Economic indicators ; Manufactures - North Central states ; Federal Reserve District, 7th

Philip R. Israilevich

Robert H. Schnorbus

English

Research Papers in Economics

 h  M d   t M n f  t r n  Ind x:  h  Ch     
  d   n   r    n l    n      nd   t r
R b rt H.   hn rb    nd Ph l p R.   r  l v  h
 h    d r l     rv    n  (      f
Ch       nd th       n t  th t  t   rv  —th 
S v nth   d r l     rv     tr  t— h r   
     n  nt r  t  n   n t r n  r    n l   n  
f  t r n    t v t   n   t   l  b    . In th 
pr       f f r  l t n    n t r  p l   , th 
  n       n  rn d  b  t h      n       t v t 
 n th  S v nth    tr  t d ff r  fr   th  n t  n
 nd h     n t r  p l     ff  t  th t d ff r 
 n  . M n f  t r r  n  d t   n   h   r  
   n l    n       r  p rf r  n ,  n  rd r t 
 nt rpr t th  r   n  h p  nt  d t   nd pl n
pr d  t  n   h d l  .     l   v rn  nt     t
b     r   f  n   h n     n    n       t v t 
th t tr n l t   nt  d  l n n  r v n     r r   n 
d   nd  n  xp nd t r  .
St rt n   n th  S pt  b r        f th  n  
 h      F d L tt r, th       f Ch        ll
p bl  h    n       nthl   nd x  f   n f   
t r n    t v t  f r  t   nt r  f v   t t     tr  t
(        r    —th  M d   t M n f  t r n 
Ind x (MMI,     r  2 . Wh l    r   r l   
f ll   n  th          l   l p tt rn    th    d 
 r l     rv     rd   Ind x  f Ind  tr  l  r  
d  t  n, t     p  t   f th  MMI  r 
n t   rth .   r t, th  MMI  h         h
 tr n  r r   v r   n   n f  t r n    t v t 
  n   th  l  t r       n th n          t d b 
  n f  t r n    pl    nt  xp n   n. S   
 nd, th  MMI h       r  dl  d ff r nt tr nd
th n th     rd   Ind x. M n f  t r n    t v 
 t   n th  S v nth    tr  t h   b  n  n    r d 
  l d  l n    n    t l   t      (th   t rt n 
p  nt  f th  MMI ,  h l  f r th  n t  n     
 h l ,   n f  t r n    t v t  h   b  n   n r 
 ll   xp nd n .
 h  d  l n   n   n f  t r n    t v t — n
  t  hn   l   n  , d  nd  tr  l z t  n—    b 
h v n    r     r p r      n  thr   h  t  ll
   t r   f th     tr  t      n   .   h   b l t 
t    p r t    nth t    nth   v   nt   n
  n f  t r n    t v t   nt   n  nd rl  n 
tr nd    p n nt  nd   b   n       l     p  
n nt ( h  h   n  ft n   n   l th  tr nd    
v l  bl  f r  nd r t nd n  n t  nl   h t   
  rr ntl  h pp n n  b t  l    h t h   b  n
h pp n n   n th  r    n l    n   —   h d  
v l p  nt     th   r  th  f "h  h t  h"  n 
d  tr     nd th    rv      nd  tr , f r  x  pl .
In  dd t  n, th   nd x pr v d        nt t t v 
b    r  nd     n t  h  h t   v l  t  th   f 
f  t   f n t  n l  nd  t t  p l       n th  S v 
 nth    tr  t      n   . ( h    t p     r 
d       d  n  th r  rt  l    n th          f     
n     P r p  t v  . 
