Relation between Seasonal Amplitudes and the Level of Production—An Application to the Production of Steel Ingots
THERE ARE three possible relationships between the business cycle and seasonal amplitudes of production. A particular relationship will depend on the circumstances surrounding an individual product. In the case of steel, for example, the amplitudes of seasonal fluctuations tend to become larger as the general demand for that product declines. This tendency is entirely reasonable in view of modern business practices. During periods of recession business men often resort to hand-to-mouth buying; they do not build up stocks; they are doubtful of the future. Production, therefore, is largely seasonal in nature, and demand varies widely from month to month. During the upswing of the cycle seasonal fluctuations assume a different character. Demand increases over an extended period of time; business men become increasingly optimistic; they build stocks; the policy of hand-to-mouth buying is discarded. Because of the continued increase in demand, production is largely cyclical in nature, and month-to-month variations diminish as the peak of the cycle is approached. Moreover, seasonal amplitudes of steel production must decrease because of the fixed physical capacity which is present at a given point of time. A second kind of relationship may exist. In the case of certain luxury goods, for example, seasonal amplitudes of production increase as the peak of the business cycle is approached. Here the circumstances are different, for the sale of these goods depends, in a large measure, on the purchasing power of consumers. When purchasing power is low or declining the consumer does not easily part with his money, either in or out of season. On the other hand, when the consumer's pockets are well filled his purchases in season are large. Finally, there are some types of products whose seasonal amplitudes of production are but little affected, if at all, by general business conditions. A case in point is to be found in the motion picture industry, where the number of domestic feature-length films produced varies but little between the years of prosperity and the years of depression. General recognition of the fact that seasonal patterns change in response to one or more causal factors has resulted in newer and more