STATE OF BUSINESS: New Yardstick for the U.S.

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The postwar rate of growth of the U.S. economy has been "materially greater" than Government statistics show. So, last week, said Federal Reserve Board Chairman William McChesney Martin Jr. as he announced a revision of FRB's index of industrial production, the first since 1953.

The first compilations of the revised index, now near completion, show that U.S. output, which reached a record 155 in June (1947-49 average: 100), is actually ten points higher. The FRB made its revision on the basis of a detailed business census for the year 1954, which reviewed some 6,000 product lines in manufacturing alone.

Almost half the jump was caused by the addition of electric and gas utilities' production to the index base. The rest of the change was due to improvements in measuring industries already included in the index. Under the revised index, industrial output of consumer goods has risen at an annual rate of 3.8% during the past decade, v. a 3.2% rise shown by the unrevised index. The U.S. population has grown at the rate of 1.7% per year.

Chairman Martin pointed out that the index of industrial growth is a more significant indication of the economy's bustle than many other indicators, such as gross national product. It is a pure index of real production, does not include the inflationary rise in prices, which often makes the rise in other indexes seem greater than it actually is. Said Martin: "As the structure of the economy keeps changing, the job of combining measures of its many parts into a single index cannot be done without having to make major revisions every few years." With increasing use of electronic computers, the FRB hopes to reduce even more the time of assembling such information, thus lessen the lag between the economy's real growth and the stick that measures it.