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Federal Reserve Bank of St. Louis
Collection: Paul A. Volcker Papers
Call Number: MC279
Box 13
Preferred Citation: Humphrey-Hawkins Testimony, 1982 July 20-21; Paul A. Volcker Papers, Box
13; Public Policy Papers, Department of Rare Books and Special Collections, Princeton University
Library
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
ead.
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Federal Reserve Bank of St. Louis
I am pleased to have this opportunity once again to
discuss monetary policy with you within the context of recent
and prospective economic developments.
As usual on these
occasions, you have the Board of Governors' "Humphrey-Hawkins"
Report before you.
This morning I want to enlarge upon some
aspects of that Report and amplify as fully as I can my thinking
with respect to the period ahead.
In assessing the current economic situation, I believe
the comments I made five months ago remain relevant.
Without
repeating that analysis in detail, I would emphasize that we
stand at an important crossroads for the economy and economic
policy.
In these past two years we have traveled a considerable
way toward reversing the inflationary trend of the previous
decade or more.
I would recall to you that, by the late 1970s,
that trend had shown every sign of feeding upon itself and
tending to accelerate to the point where it threatened to
undermine the foundations of our economy.
Dealing with inflation
was accepted as a top national priority, and, as events developed
that task fell almost entirely to monetary policy.
In the best of circumstances, changing entrenched patterns
of inflationary behavior and expectations -- in financial markets
in the practices of business and financial institutions, and in
labor negotiations -- is a difficult and potentially painful
process.
Those, consciously or not, who had come to "bet" on
rising prices and the ready availability of relatively cheap
credit to mask the risks of rising costs, poor productivity,
aggressive lending, or over-extended financial positions have
found themselves in a particularly difficult position.
The pressures on financial markets and interest rates
have been aggravated by concerns over prospective huge volumes
of Treasury financing, and by the need of some businesses to
borrow at a time of a severe squeeze on profits.
Lags in the
adjustment of nominal wages and other costs to the prospects
for sharply reduced inflation are perhaps inevitable, but have
the effect of prolonging the pressure on profits -- and indirectly on financial markets and employment.
Remaining doubts
and skepticism that public policy will "carry through" on the
effort to restore stability also affect interest rates, perhaps
most particularly in the longer-term markets.
In fact, the evidence now seems to me strong that the
inflationary tide has turned in a fundamental way.
In stating
that, I do not rely entirely on the exceptionally favorable
consumer and producer price data thus far this year, when the
recorded rates of price increase (at annual rates) declined to
31
/
2 and 21
/
2%, respectively. That apparent improvement was magnified
by some factors likely to prove temporary, including, of course,
the intensity of the recession; those price indices are likely
to appear somewhat less favorable in the second half of the
year.
What seems to me more important for the longer run is
that the trend of underlying costs and nominal wages has begun
to move lower, and that trend should be sustainable as the
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Federal Reserve Bank of St. Louis
3
economy recovers upward momentum.
While less easy to
identify -- labor productivity typically does poorly during
periods of business decline -- there are encouraging signs
that both management and workers are giving more intense
attention to the effort to improve productivity.
That effort
should "pay off" in a period of business expansion, helping
to hold down costs and encouraging a revival of profits, setting
the stage for the sustained growth in real income we want.
I am acutely aware that these gains against inflation
have been achieved in a context of serious recession.
Millions
of workers are unemployed, many businesses are hardpressed to
maintain profitability, and business bankruptcies are at a
postwar high.
While it is true that some of the hardship can
reasonably be traced to mistakes in management or personal
judgment, including presumptions that inflation would continue,
large areas of the country and sectors of the economy have been
swept up in more generalized difficulty.
Our financial system
has great strength and resiliency, but particular points of
strain have been evident.
Quite obviously, a successful program to deal with
inflation, with productivity, and with the other economic and
social problems we face cannot be built on a crumbling foundation
of continuing recession.
As you know, there have been some
indications -- most broadly reflected in the rough stability
of the real GNP in the second quarter and small increases in the
leading indicators -- that the downward adjustments may be drawin
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Federal Reserve Bank of St. Louis
k
a
-4-
to a close.
The tax reduction effective July 1, higher social
security payments, rising defense spending and orders, and the
reductions in inventory already achieved, all tend to support
the generally held view among economists that some recovery is
likely in the second half of the year.
I am also conscious of the fact that the leveling off
of the GNP has masked continuing weakness in important sectors
of the economy.
In its early stages, the prospective recovery
must be led largely by consumer spending.
