itOOM
L'\ S Vcci Wcclt-S Si eA -)
Works Progress Administration
F. C. HARRINGTON, Administrator
A
PRICE DISPERSION
AND
INDUSTRIAL ACTIVITY,
1928 - 1938
CORRINGTON GILL
Assistant Administrator
EMERSON ROSS
Dlrsctor , Division of Statistics
and Economic Research
FEBRUARY 1939
WASHINGTON, D. C.
I
M-1765
PRICE DISPERSION AND INDUSTRIAL ACTIVITY,
1/
1928-38
The problem of "price disparity" has occupied a good
deal of attention in recent years. In the depression of
1930-33 price relationships were badly distorted; again in
the decline in 1937 this distortion reappeared* Some prices
remain relatively inflexible during the decline in business,
while other prices show enormous drops* On the upturn in
business the flexible prices advance very rapidly and the
indexes of these prices often go well beyond those of the
inflexible price groups.
The economic significance of these changes in price
groups cannot be ignored. A rapid increase in some price
groups leads to a distortion of price-cost relationships and
threatens the expansion of production and the maintenance of
employment. On the other hand, the disparities during a pe¬
riod of declining production and employment aggravate de¬
pression conditions and contribute to unemployment*
Price movements and price disparities cannot be singled
out as the causes of the ups and downs of business. They
are, however, important contributing factors, and, in some
cases, perhaps the decisive factors. During the depths of
l/This report has drawn upon a more comprehensive study of
the subject now in preparation by Mr. J. M. Cutts, of the
Bureau of Labor Statistics, and Mr. Walter G. Keim,of the
Works Progress Administration.
M-1765
2
the 1930-33 depression, prices were far out of balance.
During the recovery period 193V-36, price groups approached
their predepression relationships. Early in 1937 price dis¬
persion again developed and was followed by a sharp drop in
production. Chart I shows the index of price dispersion and
the index of industrial production. A decrease in price dis¬
parity in 1938 was accompanied by an upturn in production.
it is difficult to select a base year or base period in
which ideal relationships exist among all prices. In one
industry conditions may be favorable to the maintenance of a
large volume of production and consumption. In another indus¬
try unfavorable conditions may prevail. There are, however,
uniformities in the movement and characteristics of individ¬
ual price serie8,and combinations of price levels which mqy be
taken to represent an approximation to price balance. It is
a familiar thesis ihat certain relationships among prices are
more conducive to satisfactory industrial records of employ¬
ment, production, and profits than are other relationships.
Various investigations of the relative soundness of the
price structure have utilized the principle of price disper¬
sion. The present study is limited to a statistical examina¬
tion of the dispersion of price relatives as a means of de¬
scribing and summarizing the varied trendscf ^commodity prices
over the last decade. This measure, of course, is only one
of maty criteria of price balance.
3
The Measurement of Price Dispersion
Frederick C. Mills has done the most extensive work in
1/
the field. Among others who have investigated this aspect
of price analysis, F. Y. Edgeworth utilized as the measure
of dispersion the so-called "modulus", which is "the standard
u'
deviation multiplied by the square root of 2. Wesley C.
2/
Mitchell made effective use of deciles. Dr. Silverstolpe
y
employed the mean deviation in his analysis. Irving Fisher
has used the standard deviation computed from relative prices
y
and from logarithms of relative prices.
Norman Crump originally experimented with the arithmetic
y
standard deviation and the logarithmic deviation. His most
practical compilations utilized the arithmetic coefficient
of variation and a measure of the "angle of deviation de¬
rived from the standard deviation and the arithmetic mean."
l/The Behavior of Prices. Chap. Ill, Sec. IV, pp. 251-85.
2/Memoranda in Papers Relating to Political Economy (London:
Macmillan & Co., 1925), Vol. I.
3/Business Cycles (Univ. of Calif. Press, 1913)jand The Mak¬
ing and Using of Index Numbers (U. S. Dept. of Labor, Bur.
of Labor Stat. Bull. 284> 1921), Part I.
4/Dt. Silverstolpe1s measures have been published in the
Goteborgs Handels och S.iofarts-Tidning.
5/The Making of Index Numbers, A Study of Their Varieties,
Tests, and Reliability (3d ed., Boston: Houghton Mifflin
Co., 1927).
6/"The Interrelation and Distribution of Prices and Their
Incidence Upon Price Stabilization," Journal of the Roval
Statistical Society. 1924, Vol. 87, Part II. Mr. Crump's
measures of dispersion are now published currently in the
Financial Times of London.
