With this latest installment of the Maine Business Index, we have switched from using 1987 as the base year to using 1996 instead. This revision provides a more up-to-date reference point for tracking the relative movement of the Index. We have chosen 1996 because several agencies of the federal government have now begun to use that as the base year in their own indexing of the various statistics that they produce.

To demonstrate the effect that changing the base year has on the Maine Business Index, two graphs have been presented showing the entire Index from mid-1986 to the present, including the current forecast of its future twelve months. Notice that, although data for the Index has been maintained since July 1986, the data stream does not begin until January 1990. This is due to averaging that is utilized in the construction of the Index.

In analyzing these graphs, the reader should note that the overall shape of each data series is identical. But the line in Fig. 1, the base-year 1996 graph, has shifted down. This reflects the fact that business activity in Maine, which the Index measures, has increased fairly steadily since 1987, except for a downturn in the early 1990s. Compared to 1987, current business activity in the state is approximately 32 percent higher than it was in 1987. Compared to 1996, however, current business activity is only about 23 percent higher. Or, to take a historical view, business activity in the beginning of 1990 was about four percent higher than it had been in 1987, but it was one percent lower than it would become in 1996.

This suggests a larger issue. A graphical display of data provides a handy visual tool. At the same time, the reader must always exercise caution so as to interpret the information meaningfully.

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