]ty itself is often
necessary, as the exact dividing line between many articles-such as
box board and paper board, locomotive cranes and power shovels,
structural steel fabrication and steel-plate work-is often difficult to
draw without a definite statement. Definitions in some detail of the
exact data to be reported are printed on the forms distributed to
members by the News Print Service Bureau, the Bureau of Envelope
Manufacturers of America, the Cordage Institute, and the American
Face Brick Association.
The iteins of production, stocks, etc., also need definition, for those
not accustomed to reporting these kinds of statistics. Some firm;:,
for instance, will report as accepted orders their gross orders, while
others will deduct cancellations; some consider that their orders are
filled once they are produced, while others wait until they are shipped
before deducting them from the unfilled-order total.
To remedy this situation, a committee on statistics was appointed
in October, 1925, by the American Trade Association Executives, the
national organization of trade association secretaries and managers,
and its preliminary report to the association recommended that
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standard definitions be adopted. A subcommittee on terminology of
the sectional committee on standards for graphic presentation, sponsored by the American Society of Mechanical Engineers, has studied
this subject in further detail, and has recently submitted the following definitions for adoption:
Projects.-Projects consist ot plans toward the accomplishment ot which
sufficiently definite steps were taken during the period to justify the presumption ot subsequent orders tor commodities. Projects should be reported by the
planner or his authorized agent.
/nquiries.-Inquiries consist of formal requests received during the period
for quotations or other information looking toward the ordering of goods.
Inquiries should be reported only by the recipient ot the inquiry and requests
made by curiosity-seekers, students, or others not apt, to lead to orders should
be excluded. Where duplicate inquiries to ditferent firms are deducted from
the totals by the compiling organization through identification of the source of
each inquiry, the resulting compilation may be called " net inquiries " and the
duplicated totals " gross Inquiries."
Orders accepted.-Orders accepted consist of orders, reservations, bookings,
contracts and commitments accepted during the period from or for customen
or related establishments or departments functioning as customers and deftnite
as to quantity and commitment, whether delivery date is specified or not.
Where an order calis for a Eq>ecified amount, more or less, the amount specified should be considered as the order. When the goods are shipped, any
excess over the amount specified should be added to orders accepted for the
period and any deductions should be taken as cancellations.
Oancellations.-Cancellations consist of orders canceled during the period or
reduced or written oft' in any manner except by shipments.
Net orders !WCef)ted.-Net orders accepted consist of orders accepted during
the period minus cancellations during the period.
Sh.ipments.-Shlpments consist of finished product disposed of during the
period by any form of delivery to the next stage of distribution for customen
or related establishments or departments functioning as customers. Consigned
goods are not to be considered shipments until disposed ot. In retail stores the
term " sales " may be used for shipments.
Returned product.-Returned product consists ot product previously recorded
as shipments but returned <luring the period for the credit of customers or
related establishments or departments functioning as customers.
Net shipments.-Net shipments consist of shipments during the period mlou■
product returned during the period.
Resales.-Resales consist ot product originally purchased for resale frOlll
establishments within the same industry and disposed of during tbe period.
Resales should not be included with shipments ot the reseller's own product.
as they already are included In the shipments ot the original producer.
UM1upped orders.-Unshlpped orders consist of unshipped balances of orders o■
hand at the end of the period. Unsh:pped orders may be divided as between a)llllied
and unapplled, according as to whether stocks have been allocated to them or aot.
Finished stock.-Finished stock consists of product on hand at the end of die
period ready for delivery to the next stage in distribution and includes consigned goods until disposed of. Finished stock may be divided ai, betweea
applied and unapplled, according as to whether it has been allocated agaiDllt
particular orders or not.
Production.-Production consists of product actually finished during the peri04I
ready for delivery.
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Purchases.-Purchases consist of orders, reservations, contracts, and commitments given during the period to sellers or related establishments or depart. ments functioning as sellers and definite as to quantity and commitment,
whether delh·ery date is specified or not. Where a purchase calls for a specified amount, more or less, the amount specified should be considered as the
purchase. When the goods or materials are received, any excess over the
amount specified should be added to purchases for the period, and any deductions should be taken as canceled purchases.
Ca.nceleit purchasu.-Canceled purchases consist of purchases canceled during the period or reduced or written olf in any manner except by receipts.
Net purchases.-Net purchases consist of purchases during the period minus
canceled purchases during the period.
Resale purchases.-Resale purchases consist of product purchased during the
period from establishments within the same Industry for resale. Resale pur, i!hases should not be Included ll°ith purchases.
Unshippeit purchases.-Unshipped purchases consist of unshipped balances of
purchases outstanding at the end of the period.
Recmpts.-Recelpts consist of materials or goods acquired during the period
by any form of delivery from or for sellers or related establishments or depart. ments functioning as sellers. Consigned goods are not to be considered receipts
unless purchased.
·
Returned receipts.-Returned receipts consist of materials or goods previously
recorded as receipts but returned for credit during the period to sellers or
. related establishments or departments functioning as sellers.
Net receipts.-Net receipts consist of receipts during the period minus
returned receipts during the period.
Material stock.-Materlal stock consists of materials on hand at the end of
the period upon which no work has been done by the reporting industry,
although it may be finished product of a previous stage in distribution.
Process stock.-Process stock consists of materials on hand, upon which work
. has been started but not completed at the end of· the period.
Factory consumpt-ion.-Consumption consists of materials entering into the
process of manufacture during the period, whether the process is completed during the period or not.