INDEXES OF WHOLESALE PRICE DISPERSION AND INDUSTRIAL PRODUCTION
INDEX OF
PRODUCTION
INDEX OF
DISPERSION
350
>
3D
30L#
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
Works Progress Administration 3070
M-17&S
5
A. L. Bowley has made use of the "mean percentage diver¬
gence", a measure similar to the mean deviation except that
the variations -which are averaged are the percentage devia-
1/
tions of individual relatives from their geometric mean.
The measure worked out in the course of th(e present in¬
vestigation is calculated by weighting the variations —
which are the percentage deviations of individual relatives
from their weighted mean - on a fixed base (the year 1926).
The index of dispersion plotted in Chart I and tabu¬
lated in Table I is simply a measure of the spread among
prices. For the most part, it represents the spread between
raw materials and finished goods prices (see Chart II), al¬
though the calculation involves the prices of 45 subgroups
of commodities. The direction of the trend indicates whether
prices are moving toward or away from their mean (the all-
commodities level).
The computation of the index of dispersion involves,
first, the calculation of the average percentage deviation
which is the amount the price indexes differed from the mean
2/
price index. In this method, the average is obtained by
weighting the percentage deviation for each subgroup by its
l/"Relative Changes in Price and Other Index Numbers," Spe¬
cial Memorandum. No. 5, (London and Cambridge Economic
Service, February 1924).
£/The subgroup indexes of the Bureau of Labor Statistics
have been used in the calculation of the average deviation.
The subgroup, "Structural Steel" was omitted, as it is in¬
cluded in the "Iron and Steel" subgroup.
M-1765
COMPARISON OF THE LEVELS OF FINISHED GOODS & RAW MATERIALS
PRICES WITH THE ALL COMMODITIES PRICE LEVEL
PERCENT
+i 5 r
+10
+ 5
-10
-15
-20
-25
(PERCENT DEVIATION OF GROUP INDEX FROM THE ALL COMMODITIES INDEX)
PERCENT
111II1II1II
1 1 1 1 1 1 1 1 1 1 1
1!Ill 1 1 II
1 1 1 11 1 1 II
1 1 1 1 1 | 1 1 1 1 1
11111111111
11111 11111
1II11 11111
M i M111111
Milium
1 1 1 1 1 | 1 1 1 1 1
111111 ii 111
i m ill m i
■'V^FU
ISHED G00(
)S
\/\
V Vl
r~x r\
V v
\ J*
\y/
M /
4 /
4 /
A\
V\
r^
i —-
/
A /
I/V
Vs
4
s
9
1
V
i
\
/
r
i
I
/
4
4
4
>
\-
%
/V
i
/*\ /
/ v
r
SOURCE: RUREA
PRICE
1 1 1 1 1 1 1 1 1 1 1
U OF LABOR STATIST
INDICES (1926 - 1
null
\ 1 \
V '■
1
1
\ A-RAW
V
MATERIALS
CS iHOLESALE
50.0)
1 1 M 1 1 1 1 II 1
1 1 1 1 1 l 1 1 1 1 1
1M111
11111111111
11111111111
11111111111
11111 1 11111
1 1 1 1 1 1 1 1 1 1 1
11111 111 n
11111111111
1111J M i M
+10
+ 5
-10
-15
-20
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
Works Progress Administration 3101
7
value of production in 1935. A weighted average deviation
is then calculated for each month. This monthly figure is
divided by the 1929 average deviation to obtain the monthly
index number of price dispersion.
In a technical sense the resultant figure indicates the
representativeness of the all-commodities index. When the
dispersion is relatively small, the composite price index is
more representative of its components than when the disper¬
sion is larger. During periods of relative stability when
prices seem to move along together, showing only minor fluc¬
tuations, the representativeness of the all—commodities in¬
dex varies little. In these periods, the index of dispersion
maintains itself at a fairly constant level.
Large increases in the index of dispersion (indicating
violent changes within the price structure) have been gener¬
ally associated with recessions in business activity. The
1/
A. D. -
x-p.. ,xn s price index (1926 m 100) for commodity subgroup
7 « price index (1926 » 100) for "all commoditiesw
w, ... .w s weight of each commodity subgroup — percent of
value of production of "all commodities" in 1935
n m number of subgroups » 45
A. D« = weighted average deviation
I " Index of Dispersion
M-1765
100 - x.
W1 4
100 - Xg
W~ 4
100 - x^
7
4
100
ff
X
n
100
I - A. D. for month
~ A. D. for 1929
8
inverse relationship between price dispersion and industrial
production during the period 1928 to date is indicated by
the -0.87 Pearsonian coefficient of correlation, (See
Chart I.)