But to be sustained
over time, and to support continuing growth in productivity and
living standards, more investment will be necessary.
as you know, business investment is moving lower.
At present,
House building
has remained at depressed levels; despite some small gains in
starts during the spring, the cyclical strength "normal" in that
industry in the early stages of recovery is lacking.
Exports
have been adversely affected by the relative strength of the
dollar in exchange markets.
I must also emphasize that the current problems of the
American economy have strong parallels abroad.
Governments
around the world have faced, in greater or lesser degree, both
inflationary and fiscal problems.
As they have come to grips
with those problems, growth has been slow or non-existent, and
the recessionary tendencies in various countries have fed back,
one on another.
In sum, we are in a situation that obviously warrants
concern, but also has great opportunities.
Those opportunities
lie in major part in achieving lasting progress -- in pinning
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Federal Reserve Bank of St. Louis
5
down and extending what has already been achieved -- toward
price stability.
In doing so, we will be laying the base for
sustaining recovery over many years ahead, and for much lower
interest rates, even as the economy grows.
Conversely, to
fail in that task now, when so much headway has been made,
could only greatly complicate the problems of the economy over
time.
I find it difficult to suggest when and how a credible
attack could be renewed on inflation should we neglect completim_
the job now.
Certainly the doubts and skepticism about our
capacity to deal with inflation -- which now seem to be yielding
would be amplified, with unfortunate consequences for financial
markets and ultimately for the economy.
I am certain that many of the questions, concerns and
dangers in your mind lie in the short run -- and that those in
good part revolve around the pressures in financial markets.
Can we look forward to lower interest rates to support the
expansion in investment and housing as the recovery takes hold?
Is there, in fact, enough liquidity in the economy to support
expansion -- but not so much that inflation is reignited?
Will, in fact, the economy follow the recovery path so widely
forecast in coming months?
These are the questions that we in the Federal Reserve
must deal with in setting monetary policy.
As we approach
these policy decisions, we are particularly conscious of the
fact that monetary policy, however important, is only one
instrument of economic policy.
Success in reaching our common
objective of a strong and prosperous economy depends upon more
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Federal Reserve Bank of St. Louis
6-
than appropriate monetary policies, and I will touch this
morning on what seem
to me appropriately complementary
policies in the public and private sectors.
The Monetary Targets
Five months ago, in presenting our monetary and credit
targets for 1982, I noted some unusual factors could be at
work tending to increase the desire of individuals and businesses
to hold assets in the relatively liquid forms encompassed in the
various definitions of money.
Partly for that reason -- and
recognizing that the conventional base for the M1 target of the
fourth quarter of 1981 was relatively low -- I indicated that
the Federal Open Market Committee contemplated growth toward
the upper ends of the specified ranges.
Given the "bulge"
early in the year in Ml, the Committee also contemplated that
that particular measure of money might for some months remain
above a "straight line" projection of the targeted range from
the fourth quarter of 1981 to the fourth quarter of 1982.
As events developed, M1 and M2 both remained somewhat above
straight line paths until very recently.
M3 and bank credit
have remained generally within the indicated range, although
close to the upper ends.
(See Table I.)
Taking the latest full
month of June, M1 grew 5.6% from the base period and M2 9.4%,
close to the top of the ranges.
To the second quarter as a
whole, the growth was higher, at 6.8% and 9.7%, respectively.
Looked at on a year-over-year basis, which appropriately tends
to average through volatile monthly and quarterly figures, M1
during the first half of 1982 averaged about 4-3/4% above the
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Federal Reserve Bank of St. Louis
7
first half of 1981 (after accounting for NOW account shifts
early last year).
On the same basis, M2 and M3 grew by 9.7
and 10.5 percent, respectively, a rate of growth distinctly
faster than the nominal GNP over the same interval.
In conducting policy during this period, the Committee
was sensitive to indications that the desire of individuals
and others for liquidity was unusually high, apparently reflecting concerns and uncertainties about the business and
financial situation.
One reflection of that may be found in
unusually large declines in "velocity" over the period -that is, the ratio of measures of money to the gross national
product.
Ml velocity -- particularly for periods as short as
three to six months -- is historically volatile.
A cyclical
tendency to slow (relative to its upward trend) during recessions
is common.
But an actual decline for two consecutive quarters,
as happened late in 1981 and the first quarter of 1982, is rathe,unusual.
The magnitude of the decline during the first quarter
was larger than in any quarter of the entire postwar period.
Moreover, declines in velocity of this magnitude and duration
are often accompanied by (and are related to) reduced shortterm interest rates.