In line with making the reports as clear as possible, the facts to
be gathered on the form should be reported as units rather than as
percentages or relatives, owing to the difficulties of combining the
latter data. For instance, we may take the simple illustration of a
supposed industry w,ith two plants. One, a 10,000-ton plant, pro, duced in a given month 5,000 tons, which is 50 per cent of its capacity. The other, a 1,000-ton plant, produced 1,000 tons, which is 100
per cent of its capacity. If an association secretary secured merely
· the percentages of capacity he would have just these two figures, 50
pet cent and 100 per cent, which averaged would give him 75 per cent
, ;as representing the per cent of the industry's capacity which was
active. This 75 per cent figure, of course, would be an error. The
t9tal capacity of the industry is 11,000 tons. Its total production is
6,000 tons. The actual per cent of the industry's capacity which 1s
p,,ctive is not 75 per cent, but 54.5 per cent.
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The mere reporting of percentages of ca.pa.city or of increase or
decrease from the preceding month fails to establish the proper
relationship between large and small firms, unless figured out on a
basis of total capacity as indicated above. How much easier it js
simply to report the items .i n units, such as tons, in the first place,
so that only one addition need be made I Some executives, it is
true, will give only percentages. They seem to be afraid to give
their unit or absolute figures, even to the secretary of their association.
The misleadjng tendency of percentages when combined as a simple
average has been revealed in the example cited. If, to avoid such
errors, the capacities of plants as well as the percentages of capacities
active are given, then the association's secretary obtains the unit
figures anyhow in order to get his finished product. Giving the
unit figures in the first place saves time, energy, and clerical work.
A detail of the form that should not be overlooked is the name
of the association and the exact address of the person to whom the
report should be returned for compilation. Often such reports are
missent to Government departments or to other organizations and
may be lost or greatly delayed in getting to the proper person.
On the first report it might be advisable to secure figures on
capacity so that definite percentages of production, etc., can be
calculated in the future. As mentioned above, such figures on the
relationship to capacity are important items in the reports of many
IL$0Ciations. The capacity figures should be revised about once a
year to take account of changes in the industry.
The capacity item should be carefully defined, owing to the tendency of companies to use inflated figures designed to make an
impression in sales talk. Where capacity can be ascertained by
machine measurements, as in the box-board industry, aa accurate
indicator can be obtained, but otherwise the capacity of a plant
is apt to vary with the individual making out the report, unless
it is tied down to a strict definition. On the other hand, capacity
for making a particular product is elastic at best, especially in
plants able to produce other articles. For instance, a fabricator of
structural steel may turn his plant to the fabrication of plate work,
shipbuilding, the construction of railroad cars, etc., and thus keep
his force busy, although working at far below capacity on structural business alone, while even on strictly structural work the tonnage will vary considerably as between light work and heavy work.
To overcome as far as possible such difficulties, the Bureau of the
Census has used in its inquiry relating to structural steel the following definition, which may be modified to suit other industries:
Capacity of the plant is to be regarded as the tonnage of structural steelwork that actually could be turned out running single turn on the character
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and class of structural work that the plant ordinarily secures.
Structural
work is considered as all work using structural shapes.
The carelessness with which some concerns fill in the report form
has led some associations to put the schedule into the form of a
balance sheet, so that all the items shall check. The Paving Brick
Manufacturers' Association, the Bureau of Envelope Manufacturers
of America, and the Illuminating Glassware Guild secure an exact ,
balance on all the items on their reports. A form of balanced
reports is given below in some detail, covering all the principal
factors of products and material, showing the balance maintained
between the quantities appearing opposite the various items. This
form goes even further than most a$ociation reports, which generally cover only the sales and production situations:
SALES SITUATION
Unshipped orders, end previous month ________________________________ 10,000
Orders accepted _______________________________________________ 5,000
Cancellations ___________________________ _______________________ 1,000
Net orders accepted------------------------------------------------- 4,000
Total demand in orders _______________________________________ 14,000
Shipments
____ · --------------------------------------------- 8,000
_____________________________________________
1,000
Returned product
Net shipments-------------------------------~-------------------- 7,000
Unshlpped orders, end of month ________________________________ 7,000
PRODUCTION SITUATION
Finished stock, end previous month----------------------------------- 3,000
Production.--------------------------------------------------------- 8, 000
Total supply of finished goods---------------------------------- 11, 000
Net
-------------- 7,000
1,000
Stockshipments---------------------------------adjustments ___________________________________________
8,000
Finished stocks, end of month__________________________________ S, 000
PURCHASE SITUATION (MATERIALS)
Unshipped purchases, end previous month _____________________________ 5,000
Purchases __ ------------------------------------------------- 3,000
Canceled purchases-------------------------------------------- 1,000
Net purchases..------------------------------------------------------ 2,000
Total commitments____________________________________________ 7,000
Receipts... _____________________________________________________ 4,000
Returned receipts-------------------------------------------- 1,000
Net receipte ------------------------------------------------------- 3,000
Unshlpped purchases, end of month_____ ________________________ 4,000
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75-
CONSUMPTION SITUATION (MATERIALS)
Material ______________________________________________________
stock, end previous month----------------------------------4,000
Receipts
4,000
Returned receipts _____________________________________________ 1,000
Net receipts________________________________________________________ 3,000
Total supply raw materials____________________________________
7,000
Consumption _______________________________________________ • __ 5,000
Stock adjustments--------------------------------------------- 1,000
6,000
Material stock, end ot month__________________________________
1,000
An important part in the success of trade association statistics .is
the confidence reposed in the secretary for the complete secrecy of
individual returns. This secrecy must be inviolable and usually only
the association secretary or a trusted clerk is permitted to see the
individual returns.