Frederick C. Mills conducted his investigations with
price dispersion prior to 1926. The present study covers
the period from 1926 to date. Mills shows that the disper¬
sion of fixed-base relatives increases naturally over a pe¬
riod of years. Our index of price dispersion (1929®100) in¬
creased very rapidly from the base year of the wholesale
price indexes (1926), on a parabolic trend, to the middle of
1930 when the weighted average deviation was 10 percent above
the base year, (See Table II,) A parabolic trend of the
monthly data from 1926 to July 1930 would have carried the
deviation to approximately 12 percent by 1935. Actually,
after the large dispersion which occurred during the years
from 1930 through 1934 had been dissipated, the amount of
the dispersion leveled off at approximately 12 percent, al¬
though it dropped a little in 1936. This trend seems to in¬
dicate that the dispersion calculated from fixed-base rela¬
tives increases very rapidly during the first 3 or 4 years
following the base period and increases relatively little
thereafter.
Previous investigations - including those of Wesley C.
Mitchell, F. T. Edgeworth, and Norman Crump - tended to show
that the dis ersion of price relatives increases with a ris-
M-1765
9
ing price level and that the degree of dispersion declines
with falling prices. The present study indicates that the
relative direction of the price level is not nearly so irv-
fluential on the magnitude of the dispersion as was the rate
of change of the price level regardless of its direction.
In recent years, excellent examples of this phenomenon were
afforded by the rapid change in the price level from 1929 to
1932 and from 1937 to 1938. In both instances the increase
in dispersion was caused by the relatively large declines in
prices of certain commodities (principally the raw materi¬
als), and relatively small declines in prices of other com¬
modities (particularly finished goods).
The irregular price declines from 1929 and 1930 to 1933
resulted in a very large dispersion. During the recovery
from 1933 to 1934-, the price level went up rapidly and the
index of dispersion declined. But the dispersion decline was
directly proportionate to the decrease in the spread between
raw materials and finished goods prices. It was this ability
of the competitively priced raw materials to gain on the
more rigid and slower-coving finished goods prices which re¬
sulted in the drop in the dispersion index.
During the period from the middle of 1934 to the middle
of- 1936, prices in general seemed to move moderately upward
together. This was indicated by the slight change which oc¬
curred in the index of dispersion during that period of ad¬
vances in industrial production.
M-1765
10
The large increase in dispersion which characterized the
rapid change among price relationships from the fall of 1936
t6 the spring of 1937 was the result of a surge in most com¬
modity prices at that time. In general, it was the reflec¬
tion of the very large increases in the prices of the flexi¬
ble commodities and the relatively sluggish reaction in the
prices of finished goods. The period from April 1937 to the
present, however, presents a somewhat different picture.
During this period there was an increase in price dispersion
caused by drastic reductions in the prices of flexible com¬
modities and the relative maintenance of the prices of other
items.
On the advance or on the decline of prices, the changes
/>
in the dispersion were the result of large fluctuations in
flexible prices, particularly of raw materials. Whether or
not the dispersion increased or decreased was dependent, of
course; upon the position of the price indexes of these com¬
modities relative to the index of all commodities. If the
indexes for these prices were below the all-commodities in¬
dex, theii any increase, violent or moderate, tended to lower
the dispersion; if the price indexes for these commodities
were above the all-commodities index, a price rise would in¬
crease the dispersion.
The following paragraphs describe in more detail the
changes in the dispersion during the major changes in the
price level from 1929 to date.
M-1765
11
Analysis of the Dispersion
The major characteristics of the decline from 1929 to
1933 are well known. Raw materials and other sensitive comp-
modities dropped precipitously during this period. (See
Chart III,) On the other hand, there was a very large group
of commodities, chiefly the finished goods items, whose
prices went down very little. Previous price relationships
were rapidly destroyed. Throughout 1930, 1931, and part of
1932 the index of dispersion - 1929=100 (see Chart I) in¬
creased steadily until in June 1932 it was 277. During this
period from 1929 to July 1932, the index of production de-
clined to a point which was 49 percent of its 1929 level. A
slight improvement in the price situation occurred during
the summer and the dispersion index then dropped until it
was 237 in September 1932. At the same time, business ac¬
tivity improved and the production index advanced to 56 in
October 1932, But the price structure became further dis¬
torted when the prices of the flexible commodities dropped
rapidly in the fall of 1932 and the first 2 months of 1933
so that the dispersion index increased to 305 in February.