Those interest rate levels during the
first half of 1982 were distinctly lower than durfng much of
1980 and 1981, but they rose above the levels reached in the
closing months of last year.
More direct evidence of the desire for liquidity or precautionary balances affecting M1 can be found in the behavior
of NOW accounts.
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Federal Reserve Bank of St. Louis
As you know, NOW accounts are a relatively
,
-8--
new instrument, and we have no experience of behav
ior over the
course of a full business cycle.
We do knOw that NOW accounts
are essentially confined to individuals, their turno
ver relative
to demand accounts is relatively low, and, from the
standpoint
of the owner, they have some of the characteristics of
savings
deposits, including a similarly low interest rate but easy
access on demand.
We also know the great bulk of the increase
in M1 during the early part of the year -- almost 90% of
the
rise from the fourth quarter of 1981 to the second quarter
of
1982 -- was concentrated in NOW accounts, even thoug
h only
about a fifth of total M1 is held in that form.
In contrast
to the steep downward trend in low-interest savings
accounts
in recent years, savings account holdings have stabi
lized or
even increased in 1982, suggesting the importance
of a high
degree of liquidity to many individuals in allocating
their
funds.
A similar tendency to hold more savings deposits has
been observed in earlier recessions.
I would add that the financial and liquidity positions of
the household sector of the economy, as measured by conventional
liquid asset and debt ratios, has improved during the recession
period.
Relative to income, debt repayment burdens have declined
to the lowest level since 1976.
are clearly mixed.
Trends among business firms
While many individual firms are under strong
pressure, some rise in liquid asset holdings for the
corporate
sector as a whole appears to be developing.
The gap between
internal cash flow (that is, retained earnings and
depreciation
allowances) and spending for plant, equipment, and inven
tory
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Federal Reserve Bank of St. Louis
-9-
has also been at an historically low level, suggesting that a
portion of recent business credit demands is designed to
bolster liquidity.
But, for many years, business liquidity
ratios have tended to decline, and balance sheet ratios have
reflected more dependence on short-term debt.
In that per-
spective, any recent gains in liquidity appear small.
In the light of the evidence of the desire to hold more
NOW accounts and other liquid balances for precautionary rather
than transaction purposes during the months of recession, strong
efforts to reduce further the growth rate of the monetary aggregates appeared inappropriate.
Such an effort would have
required more pressure on bank reserve positions -- and
presumably more pressures on the money markets and interest
rates in the short run.
At the same time, an unrestrained
build-up of money and liquidity clearly would have been inconsistent with the effort to sustain progress against inflation,
both because liquidity demands could shift quickly and because
our policy intentions could easily have been misconstrued.
Periods of velocity decline over a quarter or two are typically
followed by periods of relatively rapid increase.
Those increasej
tend to be particularly large during cyclical recoveries.
Indeepll
velocity appears to have risen slightly during the second quarte/
and the growth in NOW accounts has slowed.
Judgments on these seemingly technical considerations
inevitably take on considerable importance in the target-setting
process because the economic and financial consequences (includini
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Federal Reserve Bank of St. Louis
-10-
the consequences for interest rates) of a particular M1 or M2
increase are dependent on the demand for money.
Over longer
periods, a certain stability in velocity trends can be observed,
but there is a noticeable cyclical pattern.
Taking account of
those normal historical relationships, the various targets
established at the beginning of the year were calculated to be
consistent with economic recovery in a context of declining
inflation.
That remains our judgment today.
Inflation has,
in fact, receded more rapidly than anticipated at the start of
the year potentially leaving more "room" for real growth.
On
that basis, the targets established early in the year still
appeared broadly appropriate, and the Federal Open Market Committee decided at its recent meeting not to change them at this
time.
However, the Committee also felt, in the light of developments
during the first half, that growth around the top of those ranges
would be fully acceptable.
Moreover -- and I would emphasize
this -- growth somewhat above the targeted ranges would be
tolerated for a time in circumstances in which it appeared that
precautionary or liquidity motivations, during a period of
economic uncertainty and turbulence, were leading to stronger
than anticipated demands for money.
We will look to a variety of
factors in reaching that judgment, including such technical factors
as the behavior of different components in the money supply, the
growth of credit, the behavior of banking and financial markets,
and more broadly, the behavior of velocity and interest rates.
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Federal Reserve Bank of St. Louis
-11-
I believe it is timely for me to add that, in these
circumstances, the Federal Reserve should not be expected to
respond, and does not plan to respond, strongly to various
"bulges" -- or for that matter "valleys" -- in monetary growth
that seem likely to be temporary.