A b      nd r t nd n   f h   th  MMI
      n tr  t d    n      r  t       th  b  t
     f th  t   l   nf r  t  n  t   ll   nv  .
Wh l      l r  n  nt nt t  th     rd   Ind x,
th  MMI    b   d  n   th d l    d v l p d
b  th       f Atl nt .2  h    rt  l  pr v d  
    n     d   r pt  n  f h   th   nd x     f r 
  l t d  nd h   th  d t    r   n  rp r t d.
C n  pt  l b    r  nd
         f  t   v  l b l t   nd   n  t v t 
t  th  b   n       l ,   n f  t r n    pl   
  nt h   l n  b  n th  pr   r  t  l f r tr    
 n    r    n l    n   . Unf rt n t l ,
  n f  t r n    pl    nt d t  h v      j r
l   t t  n         pr h n  v       r   f
  n f  t r n    t v t . E pl    nt     nl 
 n   f   n   np t   n th  pr d  t  n pr     
th t tr n f r   l b r,   p t l,  n r  ,  nd    
t r  l   nt  f n l   tp t—th  tr        r   f
  n f  t r n    t v t   n   r    n. A    p r 
t   p nt  n th  pr     ,   pl    nt   n pr  
v d ,  t b  t,  nl    p rt  l p  t r   f th 
  n f  t r n    t v t   n   r    n.
  rh p  th     t   r            n  n th 
 n l      f   n f  t r n    t v t  h   b  n th 
     r   nt  f   p t l      .   r  x  pl ,
d r n  th    rl   t      f   r   v r , l b r
pr d  t v t      b   xp nd n     l b r  nd
  p t l  r     d   r   nt n  v l . Or,    th 
   n    n  r    b   n       l  p   ,   n 
 f  t r r       xp nd th  r   p t l  t    f  t r
th n  t  n   th r t     v r th  b   n       l .
In b th      ,  h n     n   pl    nt    ld
  b rt  . S hn rb    nd  h l p  . I r  l v  h  r  r  
   n l    n    t   t th    d r l     rv    n   f Ch     .
 h    th r  th n  St v    n f rd  nd E  d M  h  l f r
th  r      t n  .
  d r l     rv    n   f Ch     	 3 igu e 1
 h  S v nth   d r l     rv     tr  t
 nd r t t  th  r t   t  h  h   n f  t r n 
  t v t      xp nd n .
 h     rd   Ind x  f Ind  tr  l  r  
d  t  n  v  d  th  pr bl    f  n d    t    v 
 r    b     n       r    f n t  n l   tp t th t
   b n  d t   n ph     l   tp t,    h    t n 
 f  t  l,   th d t   n  h p  nt , h  r    r  d,
 nd  l  tr   l p   r      .  In th     0   nd
  60 , th       f Ch       l   pr d   d   t 
p t  nd x   f r th    tr p l t n  r     f  t 
   tr  t, b   d  n  l  tr   l p   r d t . 4  r  
t    t  t   ,  th r      h v  pr v d d       
 l r   rv   ,    n  v r       th d l     . At
pr   nt, h   v r,  nl   nd x   f r   x    nd
Oh    r  b  n     nt  n d. 
 h  br  d  nt nt  f  n  pr d  t  n  nd x
   t  pr v d       n   f      n   p   d v r  t 
 f    d    n f  t r d  n   r    n  nd  f
  n t r n  th  r   v   nt  v r t   ,  n    h
th              th  Gr      t  n l  r d  t
d    f r  ll    n        t r . In  t     pl  t
f r ,  n  nd x  f   n f  t r n    t v t    n
b  f r  l t d   :
(1 	 11+  = (
	