The index of production had dropped to 50 by March 1933.
By February 1933 the price index for all commodities had
reached a point which was 63 percent of its 1929 level. Raw
materials and finished goods stood at 50 and 70 percent, re—
l/The Federal Reserve seasonally adjusted index of industrial
production, 1923-25=100, has been converted to 1929=100
for use in this study.
•CHART HE
RELATIVE WHOLESALE PRICE LEVELS IN FEBRUARY 1933,
PEAK IN 1937, AND JUNE 1938
^SUBGROUPS OF COMMODITIES RANKED ACCORDING TO INDICES FOR JUNE 1938)
COMMODITIES
COKE
BITUMINOUS COAL
IRON AND STEEL
AUTOMOBILE TIRES AND TUBES
CEMENT
DRUGS AND PHARMACEUTICALS
AGRICULTURAL IMPLEMENTS
6AS
FURN I SH INGS
PAPER AND PULP
BR I CK AND TILE
MOTOR VEHICLES
BOOTS AND SHOES
BUILDING MATERIALS (MISC.)
LUMBER
LEATHER PRODUCTS (MISC.)
CLOTH I N6
CEREAL PRODUCTS
ELECTR IC I TY
FURN I TURE
WOOLEN.AND WORSTED GOODS
PAINT AND PAINT MATERIALS
AN THRAC I TE
OTHER MISCELLANEOUS
ALL COMMODITIES
CHEMICALS
PLUMBING AND HEATING
PETROLEUM PRODUCTS
MEATS
LIVESTOCK AND POULTRY
FERTILIZER MATERIALS
LEATHER
FER T I L I ZERS , MIXED
TEXTILE PRODUCTS ISC. )
FOODS (MISC. )
HOSIERY AND UNDERWEAR
DAIRY PRODUCTS
COTTON GOODS
CATTLE FEED
GRA INS
NONFERROUS METALS
FRUITS AND VEGETABLES
RUBBER, CRUDE
FARM PRODUCTS (MISC.)
HIDES AND SK INS
SILK AND RAYON
Price level in June 1938
1//////////a Change in price from the peak level of 1937 to June 1938
O Price level in February 1933, the low point of the depression
Source: Computed from data furnished by the Bureau of Labor Statistics,
w/7//a
v/////////77x
y//////7///a
Index Numbers, 1929 - 100
0 26 50 7 5 100 126
1 I I I I I
wz&
v/////a
vzzzzzzzztzza
vzzzzzzzzzzzza
*77777,
by/x/////////777a
1zzzzzzzzzzzz3zzzzzzz&
a
ggggggg
w.v7//////7///////////////a
v7//////7///////////a
m////////////)//////a
77
7zzzzzzzzzzzzzza
Works Progress Administration 3102
(4-1765
13
spectively, of their 1929 prices. In other words, the com¬
posite wholesale price level had declined 37 percent, raw
materials 50 percent, and finished goods only 30 percent.
Below are shown two lists of important commodities. One
is a tabulation of the items which declined relatively lit¬
tle (less than 20 percent) during the major depioJsionj the
other is composed of the flexible commodities whose prices
were volatile (dropping more than 50 percent). The rigid
classification represents 27 percent and the flexible group
39 percent of the Bureau of Labor Statistics "all-commodi-
y
ties * index.
Percent
Percent
y
change
1/
change
Relatively rigid
from
Relatively flexible
from
1929 to
1929 to
February
February
1933
1933
Electricity 2/
+ 3.9
Rubber, crude
—85.6
Gas 2/
+ 3.8
Silk and rayon
-68.2
Anthracite
- 1.6
Cattle feed
-66.6
Cement
-10.9
Grains
—66.4
Coke
-11.1
Hides and skins
-63.7
Bituminous coal
-13.0
Livestock and poultry
—62.8
Motor vehicles
—14.8
Other farm products
-58.5
Agricultural implements -15.8
Nonferrous metals
-56.5
Iron and steel
-18.5
Meats
-54.0
Paper and pulp
-18.9
Petroleum products
-51.9
Other building
Leather
-51.1
materials
-19.7
Dairy products
-50.4
Brick and tile
—20.4
l/See Chart III.
2/These are average rates based on sliding scales of con¬
sumption.
l/These percentages are based on the values of production in
1937.
u
The average weighted deviation of the 45 subgroup price
indexes from their mean index in 1929 was 8.58 percent; by-
February 1933 the dispersion had increased the average devi¬
ation to 26.17 percent (see T ble III). This amounted to an
increase from 100 to 305 in the index of dispersion. General
economic activity, as measured by the index of industrial
production, had declined 47 percent during this period(i.e.,
in February 1933 it was only 53 percent of its 1929 level).