As we have emphasized in the
past, the data are subject to a good deal of statistical "noise"
in any circumstances, and at times when demands for money and
liquidity may be exceptionally volatile, more than usual caution
is necessary in responding to "blips."*
We, of course, have a concrete instance at hand of a
relatively large (and widely anticipated) jump in M1 in the
first week of July -- possibly influenced to some degree by
larger social security payments just before a long weekend.
Following as it did a succession of money supply declines, that
increase brought the most recent level for M1 barely above the
June average, and it is not of concern to us.
It is in this context, and in view of recent declines
in short-term market interest rates, that the Federal Reserve
yesterday reduced the basic discount rate from 12 to 111
/
2 percent.
*In that connection, a number of observers have noted
that the first month of a calendar quarter -- most noticeably
in January and April -- sometimes shows an extraordinarily
large increase in M1 -- amplified by the common practice of
multiplying the actual change by 12 to show an annual rate.
Those bulges, more typically than not, are partially "washed
out" by slower than normal growth the following month. The
standard seasonal adjustment techniques we use to smooth out
monthly money supply variations -- indeed, any standard
techniques -- may, in fact, be incapable of keeping up with
rapidly changing patterns of financial behavior, as they
affect seasonal patterns. A note attached to this statemen
t
sets forth some work in process developing new seasonal
adjustment techniques.
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
-12-
In looking ahead to 1983, the Open Market Committee
agreed that a decision at this time would -- even more
obviously than usual -- need to he reviewed at the start of
the year in the light of all the evidence as to the behavior
of velocity ot'i- money and liquidity demand during the current
year.
Apart from the cyclical influences now at work, the
possibility will need to be evaluated of a more lasting change
in the trend of velocity.
The persistent rise in velocity during the past twenty
years has been accompanied by rising inflation and interest
rates -- both factors that encourage economization of cash
balances.
In addition, technological change in banking --
spurred in considerable part by the availability of computers
has made it technically feasible to do more and more business
on a proportionately smaller "cash" base.
With incentives
strong to minimize holdings of cash balances that bear no or
low interest rates, and given the technical feasibility to do
so, turnover of demand deposits has reached an annual rate of
more than 300, quadruple the rate ten years ago.
Technological
change is continuing, and changes in regulation and bank practices
are likely to permit still more economization of Ml-type balances.
However, lower rates of interest and inflation should moderate
incentives to exploit that technology fully.
In those conditions,
velocity growth could slow, or conceivably at some point stop.
To conclude that the trend has in fact changed would
clearly be premature, but it is a matter we will want to evaluate
carefully as time passes.
For now, the Committee felt that the
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Federal Reserve Bank of St. Louis
-13-
existing targets should be tentatively retained for next year.
Since we expect to be around the top end of the ranges this
year, those tentative targets would of course be fully consistent
with somewhat slower growth in the monetary aggregates in 1983.
Such a target would be appropriate on the assumption of a more
or less normal cyclical rise in velocity.
With inflation
declining, the tentative targets would appear consistent with,
and should support, continuing recovery at a moderate pace.
The Blend of Monetary and Fiscal Policy
The Congress, in adopting a budget resolution contemplating
cuts in expenditures and some new revenues, also called upon
the Federal Reserve to "reevaluate its monetary targets in
order to assure that they are fully complementary to a new
and more restrained fiscal policy."
I can report that members
of the Committee welcomed the determination of the Congress to
achieve greater fiscal restraint, and I want particularly to
recognize the leadership of members of the Budget Committees
and others in achieving that result.
In most difficult
circumstances, progress is being made toward reducing the
huge potential gap between receipts and expenditures.
But I
would be less than candid if I did not also report a strong
sense that considerably more remains to be done to bring the
deficit under control as the economy expands.
The fiscal
situation as we appraise it, continues to carry the implicit
threat of "crowding out" business investment and housing as
-14-
the economy grows -- a 2rocess that would involve interest
rates substantially higher than would otherwise be the case.
For the more immediate future, we recognized tnat the need
remains to convert the intentions expressed in the Budget
Resolution into conci -2te legislative action.
In commenting on the budget, I would distinguish
sharply between the "cyclical" and "structural" deficit
that is, the portion of the deficit reflecting an imbalance
between receipts and expenditures even in a satisfactorily
growing economy with declining inflation.
To the extent the
deficit turns out to be larger than contemplated entirely
because of a shortfall in economic growth, that "add on"
would not be a source of so much concern.