W  j l+ Q1  -  n	   (          0
 h r           t  n    n
T   th  b    p r  d (     
t           v n   nth,  ,  n    r
     p   f   pr d  t
    ht  ppl  d t     p   f  
pr d  t  n t    
   nd  tr  j     tp t  n t    
   nd x  f    r   t  pr d  t  n
 n t    .
In  th r   rd , th   nd x       pl  th       f
 ll th   nd  tr  l  t    pr d   d b  th  r    n
 n  n     r d v d d b  th       f th  b       r.
Obt  n n       r    f r    n l   tp t ,
h   v r,    n t  n      t   . Alth   h     
ph     l  n t   f   tp t  r   v  l bl   n   r  
   n l b     ( . .,t n   f  t  l ,    h d t   r 
 xtr   l  r r .   ll r v l     f ph     l   t 
p t , d fl t d t  r   v  th   nfl  n    f  n 
fl t  n,    ld b   n     pt bl   lt rn t v  t 
ph     l  n t , b t  v n  nf r  t  n  n v l   
 f    d  pr d   d  n   r    n  r  r r .
Sh p  nt   r   n  n ppr pr  t       r 
 f   tp t  t th  r    n l l v l, Onl  th t p r 
t  n   t  ll  pr d   d   th n th  r    n  h  ld
b   n l d d  n th   nd x,  r th  pr bl    f
d  bl     nt n    ll d  t rt th    v   nt  f
th   nd x.   r  x  pl , d t   n   th r  n t 
 r v l     f   t   b l     ld b  pr d   r   n
  r    n    ld n t d  t n    h b t   n th 
p rt  n   t  ll    ntr b t d b  th  r    n l
pr d   r   nd th  p rt  n p r h   d     n
 nt r  d  t  pr d  t ( . ., t r  ,  n  n  ,  t . .
A pr f rr d      r  f r ph     l   tp t
pr d   d  n   r    n        n t nt d ll r
     r   f v l    dd d.   l    dd d        
  r d b    btr  t n  p r h   d   t r  l  fr  
th  v l    f  h p  nt . In l d d  n v l  
 dd d  r  pr   r l  r t rn  t  l b r  nd   p  
t l,  nd, t    l    r  xt nt,   p t l r   v r ,
   n     pr f t ,  nt r  t  n d bt, t x  ,  nd
th  p r h     f b   n      rv    . U  n  v l  
 dd d, th r f r ,  v  d  th  d  bl     nt n 
pr bl     nh r nt  n  h p  nt  d t . Unf r 
t n t l , v l    dd d d t  b  r    n  r   nl 
 v  l bl   n  n  nn  l b      nd  v n th n
  th     n  d r bl  t    l  .
  r     nthl   nd x, d t  fr   th    j r
 np t  th t    pr    v l    dd d—l b r  nd
  p t l   rv    —  n b  d r v d  n   r    n l
b     fr   th  d t    ll  t d b  th     rd f r
 t  Ind x.   b r   rv       n b       r d b 
  pl    nt  nd  v r      nthl  h  r 
  r  d. C p t l   rv       n b   ppr x   t d
b  d t   n  l  tr   l p   r       pr v d d t 
th     rd b   t l t     p n   . Wh l  th   
t    np t       t ll n t b    pt r n   ll th 
 	 E  n       r p  t v   igu e  
Mi wes  Ma u ac u i g I  e   s  U S 
i  us  ia    o uc io  i  e 
SOU CE   oa   o  Go e  o s o    e  e e a   ese  e Sys em
a     e  e e a   ese  e  a k o  C icago 
f  t r  th t  r   nfl  n  n    n f  t r n     
t v t  fr     nth t    nth, th    r    v  t
  pr v   nt  v r   r    pl    nt d t .
  n tr  t  n  f th   nd x
  rh p  th     t      n   th d  f
   b n n  l b r  nd   p t l   rv      nt   
pr d  t  n  nd x    t             f p    nt 
 ppr   h. Und r th  pr p r      pt  n , l  
b r  nd   p t l   rv       n   t   t    tp t b 
 dd n  th      ht d v l    f b th  np t  t  
  th r    h   nth.  St rt n    th  n  nd v d 
  l  nd  tr , th  b     f r  l  b      :
(2 
	