In the early part of 1933, prices began to move upward
at a rapid pace, and within a period of a few months much of
the disparity between the prices of raw materials and fin¬
ished products had disappeared. This boom was short-lived
and it was followed by a general recession in economic ac¬
tivity and prices during the fall of 1933* The index of
dispersion increased slightly. In 1934, however, the recov¬
ery became more positive and the upward movement of prices
assumed a steadier pace. Prices recovered rapidly and the
dispersion was decreased to an index of 131 in February 1935.
Production also increased substantially, the index increas¬
ing to 77 in January 1935 for a gain of 54 percent.
Prices in general moved together in a moderately upward
direction during 1935 and the first half of 1936. There were
no violent price changes,although the gap between the prices
of raw materials and finished goods became narrower. The in¬
dex of dispersion showed very little net change, dropping
from 131 in February 1935 to 126 in May 1936s,
15
It may be argued that this relative stability had a stim¬
ulating effect on all types of economic activity. Produc¬
tion, employment, and profits increased. The volume of pro¬
duction rose by 33 percent during 1935 and 1936. The disper¬
sion among prices was further diminished in the fall of 1936
when farm prices advanced rapidly; in November the index was
only 1.4 percent above its 1929 level. In December 1936 pro¬
duction reached a peak which was 1.7 percent in excess of
its 1929 volume.
But the relative balance in the price structure did not
endure. In the summer of 1936 prices of farm products began
to move rapidly upward; in the fall of that year the index
of farm prices exceeded the index representing the price
level of other commodities. The nonferrous metals also in¬
creased rapidly, led by copper which reached a very high
level. Steel increased in October 1936 and again in the
spring of 1937, and building materials, led by lumber, ad¬
vanced rapidly. The general price level increased 12 percent
from its low point in 1936 to its high point in 1937. A few
of the specific groups of commodities showed enormous in¬
creases; "thus, grains advanced 69 percent, crude rubber 71
percent, meats 34 percent, nonferrous metals 45 percent, and
cattle feed 116 percent.
By 1937 more than 50 percent of all commodities, accord¬
ing to value, had advanced to levels which were higher than
their 1929 prices. The list of these commodities, in order
M-1765
16
of their importance, showing the amount by which they ex¬
ceeded their 1929 levels, is given below.
Commodity
Percent
Commodity Percent
Meats
3.9
Boots and shoes
1.2
Iron and steel
5.3
Furnishings
1.5
livestock and poultry
2.0
Woolen & worsted goods
6.9
Cereal products
4.9
Other bldg. materials
3.7
Bituminous coal
10.7
Coke
24.7
Grains
22.4
Cement
4.0
Clothing
.1
Cattle feed
20.7
Paper and pulp
6.9
Hides and skins
8.3
Auto tires and tubes
5.3
Brick and tile
1.3
Lumber
9.8
Rubber, crude
20.3
Drugs & pharmaceuticals
16.1
As in all other periods of volatile upward price move¬
ments, great disparities among prices developed. Some prices
advanced very rapidly; others relatively little.
The period was one of speculation and was characterized
by the accumulation of large inventories. Prices of flexi¬
ble commodities, notably raw materials, reached their peak
in April 1937. The prices of the more highly fabricated
goods continued upward until the summer.
The period extending from the third quarter of 1937 to
the last quarter of 1938 is unique with respect to the move¬
ment of prices. Prices of the primary commodities declined
precipitously from April 1937 to the early months of 1938»
On the other hand, the prices of fabricated goods were main¬
tained at relatively high levels.
M-1765
17
Heavy inventories had the normally expected effect on
prices of competitive commodities. This is evidenced by the
fact that cotton goods, grains, nonferrous metals, hides and
skins, and many other commodities declined 34 percent on the
average from 1937 to June 1938 (see Chart III). The drop in
the general wholesale price level was U percent.
Inflexible prices,on the other hand, remained at approx¬
imately their 1937 peak levels. The commodities exhibiting
the extremes of rigidity and flexibility and their respec¬
tive price changes during the recent recession, from the
1937 peak to June 1938 are tabulated below.
