Regional Business Conditions: A Study of Bank Debits

Abstract

A,NALYSIS of business conditions in the I 2 federal reserve districts, as shown by the fluctuations in the volume of check payments (bank debits) since the beginning of I9I9, supports the following conclusions: (I) Business in the individual districts usually fluctuates in sympathy with that in the United States as a whole. There are no systematic differences in either the timing or nature of the business fluctuations among the various federal reserve (listricts, after due allowance has been made for varying seasonal movements and trends. Such differences as do appear are clearly less significant than the fundamental similarity in the broader movements. This condition is indicative of the close economic interrelationship of the several areas of our country. (2) Substantial improvement has been taking place in agricultural conditions in recent years. This is clearly reflected in the figures for the primarily agricultural districts, notably the Kansas City and Dallas districts. The sharpest recent movement is to be found in the Minneapolis district, where the marketing of a large spring wheat crop in I927 has been clearly reflected in the figures for debits. The Kansas City and Dallas districts exhibit a more steady gain, and have advanced materially above their I924 levels. (3) The recurrent brief periods of expansion, recession, and renewed expansion are less marked in bank debits than in basic production. This condition is explained by the fact that fluctuations in such production, while important, do not represent the movements of general business. Bank debits, on the other hand, constitute an extremely representative measure of the complex of activities included under the term general business. Production of consumption goods, wholesale and retail trade, construction of buildings and engineering projects, and agriculture these and all other forms of economic activity have a share in making up the total of check transactions. Thus, while production indexes have moved sharply during these intermediate movements, it seems probable that the narrower movements of total debits depict more accurately the course of general business over the past few years. Except in those districts which are primarily agricultural, the several districts contain such a diversity of economic interests that the volume of check transactions is relatively insensitive to changes in any one line of activity. There are, however, some instances (notably the Cleveland district, where the iron and steel trade is of such great importance) in which sharp changes in the pace of basic industry are reflected in the figures for debits. These conclusions are based upon adjusted relatives for bank debits which appear on Charts 3 and 5 and in Table 4. Conditions in the various federal reserve districts are discussed in the following sections and a map of the I2 districts appears on page I46. A full description of the actual data and the statistical methods employed in adjusting the figures for irregularities of the calendar, trend, and seasonal variation is given in the section on data and methods,