  A   +m =     +„  j +   
E k   +m     +m
 h r  j =    p   f   pr d  t
  A = r  l v l    dd d
   = pr     f l b r,  r  v r   
h  rl    rn n  
P  =
 r nt l pr     f   p t l   rv    
L =
 l b r   rv    ,  r t t l h  r 
  r  d
K =   p t l   rv    ,  r   l   tt h  r .
Wh l    nthl  d t   n l b r  nd   p t l
  rv      r   v  l bl , r nt l pr      f   p t l
  rv      r  n t.     v  d    n  pr    , thr  
  d f   t  n   r    d  t  th       t  n.   r t,
pr      r    lt pl  d b  th  r t     f th   np t 
t  th  f n l   tp t t     p t     h  np t  
 h r   f   tp t.   r  x  pl , l b r    h r   f
  tp t    ld b     =     1  A  C p t l  
 h r ,    =     K1  A   nd r th    n t nt r  
t rn  t     l       pt  n          d t  b   n 
  n   l b r    h r .  h    r t     h  ld b 
f  rl   t bl   v r t   ,    th t  nn  l d t    n
b     d t  r pr   nt   nthl  v l      th r   
  n bl    nf d n  .
S   nd,    h  np t   pr d  t v t  ( . .,
   =   A/   nd    =   A/K     t b   dd d,
   th t   nthl   np t d t    n b    nv rt d
t         r   f   tp t b   d  n v l    dd d
( . .,      =   A    h    tp t        t d   th
    v n l v l  f l b r   rv       n th n b 
   b n d   th th    tp t        t d   th  
  v n l v l  f   p t l   rv     b      ht n     h
 np t b   t   h r   f   tp t t  pr d    th  d  
  r d      r   f t t l   tp t r pr   nt d  n th 
    t  n  b v .
  n ll , b th th   h r      ht   nd th 
pr d  t v t      ht     ld b   xp  t d t 
 h n    r d  ll  fr     nth t    nth, r  
fl  t n  th   nd rl  n  tr nd  n    h      r .
     pt r  th t tr nd  n     nthl  b     r  
   r   d  tr b t n  th   nn  l  r  th r t  
 v nl   v r t  lv    nth .   r  x  pl ,
l b r    h r   f   tp t  r    fr    n     r t 
th  n xt  t      p  nd d  r  th r t ,  r:
= (S1  1/SU  _
1 1/  
  
