The purpose of the present study is three folds; (a) to provide a methodological approach to the development of composite economic index at the local government levels, (b) to develop a local manufacturing index, helpful in identifying business conditions of Daegu·Gyeongbuk region, and (c) to propose a Daegu·Gyeongbuk region manufacturing index for application of other local government manufacturing index. Using KOSIS data, the author developed the Daegu·Gyeongbuk region manufacturing index as follows: (1st) adopting components (i.e., configuration indicators) and verifying those validity, (2nd) removing the affect of seasonally and the irregularly adjusted series from each component using by X-13 ARIMA-SEATS, (3rd) producing standardization factor of month-to-month changes for each component series and standardized rate of changes, as a standardization phase, (4th) computing a manufacturing coincident index with common factor analysis and extracting a cyclical fluctuation value of manufacturing index with Hodrick-Prescott filter, and (5th) verifying the validity of Daegu·Gyeongbuk region manufacturing index by measuring this index against composite indexes from the Daegu-Gyeongbuk Development Institute.

Key words : local manufacturing, X-13 ARIMA-SEATS, common factor analysis, coincident index, cyclical fluctuation value