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TIME'S Index of Business Conditions, reversing the temporary downtrend shown throughout January, rose 1.6 points last week-from 97.6 to 99.2. Chief cause of the rise was an increase in public spending everywhere except in the ten biggest cities. Business loans continued to decline, reflecting industry's indisposition to go in debt for inventories...
With this issue TIME begins publication of a weekly Index of Business Conditions. Different in objective from the indexes most businessmen know, TIME's index will report on the financial soundness, rather than the volume, of U. S. business...
Next step was for statisticians to compile and average these fragments, thus produce what are called general indexes of business. Probably best known of all such composite indexes is the Federal Reserve Board's 20-year Index of Industrial Production, a weighted monthly measure of the quantity of production in some 40 industries. By the time these data are collected and the index calculated, the information is several weeks out of date-and the F. R. B. index is at its best in answering the question, "How was business last month...
TIME'S Index competes with none of these standard indexes but seeks rather to appraise the factors underlying the business activity they record. This is done by analyzing the weekly Federal Reserve Board banking figures just as an accountant would analyze a corporation statement. Prime clues to a corporation's intrinsic soundness are such financial factors as its working capital position, its sales to inventory ratio, the quality of its so-called assets. The soundness of U. S. business as a whole is similarly reflected in the nation's banking figures...
Specialists in the analysis of bank figures for the purpose of determining business trends are Townsend-Skinner and Co. Inc. In collaboration with them, the TIME Index of Business Conditions was worked out on these principles.* The final weighted average of accounting ratios is based on no assumed "normal." adjusted to no economists' idea of "long term trend." It is, in effect, simply a report on how sound business was last week, a subject which TIME considers news...