In some association offices the returns are placed upon an adding
machine, and as soon as the totals are obtained the original reports
and all records relating thereto are destroyed. While this .is an
ideal method of assuring permanent secrecy of the individual reports, a difficulty is presented where identical firms do not report
each month, in that it is almost imposs.ible to secure an accurate total
at some future time for comparison with a more complete current
report for the industry. This can be remedied in many cases by
having a list made of the reporting firms so that the gaps may be
filled in later from the nonreporting firms. However, where concerns d.iscontinue their membership, though still in business and no
longer included in the reports, the past association totals can not be
made comparable with the subsequent reports without deducting the
missing firms' figures from the totals. If no record of the individual reports is kept by the association, this w.ill be impossible without
resorting to duplicate figures from the individual firms, which may
entail considerable annoyance. A coded record of past figures, the
secretary alone being in possession of the code, overcomes this
difficulty.
Some associations, instead of having an individual firm sign the
reports, put a key number on each form so that no one will know
the identity of the firm reporting any set of figures. In such cases
the secretary alone knows the firms to whom the key numbers are
assigned. In certain associations the assignments of the key numbers are even kept secret from the secretary, being known only by
some outside organization, such as the trust officer of a bank, to
whom the reports may be sent, and then transmitted in bulk to the
association office for tabulation.
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.COLLECTING THE DATA
Although some associations give their members a supply of forms
to last for some time, most organizations send out the forms regularly to reach the members on the last day of the period to be reported. This latter method has the advantage of acting as a reminder
that the report is due. Daily reports, of course, can be supplied more
easily in advance, and in the case of weekly reports that procedure
might also be applied with economy in mailings; for it is easier
to remember the day of the week on which reports are to be made
than the day of the month, especially as the latter may vary from
month to month, with delays in the compilation of a firm's figures.
Weekly reports, however, must be sent promptly on the day appointed, as their issuance on time is more vital, covering, as they do,
such a short period.
To secure prompt attention, the forms should be addressed directly
to the person in charge of the statistics for each company. It should
be understood by each reporting official that the reports must be
taken care of promptly and that in his absence they must be filled
out by some one else, and not merely left on his desk for two or
three weeks in times of vacation, sickness, etc.
The sooner the forms can be returned to the as.sociation office the
quicker the tabulation can be made for the benefit of the industry.
On monthly reports members are usually asked to send in their data
within 10 days, although in many cases 20 to 25 days may elapse
before all reports are in. The reports of the American Iron and Steel
Institute and of the American Zinc Institute are examples of compilations distributed within 10 days after the close of the month.
The value of news as p·erishable as monthly business statistics is
greatly increased by gaining a few days in publication, and every
effort should be made by the secretary to show each member the
importance of reporting promptly. Telegrams are generally sent
to those firms whose reports are not in at the specified time, and
personal calls on habitual delinquents have proved effective in secur, ing more prompt attention to the reports. The secretary of a lumber
association points out in a symposium conducted by the Chamber of
Commerce of the United States that in the constant effort to get
returns in early some associations have made rebates in the members' dues, based on the number of reports turned in, while others
do not send the reports to members who do not contribute data. This
latter method, it is stated, is not very effective, as those who desire
the results will usually contribute their figures.
COMPILATION
If it is possible to obtain all reports early in the month, the tabulation should include all members each month, or at least the iden-
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HOW TO COLLECT CURRENT STATISTICS
tical reporting firms, so that the figures from month to month may
be strictly comparable. l'f identical firms are not available, the
figures in units will not be strictly comparable but may be made
approximately so through showing the percentage relation which
each item bears to the capacity of the firms reporting for each particular month. Where no capacity figures are available to make comparisons of this kind, the report should distinctly state that a certain number of firms are missing. If the reports for the missing
firms come in at some later date, the early reports can be revised
to show a true comparison of identical firms. Where the missing
firms are very small and habitually late, it is better to have the tabulation made without them, for the revision in the subsequent month
by the addition of their figures would not change the conclusions
to be drawn from the data, and the advantage of speed will more
than compensate for the slight inaccuracies.' The American Electric
Railway Association compiles its reports in this manner, showing
the percentages based on the identical reporting firms, later revising
the data to include additional reports. In the face-brick industry
the number of reporting firms varies so greatly that the American
Face Brick Association finds that an average per firm is ihe best
comparison between various periods, and the Piano Bench and Stool
Manufacturers Association also compiles its reports on this basis.
If nonidentical figures are compared in percentages of capacity,
care should be taken that the data are representative. Should it
happen that several large firms were missing one month, even a
comparison on a percentage basis might not be correct, because the
missing firms might have a different trend. The more detailed the
statistics are, the more important it is to have reports from identical
firms. For instance, firms not reporting might comprise 2 per cent
of the total association output and their absence would be negligible
in this respect; but these firms might make 10 or 15 per cent of a
particular grade of the product for which separate figures were
collected, and their absence would have a considerable effect on the
totals for that grade. The same considerations apply to geographical se~egations as well as divisions into grades and the like.
As a matter of fact, to be of any real use to any industry, the
association's statistics should include 50 per cent or more of the
industry's normal output, and 70 per cent is advisable to insure a
representative character. Less than these percentages might not
show the true trends, and in such cases it might be advisable not
to compile the figures until enough additional reporting firms are
secured to obtain a comprehensive report.
