Bituminous Coal Production At Varying Levels Of Business And Its Relative Use Value As Compared With Former Years

SINCE 1023, which closed the speculative era in the bituminous coal fields of the United States, there have been wide annual fluctuations in the national production of bituminous coal. These changes in annual output have been variously attributed to: (I) increased competition from petroleum products, natural gas and hydroelectric power; (2) lower unit consumption of coal; and (3) fluctuations in the general business level. The purpose of this paper is to measure, from a practical standpoint, the net effect upon the annual trend of bituminous coal production, and to give those who are interested a basis for estimating in advance the probable output of bituminous coal. It can readily be shown that changes in the level of general business affect the national production of bituminous coal more than does any other factor. Therefore it is necessary to use some standard measure of the relative business level for purposes of comparison. The Federal Reserve Board Index of Industrial Production offers the basis for such a measure.' This Index, a weighted composite of 81 different series, rests upon the averages of the years 1935 to 1939 as loo, and is presented graphically in Fig. I. Even a cursory examination of the chart will indicate a definite uptrend for industrial production over a period of years. This uptrend is due to at least two factors: (I) an actual increase in national population, and (2) a probable increase in the per capita consumption of goods. This means that there is no such thing as a fixed Normal, rather Normal is a variable, tending to increase from year to year. In order to measure the amount of annual increase in normal, the Index of Industrial Production must be studied in relation to its major components, Durable Goods and Nondurable Goods. Durable Goods are those made from the lasting materials such as iron, steel, other metals, lumber, stone, cement, clay, glass. Nondurable Goods are those for early consumption, such as foods, textiles, tobacco, chemicals, paper, gasoline, and goods made of leather and rubber. The purchase of Durable Goods may be postponed, but Nondurable Goods must be purchased currently unless the standard of living is lowered. The Federal Reserve Indexes of durable and nondurable goods are shown graphically, 1920 to 1939, on Fig. 2 (pp. 764-765 of ref. I). It is apparent that fluctuations in the production of nondurable goods are not nearly so wide as in the production of durable goods, and that the curve of Industrial Production (Fig. I) would fall between the two curves on Fig. 2. It would, however, seem logical that both curves should follow the same long-term trend, or that over a period of two to three decades the relative proportion of durable and nondurable goods, in periods of normal production, should he the same. It is neces-