An industrial production index for the Houston economic area
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A monthly index of industrial production is a significant economic indicator. A comparison of trends in physical output by the regional industries with trends in other regions or in the country as a whole is useful to the planner, the businessman, and the manager in their measuring and anticipating cyclical fluctuations in manufacturing output or, more generally, in their acquiring a deeper understanding of the economic environment. Also, an industrial production index affords a host of potentialities in the field of regional economic research. The purpose of this study is to develop an index of Industrial Production for the Houston metropolitan community and its service area. The selected region is called the Houston Economic Area and consists of the counties of Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Mongomery and Waller. After a review of the existing indexes on industrial production, the criteria used in defining the region under study are presented. Then, a list of the fundamental assumptions made concerning the sources of information and the methods of constructing, revising and adjusting the index are followed by a delineation of the procedure for its computation. Limitations of the index are mainly related to the statistical crudeness inposed by scarcity of necessary data. However, inasmuch as 79 per cent of the index's content reflects actual physical output, it is believed that the index retains valuable properties as a tool of analysis. For those industries lacking meaningful data -- as a unit of measurement - man-hours are used to reflect value added in production. These series should be adjusted to allow for estimated trends in productivity (output per man-hours). At the time of the computation of the index, the information available on Houston industries was not sufficient to warrant the formulation of reliable productivity factors and the indexes were left unadjusted. However, the procedure that will be employed in making productivity adjustment when the necessary data will be collected is outlined. The Index of Industrial Production of the Houston Economic Area is presently released monthly to all the participating firms. A release to the general public will follow the planned revisions and refinements of the index - namely, the use of new weights based on the 1963 Census of Manufactures, the introduction of productivity factors, and the computation of new seasonals.