When there are changes in the membership of an association,
particular care is needed to keep the reports comparable. The association reports might at all times include 100 per cent of the associa-
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HOW TO USE CURRENT BUSINESS STATISTICS
tion membership, but if that membership were often increased or
decreased the reports would not be comparable. New firms added to
the roster should be asked to send in their respective reports for
previous periods, to be added to the previous totals,· in order to have
comparable reports. The American Dry Milk Institute has increased
the representative character of its identical reporting firms by this
method. It is not advisable to add firms singly, owing to the possi•
bility of disclosing their operations. In this case the one firm's
reports had better await the admission of a second member before
being added to the old reports. When a member withdraws from
the association, arrangements may be made to have the firm continue
its reports so as to insure comparability of the totals. If this is not
possible, the firm's figures can be subtracted from the totals, provided
another firm is either added or withdrawn at the same time, so that
individual figures are not revealed.
On the other hand, where a firm goes out of business or retires
from that particular line, its past data need not be deducted from
the association reports, for the totals will still be comparable, since
the liquidating firm's report thereafter will be zero. Any busin~
which ..,ould have gone to that firm in the past will be distributed to
the other firms in the industry, a.nd thus still will be shown in the
totals. Similarly, a firm just beginning business can be added to the
totals without destroying comparability with the past, for its business
will come from what otherwise would go to the remaining firms in
the industry.
When an association has had a rather rapid growth over a period
of years, and it is impossible to secure figures from the new firms over
the earlier period, the reports can still be made fairly comparable
by finding the percentage which the production of the firms reporting in any particular year bears to the production of the year
in which all the firms reported and by prorating the figures of the
other years to the level of this latter year by these percentages. In
this manner the data for the Hydraulic Society were recently put
on a comparable basis from 1919 through 1926, in spite of a considerable increase in the number of reporting members, a:ia.d a similar
method was employed to obtain comparable data for the National
Association of Paper Box Manufacturers from 1923 through 1926.
In an industry where capacity figures are collected, the above
results can be secured more accurately and with less effort by merely
prorating the figures on the basis of the relative capacity of the two
periods. Many associations, especially in the lumber field, apply this
method month by month by prorating the figures of the varying
number of firms reporting each month up to a certain standard on the
basis of the relative capacity of the reporting firms to the capacity of
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The accuracy of this method
is shown by comparing the close relationship between the total lumber
production compiled monthly on this basis from association reports
by the Bureau of the Census for the Survey of Current Business and
the annual census returns. By the former method the production of
lumber, although many species were unreported, showed an increase .
of 6.7 per cent from 1924 to 1925, while by the final census figures,
including all species, it increased 8.3 per cent.
·The advisability of not showing separately such details as would
reveal the activity of individual firms, owing to inadequate representation in that item or because one of two firms were the only
makers of a particular style or grade, has already been mentioned.
In such a case the particular grades could be combined with other
similar grades or put into a miscellaneous classification or omitted
altogether.
Individual operations are also liable to be revealed if each firm's
data are shown separately on the tabulation sheet that goes to the
members even if given merely a code number. Such segregation of
individual figures may be identified by competitors, owing to the
knowledge of when certain large orders were placed, and thus reveal
individual operations. This revelation of the business of competitors
hardly comes within the sphere of free competition.
all the firms included in the standard.
PRICE STATISTICS
The compilation of price statistics should be watched with particular care. Such statistics can be collected, tabulated, and distributed withoUit taking on the significance of unlawful intent or
without producing an unlawful result. Careful distinction must be
drawn between this operation and the Eddy "open-price " association, in which prices to be quoted are circulated among the members.
Nothing in this discussion has any relation to the " open-price " plan.
As the Secretary of Commerce stated in addressing the Trade Association Conference in Washington on April 12, 1922: " The officers
of the Government do not believe that these functions ( open-price
reporting) are in the public interest, whether they are used in violation of the law or not."
Knowledge of prices at which sales have been consummated is one
thing; exchange of prices proposed to be quoted is quite a different
matter. One is the record of a fact which affords an essential ele•
ment in the equipment of an individual to deal competitively with
intelligence. The other is a submission of plans which almost certainly results in unanimity of action or agreement, in effect if not
in form. Agreement as to future price is prohibited, and so is
agreement not to differ in price.
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The collection of sales-price statistics is not legally determined
by the period covered by such reports; therefore a monthly or daily
i,ervice stands on the same plane so far as time only is concerned.
The collection of sales prices tends readily to the manipulation
of market prices through the device of restricting reports to the
"best " sales. It became apparent to several associations early in
the development of statistical service that a rising market was
materially assisted if the sales reports carried only such transactions
as were at the crest or above it, while report.Q including sales below
· the peak tended to retard the upward movement. Likewise. rP-porting only "best " sales tended to check the movement of the downward market. Such a method of reporting sales is manipulation of
the market, a suppression of truth for the purpose of creating 11
false impression, an unlawful method of accomplishing an unlawful
object. The association which collects, compiles, and distributes sales
prices must insist, as the price of carrying on this service, that
members report all sales or none, and that the transactions reported
are those which have been closed in good faith. Selection of reports
to create a favorable impression on the uninformed convicts the
procedure of a guilty purpose.