But the hard
fact remains that, if the objectives of the Budget Resolution
are fully reached, the deficit would be about as large in
fiscal 1983 as this year even as the economy expands at a
rate of 4 to 5 percent a year and inflation (and thus inflation
generated revenues) remains higher than members of the Open
Market Committee now expect.
In considering the question posed by the Budget Resolution,
the Open Market Committee felt that full success in the budgetary
effort should itself be a factor contributing to lower interest
rates and reduced strains in financial markets.
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Federal Reserve Bank of St. Louis
It would thus
-15-
assist importantly in the common effort to reduce inflationary
pressures in the context of a growing economy.
By relieving
concern about future financing volume and inflationary expectations •
I believe as a practical matter a credibly firmer budget posture
might permit a degree of greater flexibility in the actual shortterm execut_Lon of monetary policy without arousing inflationary
fears.
Specifically, market anxiety that short-run increases
in the Ms might presage continuing monetization of the debt
could be ameliorated.
But any gains in these respects will
of course be dependent on firmness in implementing the intentions
set forth in the Resolution and on encouraging confidence among
IS rrowers and investors that the effort will be sustained and
reinforced in coming years.
Taking account of all these considerations, the
Committee did not feel that the budgetary effort, important
aswould in itself appropriately justify still greater
growth in the monetary aggregates over time than I have anticipated.
Indeed, excessive monetary growth -- and perceptions thereof
would undercut any benefits from the budgetary effort with
respect to inflationary expectations.
We believe fiscal
restraint should be viewed more as an important complement
to appropriately disciplined monetary policy than as a
substitute.
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Federal Reserve Bank of St. Louis
-16-
Concluding Comments
In an ideal world, less exclusive reliance on monetary
policy to deal with inflation would no doubt have eased the
strains and high interest rates that plague the economy and
financial markets today.
To the extent the fiscal process
can now be brought more fully to bear on the problem, the
better off we will be -- the more assurance we will have that
interest rates will decline and keep declining during the
period of recovery, and that we will be able to support the
increases in investment and housing essential to healthy,
sustained recovery.
Efforts in the private sector -- to
increase productivity, to reduce costs, and to avoid inflationary
and job-threatening wage increases -- are also vital, even
though the connection between the actions of individual firms
and workers and the performance of the economy may not always
be self-evident to the decision makes.
We know progress is
being made in these areas, and more progress will hasten full
and strong expansion.
But we also know that we do not live in an ideal world.
There is strong resistance to changing patterns of behavior
and expectations ingrained over years of inflation.
The slower
the progress on the budget, the more industry and labor build
in cost increases in anticipation of inflation or Government
acts to protect markets or impede competition, the more highly
speculative financing is undertaken, the greater the threat that
available supplies of money and credit will be exhausted in
financing rising prices instead of new jobs and growth.
Those
in vulnerable competitive positions are most likely to feel the
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Federal Reserve Bank of St. Louis
-17-
impact first and hardest, but unfortunately the difficulties
spread over the economic landscape.
The hard fact remains that we cannot e-7ape those dilemmas
by a decision to give up the fight on inflation -- by declaring
the battle won before it is.
parently clear
Such an approach would be trans-
not just to you and me -- but to the investors,
the businessmen and the workers who would, once again, find
their suspicions confirmed that they had better prepare to
live with inflation, and try to keep ahead of it.
The reactions
in financial markets and other sectors of the economy would,
in the end, aggravate our problems, not eliminate them.
It
would strike me as the cruelest blow of all to the millions
who have felt the pain of recession directly to suggest, in
effect, it was all in vain.
I recognize months of recession and high interest rates
have contributed to a sense of uncertainty.
postponed investment plans.
Businesses have
Financial pressures have exposed
lax practices and stretched balance sheet positions in some
institutions -- financial as well as non-financial.
The
earnings position of the thrift industry remains poor.
But none of those problems can be dealt with successfully
by re-inflation or by a lack of individual discipline.
It is
precisely that environment that contributed so much to the
current difficulties.
In contrast, we are now seeing new attitudes of cost containment and productivity growth -- and ultimately our industry
will be in a more robust competitive position.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Millions are
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-18-
benefitting from less rapid price increases -- or actually
lower prices -- at their shopping centers and elsewhere.
Consumer spending appears to be moving ahead, and inventory
reductions help set the stage for production increases.
Those are developments that should help recovery get
firmly underway.
The process of disinflation has enough
momentum to be sustained during the early stages of recovery
MOM
WO,
and that success can breed further success as concerns about
inflation recede.
As recovery starts, the cash flow of
business should improve.