Relatively rigid
Percent Percent
change l/change
from Relatively flexible from
1937 peak 1937 peak
to June to June
1938 1228
Gas 2/
47.4
Hides and skins
-49.0
Electricity 2/
+2.3
Rubber, crude
-*48.3
Iron and steel
+1.0
Grains
-47.4
Motor vehicles
+ .4
Cattle feed
-46.6
Agricultural implements
.0
Nonferrous metals
-33.5
Cement
.0
Cotton goods
-32.8
Automobile tires & tubes
♦0
Fruits and vegetables
-59.7
Coke
- .2
Other farm products
-28.8
Bituminous coal
-3.6
Livestock & poultry
^25.9
Plumbing and heating
-*4.2
Meats
-25.5
Brick and tile
-5.1
Dairy products
-24.1
Anthracite
-8.7
Other foods
-21.2
l/See Chart III*
2/These are average rates based on sliding scales of con¬
sumption.
18
The rigid group constitutes 27 percent, and the flexible
group 39 percent, of the total weight of all commodities in
the index. With the significance of this contrast in mind,
it is not difficult to understand the enormous increase in
the index of dispersion to 18$ in June 1938.
The maintenance of some prices during the recent reces¬
sion and the large declines experienced by ther important
commodities resulted in the formation of disparities within
the price structure which are of a magnitude almost equal to
those in 1931. The price structure, which in 1936 had
achieved a state of good working equilibrium, of satisfac¬
tory relationships, is now distorted because some prices are
too high and others too low. The rapid unbalancing of the
price structure in the early months of 1937 was accompanied
in September by a precipitous decline in production and em¬
ployment. The production index dropped 34 percent from Au¬
gust 1937 to June 1938, when the level of output was only 65
percent of the 1929 volume.
The trends of prices since June 1938 have been very er¬
ratic, but in general tending toward an improvement in price
relationships. The all-commodities index moved slightly up¬
ward during the summer as the result of increases in prices
of raw materials. In recent months, however, the trend has
been downward because of a general weakness throughout the
price structure, especially in the finished goods lines.
Reductions in prices of finished goods and increases among
M-17S5
19
the primary commodities have effected a downward fluctuation
in the index of dispersion. The peak of the dispersion oc¬
curred in June, when the index stood at 185. The improvement
in price relationships has resulted ina steady decline until
in December the index was 169. The favorable trend is re¬
flected also in the indicator of business activity. The FEB
index of industrial production increased to 87 percent of
its 1929 level in December 1938.
Judging from past experience, relatively high prices of
the finished goods and low prices of the raw materials,
principally the grains, still loom as an obstacle to continr-
ued recovery. However, the trends are favorable. Continued
declines among the finished goods and moderate advances in
prices of raw materials should stimulate the recovery move¬
ment.
Conclixsion
In the foregoing, we have utilized the index of price
dispersion as a measure of changes in the relationships
among prices. It is not argued here that it is the sole in¬
dicator of relative balance or equilibrium within the price
structure. The amount of the dispersion does, however, serve
as one criterion of the price situation.
Our experience with this measure has been that rapid in¬
creases in the dispersion generally are associated with and
precede recessions in business activity. An exception to
this correlation becomes evident, however, when the price
20
relatives of the flexible commodities are larger than the
index of prices for "all commodities." This was the situa¬
tion in 1929, when for a few months rapid declines in the
prices of flexible items resulted in a reduction in the
amount of the average deviation. In that instance, the pro¬
duction index started its downward trend several months in
advance of the rapid increase in the dispersion index. Nev¬
ertheless, the association between changes in price disper¬
sion and changes in business activity during the last decade
has been remarkable.
The present study also has revealed that the dispersion
of price relatives increases very r apidly for the first 3 or
4 years following the base year and thereafter the natural
changes are very small. However, because of the economic
disturbances during the past 10 years it is difficult to
measure accurately this trend. He have, therefore, restric¬
ted our interpretations of small changes in the relative
level of the dispersion. It cannot be assumed that the re¬
lationships among prices are any better when the index of
dispersion is 100 than it is when the index is 125. The na¬
ture of the data and the technique do not lend themselves to
such a conclusion. On the other hand, significance can be
attached to sharp changes in the index and to the maintenance
of the index at a rather constant level. In other words, the
direction and the rate of change of the dispersion are the
important criteria of price conditions.