In compiling price statistics a simple average of all reported prices
is open to the same objection as a simple average of percentages of
capacity previously explained. It makes no distinction between the
price on 10,000 tons shipped by a large mill and that on 1,000 tons
shipped by a· small mill. A better way to secure a good average price
is to weigh each price by the amount shipped at that price, dividing
the sum of the totals thus secured by the total shipments to get a
weighted price for the industry.
The average price, although it is a weighted composite for the
entire industry, may not be the price received by any one concern.
Thus, particularly when individual prices are apt to vary, a range of
prices is m<;>re useful than an average price. With sucb a range
tabulated-that is, the amount shipped at 10 to 11 cents, that from 12
to 13 cents, etc.-each firm can see the exact working of the price
level. There has also been a tendency to misuse average prices in cost
accounting. The primary purpose in compiling average-cost data is
to encourage a study of individual costs, but too often there is a ,
reverse effect, the manufacturer using average costs for the industry
to arrive at a sales figure for his products instead of accurately
computing his actual costs.
PUBLICITY
Distribution of the compilation should be made promptly, not only
to the members of the association but to all persons interested, including trade papers and Government agencies, so that adequate pub-
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licity may be obtained. The association will thus put its statistical
activities in the open, instead of being under suspicion of secret exchange of information. The relation between publicity of statistical
service and evident go_od faith in the event that an unlawful agreement is sought to be inferred is a factor not to be hastily dismissed.
Most associations place on their mailing lists for these reports such
outsiders as request their figures. As the members of the association
bear the expense of compiling the data, it has generally been recognized, in discussions of distribution of statistical information, that
trade associations may be reimbursed for the expense entailed in the
distribution outside of their membership. If any charge is made for
distribution, it would seem to be the better policy to keep the charge
as close as possible to the reimbursement of actual cost. Any penalty
upon nonmember circulation tends to counteract the purpose for
which the service is conducted.
The first idea of the association member may very well be that
the value of the information should be enjoyed only by those who
belong to the association; but a second thought will show that this
view is so shortsighted that it helps defeat the purpose of the
statistical service. The idea of this service is that the information
will enable the man who uses it to act intelligently. That is to say,
he is protected against acting in ignorance of market conditions.
Manifestly, it is not enough that one man or a part of those whose
actions create a market can act intelligently. Their market is liable
to a constant distvrbance through decisions made in ignorance of
market conditions. It is quite as necessary to the stability of a.
market that nonmembers of the association trading in it be informed
as to its governing conditions as that members should know them.
And since it is the stability of the market which is the prime interest
of all concerned it would seem to be the proper spirit of statistical
service to secure as wide a circulation and use throughout the trade as
possible.
This broader conception of the purpose of statistical service also
includes the buyer. The relation between any seller and any buyer
is a reflection of market conditions and fluctuates with those conditions. What the buyer thinks those conditions are governs his
actions. If he knows what they really are, he buys in confidence,
steadily and continuously, tending to avoid both long and short
dealings.
More general planning of purchases according to statistics will
provide a more evenly balanced sales and production schedule and
will minimize both the big booms and the troughs of depression, so
that a manufacturer may run his plant more evenly without having
to increase his capacity for a temporary peak load and then keep it
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idle. Balanced purchasing through statistical information thus tends
to eliminate both the big profits and the big losses on both sides, it
tends to stability of production and limitation of capacity to actual
needs, it tends to lessen the expenses of both buyer and seller and thus
reduce costs to the ultimate consumer, and it tends to show the higheost producer the true situation in time to retire intact before having
to dump distress goods on . the market. The fact that almost all
industries of any consequence now publish their totals should dispel
the fear that the figures are more advantageous to the buyer.
Furthermore, if conditions are bad in any industry, the news fre<JUently leaks out and is usually exaggerated through unfounded
rumors. If the actual facts were available, these rumors would be
held within bounds and the industry would be benefited rather than
hurt. Refusal to publish figures is taken by buyers to mean a bad
-condition, and the sellers are damaged much worse than by the actual
facts.
MODE OF PRESENTATION
Many associations send their compilations to their members without any comment at a.II, while others go into explanations not only
of their particular figures but of market conditions, and some, like
the National Lumber Manufacturers' Association, present a compendium of available current statistics relating to their industries
from all possible sources. Owing to the frequent occurrence of
special circumstances, such as seasonal changes, labor troubles, and
-0ther extraneous causes, which might not be grasped at first glance
by executives unfamiliar with statistical practice, some explanation of
these causes may often be a great help to the members in properly
weighing the importance of the information. On the other hand,
interpretation should not indicate a desirable trend of action, much
less urge the adoption of any common course, as explained in
Chapter IV of Trade Association Activities.
To be of the most value, the presentation should include, if possible,
the preceding months of the year and the corresponding months of
the previous year, with cumulative totals for each period. Where
the reports are of too detailed a nature to permit such comparisons,
at least the previous month and the corresponding month of the
previous year can be given. It is often a help to the executive to
have calculated the percentage changes from both these periods, as
well as on the cumulative totals. Many associations calculate for
each firm its percentage of the association totals and of the association capacity and insert these percentages on that member's report,
so that each executive may see his own firm's progress relative to the
industry as a whole. The National Association of Steel Furniture
Manufacturers, the Label Manufacturers' National Association, and
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the Bureau of Envelope Manufacturers of .America are among those
calculating their members' percentages in this manner.