And, more confidence should encourage
greater willingness among investors to purchase longer debt
maturities.
Those factors should, in turn, work toward reducing
interest rates, and sustaining them at lower levels, encouraging
in turn the revival of investment and housing we want.
I have indicated the Federal Reserve is sensitive to the
special liquidity pressures that could develop during the
current period of uncertainty.
Moreover, the basic solidity
of our financial system is backstopped by a strong structure
of governmental institutions precisely designed to cope with
the secondary effects of isolated failures.
The recent problems
related largely to the speculative activities of a few highly
leveraged firms can and will be contained, and over time, an
appropriate sense of prudence in taking risks will serve us well.
We have been through -- we are in -- a trying period.
But
too much has been accomplished not to move ahead and complete
the job of laying the groundwork for a much stronger economy.
As we look forward, not just to the next few months but to long
e
Inn\
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
0
-19-
years, the rewards will be great:
in renewed stability, in
growth, and in higher employment and standards of living.
That vision will not be accomplished by monetary policy alone.
But we mean to do our part.
*
*
*
*
* *
*
*
•
%
Table I
Targeted and Actual Growth of
Money and Bank Credit
(Percent changes, at seasonally adjusted annual rates)
FOMC Objective
198104 to 198204
198104
to June '82
Actual Growth
198104
to 198202
1981H1
to 1982111
M1
2-1/2 to 5-1/2
5.6
6.8
4.7**
M2
6 to 9
9.4
9.7
9.7
M3
6-1/2 to 9-1/2
9.7
9.8
10.5
Bank Credit*
6 to 9
8.0
8.3
8.4
*
The base for the bank credit target is the average level of December 1981
and January 1982, rather than the average for 198104. This base was adopted
because of the impact on the series of shifts of assets to the new international banking facilities (IBFs); the 1981H1-to-1982H1 figure has been
adjusted for the impact of the initial shifting of assets to IBFs.
** Adjusted for impact of shifts to new NOW accounts in 1981.
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Federal Reserve Bank of St. Louis
Appendix
Alternative Seasonal Adjustment Procedure
For some time the Federal Reserve has been investigating ways
to improve its procedures for seasonal adjustment, particularly as they
apply to the monetary aggregates.
In June of last year, a group of pro-
minent outside experts, asked by the Board to examine seasonal adjustment
1/
techniques, submitted their recommendations.-
The committee suggested,
among other things, that the Board's staff develop seasonal factor
estimates from a model-based procedure as an alternative to the widely
used X-11 technique that provides the basis for the current seasonal
and release the results.
adjustment procedure,
'
The Board staff has been developing a procedure using statistical
The table on the last page
'
models tailored to each individual series.
compares monthly and quarterly average growth rates for the current M1
series with those of an alternative series from the model-based approach.
Differences in seasonal adjustmelit techniques do not change
the trend in monetary growth, but, as may be seen in the table, they do
alter month-,_ -month growth rates owing to differing estimates of the
1/
See Committee of Experts on Seasonal Adjustment Techniques, Seasonal
Adjustment of the Monetary Aggregates (Board of Governors of the Federal
Reserve System, October 1981).
2/
The current seasonal adjustment technique has most recen.ly been
summarized in the description to the mimeograph release of historical
money stock data dated March 1982. Detailed descriptions of the X-11
program and variants can be
tained from technical paper no. 15 of the
U. S. Department of Commerce (rev. February 1967) and from the report
to the Board cited in footnote 1.
3/
The model-based seasonal adjustment procedures currently under review by
the Board staff use methods based on the well-developed theory of statistical regression and time series modeling. These approaches allow
development of seasonal factors that are more sensitive than the current
factors to unique characteristics of each series, including, for example,
fixed and evolving seasonal patterns, trading day effects, within-month
seasonal variations, holiday effects, outlier adjustments, special events
adjustments (such as the 1980 credit controls experience), and serially
correlated noise components.
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Federal Reserve Bank of St. Louis
Growth Rates of M1 Using
1
Current and Alternative'
Seasonal Adjustment Procedures
(Monthly Average - Percent Annual Rates)
1982
1981
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Current
Alternative
9.8
4.3
14.3
25.2
-11.4
-2.2
2.8
4.8
0.3
4.7
9.7
12.4
1.4
7.5
16.0
22.6
-10.3
-0.6
2.2
5.3
3.1
0.0
11.1
15.4
(Quarterly Average
QI
QII
QIII
QIV
4.6
9.2
0.3
5.7
3.5
9.6
0.9
5.5
Current
Jan.
Feb.
Mar.
Apr.