—
 h r  d     l   2.  h     p  nd d  r  th
r t     th n d  tr b t d b  t   n  th  v l    f
th  f r t    r  nd  dd n  th    nthl   dj  t 
  nt,    h th t
      +  =
 h r    t       v l   fr     t   2. M nthl 
v l    f r   p t l  h r  ,    h  „„  nd b th pr  
d  t v t      ht ,    j    nd    j     r    n 
 tr  t d t       p n  th    nthl  l b r  nd
  p t l   rv     d t .
 h  f n l f r  l  f r   t   t d   tp t f r
   p   f    nd  tr  b      :
(     A  =         j t+   j t+ A  j t+  j t+ 
   j K  j  +m      +m   +m   • 
S n   th       t  n       d t    n tr  t  n  n 
d x f r    h  nd  tr ,    h  nd  tr   nd x    t
b     b n d,     rd n  t   t   h r   f t t l
  tp t, t    n r t       p   t   nd x  f   n 
  d r l     rv    n   f Ch     	 5 f  t r n    t v t .  h  f n l f r  l  th t
r pr   nt  th  MMI   :
(4 
	
      	 ,tR     j,t rn	 TRV *j,T
 
 h r   v h r 	 , = R V •
	 , 	 (	 RV  ,t .
 h  d t  b      n p l t  n 
 h  r   d t  n  d d t       bl  th   n 
d x  r  d r v d fr   thr      r   : th    r   
 f   b r St t  t   , th    r     f th  C n   ,
 nd th    d r l     rv     rd.  h  l b r
d t   r  b   d  n t t l   r  h  r  f r    t   
d   t  nd  tr      ll  t d  t th   t t  l v l f r
   h  f th  f v   t t      p   n  th  S v nth
   tr  t (Ind  n , Ill n   , I   , M  h   n,  nd
W    n  n .   t l   r  r h  r    r      
p t d b    lt pl  n  t t l   r  r  t      v r 
    h  r    r  d. An .      pt  n      d  th t
th  r t    f t t l   r  r  t  pr d  t  n   r  r 
     n t nt,    th t th  t t l h  r       r    
pr p rt  n l t    t  l t t l pr d  t  n   r  r
h  r .   l    dd d  nd p  r ll d t ,    d  n
  n tr  t n      ht ,  l     rr  p nd t  th 
 nt r  f v   t t    n th     tr  t. C p t l   r 
v    , h   v r,  r  l   t d t   l  tr   l p   r
        th n th     tr  t  t  lf (   th rn
W    n  n  nd M  h   n, n rth rn Ill n     nd
Ind  n ,  nd  ll  f I    .
 r n f r  n  th  r   d t   nt  th   lt  
  t  f r   n  h  h th     ll  nt r th 
    t  n   nv lv     v r l   n p l t  n .  h 
f r t  nd    t b      t p    t       n ll   dj  t
 ll r     nthl  d t   nd t  d fl t   ll n   n l
d ll r v l    t    n t nt   82 d ll r .      
n l d ll r v l     r  d fl t d    n  n t  n l
pr d   r pr     nd x   f r th   ppr pr  t   n 
d  tr    (  t  ll ,    n   h l   l  pr     nd x  
f r      d t    th t   rr  p nd  l    t t   n
 nd  tr      tp t . S    n l  dj  t  nt   r 
  d     n  th    d l     d           n l  d 
j  t  nt pr   d r .
In           ,      pl t    t  f   nthl 
d t     ld n t b   bt  n d f r     v n  nd  tr 
 r f r     v n  t t    th n  n  nd  tr .  hr  
 nd  tr    (t b    , t xt l  ,  nd  pp r l    r 
dr pp d fr   th   nd x, b         pl    nt
d t    r  n n x  t nt.  h    thr    nd  tr   
 n    r   t  r pr   nt l    th n  .  p r  nt  f
th  t t l v l    dd d  f   n f  t r n   n th 
   tr  t. Al  , f v   nd  tr    (pr nt n , p tr  
l   ,  t n   l    l   ,  nd      ll n     
l    d   pl    nt d t  f r  t l   t  n   t t 
pr  r t    80,     n b       th   nd  tr     
 n   n f   nt  n th t  t t       n   .   r th   
f v   nd  tr   , th  l b r  np t          r d
b  th  r p rt n   t t  .         th  pr d   
t v t   dj  t  nt f  t r      l   b   d  n th 
l   t d  t t  d t , l b r    h r   f th    t  
  t d  nd x      n ff  t d. Alth   h th   
 nd  tr      r   l        p r t v l     ll p r 
t  n  f t t l v l    dd d (l    th n   p r  nt ,
th   nf r  t  n   nt  n d  n th    pl    nt
d t       rth   v n . A    r   lt, th     nd   
tr      r  n t  x l d d fr   th   nd x.
  r       l r r    n,  v r    h  r 
  r  d d t    r   n  rt d f r th  p r  d pr  r
t     6.   ttl  d t   n h  r    r  r p rt d
pr  r t     6  nd, r th r th n l    th   nf r 