Often the trends of the industry can best be compared by means of
relative numbers, by letting the monthly average of some year or
period of years equal 100 and dividing that average into each
monthly figure. Especially when different products are reported on
the association's forms, the relative trend of each can be compared
over a long period of time when expressed as relative to a base period
of fairly normal activity. These relative numbers may also be adjusted to allow for regular seasonal variations or long-time growth of
the industry by means of technical methods, for which it is advisable
to secure services of a trained statistician. The National Machine
Tool Builders' .Association, the United Typothetre of .America, the
Rope Paper Sack Manufacturers' .Association, the National .Association of Wood Turners, and the Motor and .Accessory Manufacturers'
Association, all present their reports as relative to some particular
period.
In many industries it is advisable to reduce production and shipment figures to daily averages so that each month's operations
may be compared on the same basis. The occurrence of a holiday
or an additional Sunday in a month will make a difference of about
4 per cent in the month's working time, and by reducing the figures
to daily averages by the number of actual working days in the
month a correct comparative set of figures can be secured. This
method has proved extremely valuable in the combined production
index of the Department of Commerce, and when charted on this
basis the index has a very smooth curve, without the many small ups
and downs that often occur without this adjustment and which
make it difficult to see the real trend. The steel-ingot reports of
the .American Iron and Steel.Institute, reduced to a daily average,
exhibit the same principles.
GRAPHIC CHARTS
A further aid to the correct presentation of the figures is the
graphic chart. The chart tells the whole story at a glance and to
many busy executives will show the situation in a minute, while the
figures themselves can be passed on to experts for analysis. The
charts should be as simple as possible. It is not necessary to chart
all the detail on the report but merely the outstanding factors. The
fewer details given on the chart the more room there will be for
each firm to plot its own figures against the grand totals of the industry. It may be more convenient for this purpose to have relative
numbers rather than the absolute figures plotted on the chart, so that
any firm's figures may be reduced to the same relative basis as the
industry as a whole.
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Many persons who can not make out the meaning of statistical
tables can understand charts; yet any but the most simple charts are
-apt to be misunderstood by many readers. Especial care should be
taken that scales and relationships are properly made, and here again
expert advice is desirable to make sure that the presentation will not
be misleading. Simple bar charts to compare volumes or line charts
to show trends are generally the best for ordinary use. The lines
should stand out clearly and the rulings should be only frequent
enough to aid the eye in reading the plotted points. Too many
Tulings will make the actual curves harder to follow than where the
.curves are set off against a larger field of white background.
Line charts are used regularly by the News Print Service Bureau,
the American Face Brick Association, the American Washing Machine Manufacturers' Association, the National Alliance of Furniture
Manufacturers, and the Hydraulic Society. A form of bar chart
.called a barometer, showing the relation of the various items to the
,corresponding month of the previous year, is used by the Maple
Flooring Manufacturers' Association, while the National Association
-0f Lumber Manufacturers uses a similar barometer but relates all
the items to current production. A combination of line and bar
-charts is used by the National Machine Tool Builders' Association,
while the Life Insurance Sales Research Bureau adds a map to its
line and bar charts to portray the geographical trends.
The preliminary report of the committee on statistics of the
American Trade Association Executives contains the following recommendations for standard charts :
Standard mes of charts.-The committee recommends a discussion of the
posslblllty of standardizing over-all chart sizes. The committee recommends
that the minimum size of charts should be the letter-sheet slze-8½ by 11
inches. As to larger charts, two standard methods may be followed. One Is
that larger charts be multiples of the 8½ oy 11 inch size, i.ao that the over-all
sizes of the series would be 8½ by 11, 11 by 17. 17 by 22, etc. Thus the larger
sizes would all fold down to the letter-sheet size by progressive folding In
half.
Another method, applicable particularly to charts of long-time series, ls that
allowance be made for a binding margin In the larger sizes, so that while
retaining 8½ by 11 Inches as the minimum the next size would be 11 by 151h
Inches, and for longer charts 11 by 22½, 11 by 20½, etc. This method would
permit the binding of any charts extending over long periods so as to permit
their being unfolded without being taken out of the binder and without cutting
away any of the binding margin.
Standa1·d size for chart flelds.-Taking the minimum sheet of 11 by
8½ inches and leaving 1½-lnch binding margin at the left, with 1-lnch margins
at the top and bottom and 1-lnch margin at the right, would give a chart
field 9 inches high by 6 inches wide. We recommend that this be the basic
chart-field size. This size provides a liberal margin at the right-hand side to
overcome the tendency to extend the lettering to 11 point at the left where It
ls difficult to read on account of the binding. The 10-year data charts by months
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would then take a field 9 inches high by 12 inches wide, which would fit with
ample margin a sheet either 11 by 17 inches, exactly double the letter size, or
a sheet 11 by 15½ inches, which allows folding in a binder with the least
inconvenience.
8ta,ndard;j,zj,11{1 vertioa-l t·uli,n,gs.-The most common associated statistics deal
with monthly data, 12 of which constitute the major ruling unit separating
each year. There is no particul::ir reason why years should be shown in inches,
but there are several reason for showing months in convenient space. Onetwelfth of an inch distance between monthly verticals is almost too small
a space to commend itself for general use. We therefore recommend that in
time charts the vertical sp::ice be divided in tenths of an inch, which would
make the year spacing 1.2 inches. Leaving an extra wide margin on the righthand side of the chart makes the chart presentable. But, if necessary, this
wide margin would be invaded or even if it were not filled up the most
rigid waste eliminator would not begrudge the white space that gives good
opportunity for explanatory lettering.