May
June
21.0
-3.5
2.7
11.0
-2.4
-1.6
Alternative
11.4
1.3
6.4
4.5
0.5
1.3
Percent Annual Rates)
QI
QII
10.4
3.1
9.5
3.4
1/
_
Current monthly seasonal factors are derived using an X-11/ARIMAbased procedure applied to monthly data.
2/
Alternative monthly seasonal factors are derived using a modelbased procedure applied to weekly data.
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Federal Reserve Bank of St. Louis
-53-
A
SELECTED FINANCIAL MARKET QUOTATIONS
1982
Feb.
Highs
May
Lows
_
June
Highs
July 19
Short-term rates
Federal funds
16.36
13.27
14.98
12.10p1
1-month Commercial paper
3-month Treasury bills
3-month CDs
15.73
14.57
16.14
13.10
11.50
13.25
14.89
13.19
15.58
12.34
11.06
13.28
Bank Prime Rate
17.00
16.50
16.50
16.50
15.16
14.95
14.80
13.60
13.46
13.08
14.98
14.76
14.26
13.73p
13.69p
13.34p
Corporate Aaa utility
(recently offered)
16.34
15.17
16.19
15.87p2
Municipal Bond Buyer
(general obligation)
13.13
11.82
12.63
12.363
Primary Conventional Mortgages
17.66
16.63
16.87
16.882
852.55
68.17
819.54
64.54
816.88
68.28
Intermediate- and long-term rates
U.S. Treasury (constant maturity)
3-year
10-year
30-year
Stock Prices
Dow Jones Industrial
NYSE Composite
1. Average for first 5 days of statement week ending July 21 is 12.62.
2. Rate for preceding Friday.
3. Rate for preceding Thursday.
S
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Federal Reserve Bank of St. Louis
826.10
63.54
-53-
•
SELECTED FINANCIAL MARKET QUOTATIONS
1982
Feb.
Highs
May
Lows
June
Highs
July 14
Short-term rates
Federal funds
16.36
13.27
14.98
12.881
1-month Commercial paper
3-month Treasury bills
3-month CDs
15.73
14.57
16.14
13.10
11.50
13.25
14.89
13.19
15.58
13.36
12.00
14.09
Bank Prime Rate
17.00
16.50
16.50
16.50
15.16
14.95
14.80
13.60
13.46
13.08
14.98
14.76
14.26
14.26
14.10
13.68
Corporate Aaa utility
(recently offered)
16.34
15.17
16.19
15.88p2
Municipal Bond Buyer
(general obligation)
13.13
11.82
12.63
12.473
Primary Conventional Mortgages
17.66
16.63
16.87
16.932
852.55
68.17
819.54
64.54
816.88
68.28
Intermediate- and long-term rates
U.S. Treasury (constant maturity)
3-year
10-year
30-year
•
Stock Prices
Dow Jones Industrial
NYSE Composite
1. Average for statement week ending July 14 is 13.18.
2. Rate for preceding Friday.
3. Rate for preceding Thursday.
•
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Federal Reserve Bank of St. Louis
828.39
63.36
•
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Federal Reserve Bank of St. Louis
se
Table 1
Interest Rates
Percent
Period
federal
funds
1
Short-Term
Treasury bills
CDs
secondary
secondary
auction
market
market
-month
3
3-month 1-year
-month
6
2
3
4
5
S.
Jul) 19, 1982
Long-Term
comm.
paper
1-month
money
market
mutual
fund
8
7
bank
prime
loan
8
U.S. government constant
maturity yields
9
10
11
corporate
Aaa utility
recently
offered
12
3-year
10-year
30-year
home mortages
mu nicopal
Bond
Buyer
13
primary
cool.
secondary market
FNMA
GNMA
auction
Security
14
15
16
1981--High
Low
20.06
12.04
16.72
10.20
15.05
10.64
15.85
10.70
18.70
11.51
18.33
11.39
17.32
11.84
20.64
15.75
16.54
12.55
15.65
12.27
15.03
11.81
17.72
13.98
13.30
9.49
18.63
14.80
19.23
14.84
17.46
13.18
1982-High
Low
15.61
12.42
14.41
11.46
.13.51
11.66
14.36
11.59
15.84
12.94
15.56
12.40
13.89
11.77
16.86
15.75
15.01
13.70
14.81
13.51
14.63
1 1.I3
16.34
15.11
13.44
11.82
17.66
16.63
18.04 •
16.27
16.56
15.17
1981-June
19.10
14.73
13.22
13.95
16.90
17.34
16.92
20.03
14.29
13.47
12.96
14.81
10.67
16.70
16.17
15.02
20.39
20.50
20.08
15.15
16.00
16.22
14.28
14.94
15.32
13.59
14.17
14.67
15.73
16.82
17.33
11.14
12.26
12.92
16.83
17.29
18.16
16.65
17.63
18.99
15.76
16.67
17.06
July
Aug.