  t  n   nt  n d  n th    v   nt  f   pl   
  nt l v l   nd  l  tr   l p   r       b t   n
   2  nd    6, th   b  rv d v l    f r   n  r 
   6   r   ppl  d t   ll pr v       nth .
S n   th  v l   f r  v r    h  r    r  d
r n  d b t   n  8  nd 40 h  r  p r       nd
t nd d t   h n    n    ll  n r   nt , th  l b r
   p n nt b   d   l l   n   pl    nt l v l 
 t ll   ntr b t       b t nt  l     nt  f  nf r 
  t  n  b  t fl  t  t  n   n   n f  t r n 
  t v t . M r  v r, th      rl     r   r   f
pr   r   nt r  t f r pr v d n   n h  t r   l
tr nd  n   tp t r th r th n f r th    nth t  
  nth   v   nt .
M    n  d t    r   l     pr bl    n   n 
 tr  t n  th      ht  f r    h  np t.  h   n 
n  l   rv    f   n f  t r   (ASM  h   n t
p bl  h d r    n l d t  f r thr      r      ,
  80,  nd   8 . In  rd r t  br d   th     p,
d t  f r    8  nd   82   r  tr  t d     f th  
  r      n l     r,  x  pt th t th  v l   f r d
b      48  n t  d  f  2. In  th r   rd , th 
 r  th r t   tr t h d  v r 48   nth  r th r
th n  2   nth .
  n ll , th  v l    f r th    nthl 
    ht  h d t  b   xtr p l t d fr   th   nd
 f   84 t  th  f n l   nth, b       ASM d t 
b   nd   84    n t   t  v  l bl .  h   p 
pr   h    d  n th    nd x   n r ll  f ll    th 
     f Atl nt    nv nt  n.  h   h r 
    ht ,  *,  nd  * ,   r  h ld f x d  t th  r l  t
  nthl  v l  .  h  pr d  t v t      ht ,  *,
 nd    , h   v r,   r   ll   d t    nt n   t 
f ll   th  tr nd   t b  th  r  r  th r t    p 
pl  d t    84.
 	 E  n       r p  t v  C n l d n  r   r  
 h  MMI      n tr  t d fr          n
  th d l    th t    th        t t     nt  n  n
    nthl  b      nd,   r    p rt ntl ,   rr  
l t     ll   th th   b  rv d  nn  l d t   f r  l
v l    dd d.  It      p rt nt t    ph   z 
th t   pl    nt f   r    nd th  MMI  r  th 
 nl    nthl  d t    rr ntl   v  l bl  f r th 
   tr  t     n f  t r n     t r.  h  MMI   
    r     pr h n  v  b r   t r  f   n f   
t r n    t v t  th n      pl    nt. In  dd  
t  n, th  MMI pr v d     d r  t l n  t 
   n       t v t   t th  n t  n l l v l thr   h
 t    n h p t  th      Ind x.
A  n   ASM d t  b       v  l bl , th 
MMI   ll b  r v   d  nd th   xtr p l t d v l 
      ll b   pd t d.   t r  r    r h   ll b 
d    n d t    pr v  th    nth t    nth    
  r     f th  MMI  nd t  d     r   t  th 
 nd x  nt    b  nd  tr     nd   b r    n  th t
 r    p rt nt  n   n t r n  th     tr  t  
   n   .
  h         f d  nd  tr  l z t  n h   b  n h tl  d  
b t d  n th  l t r t r   n r   nt    r .   r   p r 
   l  v d n    f d  nd  tr  l z t  n  n th  S v nth
   tr  t,     S hn rb    nd G    , f rth    n 
  8 .
2S      n r   d f   t  n  t  th  Atl nt  v r   n
h v  b  n   d .   r   d t  l d d        n  f th 
Atl nt  v r   n,        n,    0.
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6S   M  d ,    4, f r th  t  hn   l j  t f   t  n.
 S   S ll v n,     , f r   d        n  f th       p 
t  n   nd rl  n  th  pr d  t  xh   t  n th  r  .
8S      b ,   84, f r  n   p r   l  n l      f  l 
t rn t v    th d l     .
  f r n   
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   tr  t   E  n       nd  tr  l z n ?,"     
n     P r p  t v  , v l.   , n . 4
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S ll v n,  .  .,   th d l     f th  T x    nd  tr  l
Pr d  t  n  nd x,   d r l     rv    n   f
  ll  ,     .
  d r l     rv    n   f Ch     

The Midwest manufacturing index: the Chicago Fed's new regional economic indicator

http://www.chicagofed.org/digital_assets/publications/economic_perspectives/1987/ep_sep_oct1987_part1_schnorbus.pdf

The Midwest manufacturing index: the Chicago Fed's new regional economic indicator

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