8ta,n,d.a,rd, soales of en,l,argement or red.uctwn..-w:th chart fields standardized
as above the committee believes that scales of enlargement or reduction should
likewise be standardized. For reductions the committee recommends scales of
one-half, one-third, and one-fourth, and for enlargement the committee recommends scales of two, three, and four times. If a chart is drawn on a standard
chart form and the scale of reduction or enlargement from the standard size
is specified in the reproduction of the chart, the relation to other charts could
be easily visualized.
Another reason for adopting the above standard scales ls that in the reproduction of a logarithmic curve the above reductions would automatically show
the curve of the square, cube, and fourth roots of a given series, while enlargements as above would automatically show the corresponding square, cube, and
fourth power, measured in a vertical direction in each case.
In addition to the familiar arithmetic chart, the logarithmic or
radio chart has come into vogue rapidly as showing a truer comparison of the rate of change, since these charts indicate by the slope of
their curves the percentage difference rather than the absolute difference. They are particularly advantageous for comparing data
measured in different units, or data whose curves are far apart on
the scale. The above committee, although referring to the saying
that "the greatest trouble with logarithmic charts is that many
people stumble over the log and fail to see the rhythm," advocates
the promotion of its use owing to its many advantages for analysis
and comparison over arithmetic charts. The committee recommendi;:
standard deck ruling of 9-inch height for one deck, 4½ inches each
for two decks, and 3 inches each for three decks~ the latter rulin~
being preferable, owing to the need usually found for three decks.
Logarithmic charts are now being used regularly by the Label
Manufacturers' National Association, the National Association of
Steel Furniture Manufacturers, and the National Automobile Chamber of Commerce.
Standard colors and shading, applicable mainly to maps and bar
charts indicating a division of the data into percentage groups, have
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HOW TO USE CURRENT BUSINESS STATISTICS
been worked" out by a committee of the National Distribution Con•
ference held under the auspices of the Chamber of Commerce of thc>United States in Washington in January, 1926. These standards
are presented in the report of Committee III of that conference, the
committee dealing with market analysis and advertising. The committee on statistics of the American Trade Association Executive~
is also studying standard types of lines to represent certain items,.
such as certain symbol for production and another for stocks. No
definite conclusions have yet been adopted.
The American Society of Mechanical Engineers is sponsoring thestandardization of graphic presentation under the procedure of the
American Engineering Standards Committee, and several trade association executives are represented on its committees.
IMPROVING THE REPORTS
Once an association report is established it should not be allowed
to lapse into a pure routine. Improvements can be made in most
reports from time to time, and the association secretary can greatly
enhance the value of the service by being on the lookout for improvements along the following lines:
1. Reports from more concerns.
2. Regular instead of spa8modic reports.
3. Earlier reports.
4. Reports on additional items.
5. Reports on related industries, in cooperation with their associations to reciprocate in furnishing similar information.
6. Classification of terms, to compare with other reports.
7. Methods of utilizing the results.
Reports should not be changed too often or comparability may be
destroyed. On the other hand, frequent discussion of the value of
the reports with individual members may not only secure earlier
and more regular returns but may also give the association secretary
ideas on how the members use the reports and how they might be improved in practical application. A campaign of education of trade
association members in the uses of statistical data should not only
make the reports of greater value to the members themselves but
might well result in a more appreciative interest in this phase of
association work and in the secretary's receiving valuable suggestions which previously lay dormant because of lack of knowledge
of the application of the statistics to the problems in hand.
The uses and interpretations of business statistics, as explained in
the earlier chapters of this booklet, should be of great help to association secretaries as suggestions for their own members.
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JOINT COLLECTION WITH CENSUS BUREAU
In some industries the members of an association, taken as a whole,
are not representative of the industry, and, with the rest of the industry aloof, statistical data would not show true conditions. To meet
such situations, the Department of Commerce, through the Bureau of
the Census, has offered its facilities to obtain complete figures for the
industry concerned. If a sufficient number of firms outside the association agree to send their figuf,es regularly and promptly to the
Bureau of the Census, the bureau will combine into a comprehensive
total these data and the figures supplied by the association for
its members. A tabulation covering these grand totals is issued
promptly each month. The outside firms agreeing to report this information must be sufficient in number so that no individual's report
may be disclosed and sufficient in their total importance to justify the
additional work involved. At the present time, the Bureau of the
Census is combining association reports with those of nonmember
firms in nine different industries covered by the following associations : National Automobile Chamber of Commerce (automobiles),
Paperboard Industries Association (box board), Enameled Sanitary
Ware Manufacturers' Association (enameled sanitary ware), Steel
Founders' Society (steel castings), Central Fabricators' Association
( fabricated structural steel), American Erectors' Association ( fabricated steel plate), Associated Tile Manufacturers ( floor and wall
tile), and the Sheet Metal Ware Association ( sheet metal ware).