K-1765
21
TABI£ I.- INDEXES OF WHOLESALE PRICE DISPERSION
January 1928 Through December 1958
Months
Yea
r s
1928
1929
1930
1931
1952
1933
January
86.1
97.0
99.1
142.8
241.5
290.5
February
79.5
94.4
100.8
150.7
254.7
305.0
March
78.8
108.7
106.8
155.6
252.2
293.3
April
87.1
108.9
107.5
160.5
253.8
283.2
May
93.8
105.5
107.8
175.1
272.5
243.2
June
88.8
102.2
111.0
188.1
277.4
221.7
July
100.1
110.7
112.4
187.8
252.1
208.8
August
105.8
112.0
109.2
188.6
244.4
226.4
Septmaber
115.7
107.6
119.9
201.4
237.1
221.7
October
94.8
100.8
123.4
206.3
252.3
231.8
November
88.5
95.0
134.2
208.0
263.8
233.2
Deoember
91.1
97.4
137.2
228.6
281.6
246.4
Months
Yea
r s
1954
1935
1936
1937
1938
January
234.4
132.0
139.8
108.3
156.6
February
219.0
131.4
133.2
107.1
166.1
March
215.3
144.5
158.5
121.9
169.5
April
223.3
139.9
132.6
137.9
178.0
May
221.4
140.6
126.3
143.2
182.4
June
201.4
136.5
114.7
145.7
185.0
July
193.4
138.3
106.7
161.0
182.8
August
172.7
150.9
113.4
170.6
182.2
September
154.1
154.5
113.0
170.3
178.7
October
168.5
148.3
105.7
166.3
175.2
November
167.4
132.7
101.4
157.2
168.8
December
166.3
142.0
102.8
155.4
168.8
Souroet U. S. Dept. of Labor, Bureau of Labor Statistics,
wholesale price indexes (1926 a 100).
Notes The measure of dispersion is the weighted average
of the deviations of the 45 commodity subgroup
price indexes from the all-commodities index. The
indexes were derived by dividing the monthly aver¬
age deviations by the average deviation in 1929.
22
TABLE II.- "WEIGHTED AVERAGE DEVIATION OF COMMODITY SUBGROUP
PRICE INDEXES FROM THE "ALL COMMODITIES" INDEX
January 1928 Through December 1938
Months
Yea
r s
1928
1929
1930
1931
1932
1953
January
7.73
8.71
8.90
12.82
21.69
26.09
February
7.14
8.48
9.05
13.53
22.87
27.39
March
7.08
9.76
9.59
13.97
22.66
26.34
April
7.82
9.78
9.66
14.41
22.79
25.43
May
8.42
9.47
9.68
15.72
24.47
21.84
June
7.97
9.18
9.97
16.89
24.91
19.91
July
8.99
9.94
10.09
16.86
22.64
18.75
August
9.50
10.06
9.81
16.94
21.95
20.33
September
10.21
9.66
10.77
18.09
21.29
19.91
October
8.51
9.05
11.08
18.53
22.66
20.82
November
7.95
8.53
12.05
18.68
23.24
20.94
December
8.18
8.75
12.32
20.53
25.29
22.13
Months
Yea
r s
1934
1935
1936
1937
1938
January
21.05
11.85
12.55
9.29
13.44
February
19.67
11.80
11.96
9.19
14.25
March
19.33
12.98
12.44
10.46
14.54
April
20.05
12.56
11.91
11.83
15.27
May
19.88
12.63
11.34
12.29
15.65
June
18.09
12.26
10.30
12.50
15.87
July
17.37
12.42
9.58
13.81
15.68
August
15.51
13.55
10.18
14.64
15.63
September
13.84
13.87
10.16
14.61
15.33
October
15.13
13.23
9.49
14.27
15.03
November
15.03
11.92
9*11
13.49
14.48
Deoember
14.93
12.75
9.23
13.33
14.48
Source» U. S. Dept. of Labor, Bureau of Labor Statistics,
wholesale price indexes (1926 ■ 100).
M-1765
23
TABLE III.- PERCENT DEVIATION OF WHOLESALE PRICE INDEXES FROM THE "ALL-
COMMODITIES" INDEX, BY COMMODITY SUBGROUPS
For Seleoted Dates
Commodity subgroups
Year
1929
Feb.
1933
Nov.
1936
Apr.
1937
June
1938
Deo.