In many industries where no organization is available to collem
statistics, the Bureau of the Census has gathered data for the entire
industry. In some cases this collection has been placed upon the
bureau by law-as, for example, in the cotton, tobacco, and leather
industries-but in most cases it has been the result of requests by
representative firms in an industry, through either an association or
a special committee, for current data which could not be obtained
from other sources. In order to start such statistics for an industry,
the bureau must be assured of participation in the reports by at least
50 per cent of the industry, based on output. With this nucleus of
the industry in agreement on the data desired and pledging themselves to report regularly and promptly each month, the bureau is in
a position to circularize the entire industry to obtain additional reports. All individual reports are made in strict confidence to the
Bureau of the Census and are examined only by sworn employees of
that bureau. Only the grand totals of all reporting firms are published in the tabulated statements. Outside the reports made in
combination with trade association figures, as mentioned in the previous paragraph, the Bureau of the Census is collecting directly from
the individual firms, at monthly or quarterly periods, statistics on
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28 industries. The trade associations covering the particular fields
have been of great assistance in supplying lists of producers, in securing agreements to report, and in making suggestions as to the information to be supplied on the blanks. In this manner many industries
now have available current statistics on their business which would
not otherwise be possible. In some cases requests to the Census
Bureau which would have involved the collection of data for several
thousand firms in a widely diffused industry have had to be laid
aside, owing to the large amount of work involved.
MEETING OBJECTIONS TO REPORTING
A considerable problem to be faced in a large association is the
indifferent or even hostile attitude of many firms toward statistics.
Soipe of the most frequent objections to statistical work are listed
below, together with the replies which have been made to them :
1. The posBibiNJ;y of discloswre of ind,ivuJ'U!IJJ, data to othe-rs.-The
methods of obtaining secrecy of individual reports have been outlined elsewhere in this chapter. In reporting to the Bureau of the
Census, as mentioned above, a heavy penalty is provided by law
against disclosure of individual operations.
2. Too '1111UCh trouble irwoh•ed.-If the forms are made out in a
simple manner, with the month and firm name or code already filled
in and a self-addressed envelope provided, it takes only a minute or
two for a clerk to copy the figures from the firm's records.
3. Multipm.ci&y of reports.-Although most of the larger firms have
many demands made upon them for all sorts of data, an investigation
by the Bureau of the Census of the reports which large firms
throughout the country have to make shows almost no duplication,
and little chance of cutting down the number of regular reports
without sacrificing information which the same industry greatly
desires. The compilation of current reports rarely ca.uses any trouble,
because the reports are simple and regular. The compla.int against
the multiplicity of reports is usually directed against the different
requirements of various States for reports on the same subject and
against the many miscellaneous inquiries for special data.
4. Qwestionabl,e kg'lNity.-The matter of association statistical activity has been greatly clarified by the decision of the United States
Supreme Court, rendered in June, 1925, in the maple flooring and
cement cases. A careful study of these opinions will reveal the
highest court's pronouncement on the legality of statistical activity.
This matter is discussed in Chapter IV of Trade Association
Activities.
5. Publ,i,catwn of the totals maty ducl-ose indivuliwl, o-peratW1UJ.If the figures are compiled with due care that no data are presented
wherein only one or two firms contribute figures or wherein even
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89
several small firms added together would not change materially the·
totals of one large firm, there should be no valid complaint on this
score. The Bureau of the Census makes it a regular rnle not to•
publish separately any data for wh.ich less than three reports are
received.
6. Plmnt too 817Ulll to affect the totals.-Although any one plant's:
operations may be so small as not to have any effect on the combined.
total, if all the small producers maintained this attitude the totals.
might be seriously affected. Not only do the small firms in most ih•
dustries make quite a showing .i n the aggregate, but in many cases
the trend of the small firms is different from the trend of the largerfirms, and thus their figures are vital to a true picture. For instance,
in the fabrication of structural steel the fluctuations occur almost
entirely among the larger firms, while in lumber manufacturing thefl.uctuations are due rather to the small firms who cut lumber when
prices are high but stop work altogether when the situation is not
advantageous. The reports of the National Machine Tool Builders.
Association are classified by sizes of firms to show these differences.
in trends.
1. Gwes informdion to buyers to be(l)t dow-n p·rices.-The publication of statistics will give information to the buyers, but it will beof still more benefit to the selling industry. The buyer may at times.
gain better prices through the use of these statistics, but at others the
seller will be enabled to get a better price. Th.is mattet is fully discussed under " Publicity " on page 80.
S. The at(l)t-istica atre of no UBe.-The many uses of statistics can
be explained and particular application made to the industry in
question. Often an official may th.ink that a. certa.in set of statistics.
is of no value, and yet another department of the firm may have
written the Government asking for the identical information.
9. Re<Xn'<k wt (l(V(Ji/able.-In many cases, where a firm does not
have accurate records, a. close estimate will be sufficient. However,.
figures 'taken from records are more accurate, and the advantages of
keeping such records, not only for purposes of compiling the .i ndustry reports but for the firm's own guidance, could be explained.
10. Unable to decide about reports.-This is usually only an excuseto put off the question, since there is practically no expense involved
and no question of policy.
11. Other firms may falsify figures.-So many business data exist
against which any industry's figures can be checked that such actions:
can often be discovered in editing the reports. Besides, data not
manifestly wrong and yet incorrect, if presented by any but a largefirm, would not seriously a:ffect the total. Often mistakes occurthrough misunderstandings, but careful editing and checking will
usually discover cases of wrong figures. In cases of doubt as to the-
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correctness of the figures, the association secretary should immediately get in touch with the firm concerned and explain the discrepancy or question.
12. Benefit foreign competitora.-This usually is not a valid argument, since practically all industries give out their figures and have
not suffered from foreign competition because of the practi~.
American industry gives out many more figures than any other
country and suffers less from foreign competition. Import and export figures have always been published without any question being
raised as to their aiding foreign competitors. In fact, such figure.5
might discourage foreign competitors. Finally, the American firms
have the advantage in any case, owing to their possessing the data
earlier.
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