1938
Farm products
Grains
*2.20
-45.32
•24.88
*35.45
-19.92
-29.35
Livestock and poultry
*11.33
-32.94
-3.28
*6.36
*2.43
-3.38
Other farm products
*11.86
-26.09
♦0.61
-5.23
-19•54
-13.64
Foods
Dairy products
♦10.81
-12.37
♦7.04
-10.80
-12.52
-4.03
Cereal produots
-7.66
*1.00
*4.25
♦2.06
*2.43
-2.86
Fruits and vegetables
*2.62
-12.37
-9.22
-5.11
-21.20
-21.56
Meats
*14.48
-16.05
*3.40
*7.84
*7.92
♦3.77
Other foods
-1.47
-9.53
-1.21
-12.50
-17.37
-10.13
Hides and leather products
Boots and shoes
♦11.54
*39.30
*20.51
*17.95
♦30.01
♦30.65
Hides and skins
*18.26
-31.61
*22.82
*37.95
-20.43
*2.34
Leather
tl8.78
-7.53
•7.28
*14.43
♦4.21
*11.56
Other leather produots
*11.65
♦30.27
*16.38
*16.25
•24.78
*24.42
Textile produots
Clothing
-5.56
*2.34
-1.09
-1.36
*4.98
♦5.97
Cotton goods
♦3.67
-17.89
♦3.76
*8.07
-18.39
-16.10
Hosiery and underwear
-7.14
-19.23
-25.73
-25.11
-23.76
-22.99
Silk and rayon
-15.63
-57.19
-59.47
-61.59
-64.75
-60.00
Woolen and worsted goods
-7.35
-11.04
*2.31
•6.25
-3.45
-2.86
Ofcher textile produots
-2.31
*10.70
-19.30
-21.82
-16.99
-16.36
Puel and lighting materials
Anthracite
-5.46
*48.33
0.00
-17.73
-4.85
*4.03
Bituminous ooal
-4.20
*32.78
♦17.96
♦12.05
*24.52
♦27.92
Coke
-11.23
♦25.75
♦18.69
*16.82
*34.48
*35.32
Eleotrioity
-0.84
*72.07
*0.36
-12.39
*11.11
*6.23
Gas
-2.31
•61.54
-0.61
-8.30
*15.45
*9.87
Petroleum produots
-25.18
-42.64
-29.49
-32.05
-28.10
-33.90
Metals and metal produots
*21.43
Agricultural implements
•3.57
*38.96
*12.74
*4.66
*22.73
Iron and steel
-0.42
♦29.25
♦7.89
•13.18
*28.86
*25.71
Motor vehicles
*11.96
*52.01
*11.65
*6.48
*22.61
*21.30
Nonferrous metals
*11.33
-22.74
-8.50
*10.23
-14.18
-0.26
Plumbing and heating
-0.31
-0.67
— 6.92
-10.57
-1.40
*2.21
M-1765
24
TABLE III.- PERCENT DEVIATION OF WHOLESALE PRICE INDEXES FROM THE "ALL-
COMMODITIES" INDEX, BY COMMODITY SUBGROUPS (Cont.)
For Selected Dates
Commodity subgroups
Year
1929
Feb.
1933
Nov.
1936
Apr.
1937
June
1938
Dec.
1938
Building materials
Briok and tile
-1.05
*25.59
*7.77
♦7.84
*15.71
*18.83
Cement
-3.67
*36.79
*15.90
♦8.52
*21.97
*24.03
Lumber
-1.57
-5.69
♦5.10
*17.05
*13.28
*18.06
Paint and paint materials
-0.42
*13.71
-2.31
-4.66
*2.30
*5.19
Other building materials
*2.52
*31.27
♦10.32
*13.52
♦19.16
*16.49
Chemicals and drugs
Chemicals
*3.99
♦32.11
*8.25
*7.05
*2.94
*3.90
Drugs and pharmaceuticals
-24.97
-8.36
-5.46
-5.80
-8.17
-4.55
Fertiliser materials
-3.36
*2.84
-17.48
-19.66
-11.24
-10.91
Fertilisers, mixed
*1.99
*4.35
-15.53
-18.18
-11.49
-4.16
Housefurnishing goods
Furnishings
-1.78
*21.91
♦4.00
*4.66
*15.84
*17.27
Furniture
-0.31
*20.23
-4.37
-2.50
*6.64
*5.97
Miscellaneous
Automobile tires and tubes
-42.81
-28.76
-39.20
-35.91
-26.69
-23.64
Cattle feed
♦27.60
-32.11
*52.91
*66.82
*0.13
-0.52
Paper and pulp
-6.72
*20.57
-1.09
*6.70
*9.19
*5.06
Rubber, crude
-55.61
-89.80
-54.98
-43.98
-66.41
-55.97
Other
*£*25
*22.58
-0.85
-3.07
♦3.68
*5.32
Weighted average deviation 8.58 26.17 8.70 11.83 15.87 14.48
Index of dispersion 100.00 305.00 101.40 137.90 185.00 168.80
Sourcet U. S. Dept. of Labor, Bureau of Labor Statistics.
M-1765