Sept.
19.04
17..82
15.87
14.95
15.51
14.70
13.91
14.70
14.53
14.40
15.55
15.06
17.76
17.96
16.84
17.70
17.58
15.95
17.04
17.17
16.55
Oct.
N7V.
Dec.
15.08
13.31
12.37
13.54
10.86
10.85
13.62
11.20
11.57
14.01
11.53
11.47
15.39
12.48
12.49
14.80
12.35
12.16
15.32
14.33
12.09
18.45
16.84
15.75
15.50
13.11
13.66
15.15
13.39
13.72
14.68
13.35
13.45
17.24
15.49
15.18
12.83
11.89
12.90
18.45
17.83
16.92
18.13
16.64
16.92
16.61
15.10
15.51
1982-Jan.
Feb.
Mar.
13.22
14.78
14.68
12.28
13.48
12.68
12.77
13.11
12.47
12.93
13.71
12.62
13.51
15.00
14.21
12.90
14.62
13.99
12.01
13.11
13.49
15.75
16.56
16.50
14.64
14.73
14.13
14.59
14.43
13.86
14.22
14.22
13.53
15.88
15.97
15.19
13.28
12.97
12.82
17.40
17.60
17.16
17.80
18.00
17.29
16.19
16.21
15.54
Apr.
Kay
June
14.94
14.45
14.15
12.70
12.09
12.47
12.50
11.98
12.57
12.86
12.22
12.31
14.44
13.80
14.46
14.38
13.79
13.95
13.74
13.49
n.a.
16.50
16.50
16.50
14.18
13.77
14.48
13.87
13.62
14.30
13.37
13.24
13.92
15.44
15.24
15.82
12.59
11.95
12.45
16.89
16.68
16.70
16.27
17.22
5
12
19
26
15.53
14.97
14.67
13.70
12.57
12.32
12.27
11.53
12.39
12.05
12.07
11.66
12.78
12.24
12.19
11.68
14.31
13.82
13.92
13.49
14.25
14.01
14.00
13.29
13.59
13.75
13.65
13.29
16.50
16.50
16.50
16.5O
14.06
13.70
13.78
13.66
13.87
13.51
13.58
13.59
13.39
13.13
13.25
13.20
15.29
15.31
15.17
15.20
12.04
11.82
11.96
11.99
16.78
16.63
16.67
16.63
2
9
16
23
30
13.43
13.60
14.24
14.17
14.81
11.79
12.13
12.20
12.70
13.01
11.86
12.17
12.39
12.94
12.98
11.59
12.12
12.50
13.03
13.42
13.52
13.81
14.10
15.00
15.25
13.25
13.42
13.75
14.29
14.61
12.94
13.02
13.05
13.01
13.17
16.50
16.50
16.50
16.50
16.50
13.86
14.03
14.29
14.89
14.91
13.81
13.96
14.13
14.63
14.65
13.50
13.70
13.80
14.18
14.13
15.39
15.59
16.11
16.19
16.03
12.13
12.40
12.63
12.62
12.58
16.65
16.70
16.71
16.73
16.87
7
14
21
28
14.47
13.18
12.59
11.88
12.78
12.20
12.98
11.97
15.13
14.13
14.57
13.54
13.14
13.28
16.50
16.50
14.74
14.17
14.47
14.04
13.96
13.60
15.80
15.87p
12.47
16.93
p
13.05
13.07
1982--May
June
July
Daily--luly
15
16
19
12,/o
11.77
11.64
11.21
p
la. o4
12.12
12.09
11.64
11.16
14.06
14.17
13.97
41.
13,22
13.59
13.33
13.16
••• ad,
16.50
16.50
16.50
14/.i0
NOTE: Weekly data for columns 1, 2, 3, and 5 through 11 are statement week averages.
Weekly data in column 4 are aftrage rates set In the auction of 6-month bills that will be Issued on the Thursday
following the
end of the statement week. Data In column 7 are taken from Donoghues Money
Fund Report Columns 12
and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the
statement week.
Column 14 is an average of contract Interest rates on commitments for conventional first
mortgages with
110 percent loan-to-valve ratios made by a sample 01 Insured savings and loan associations
on the Friday
14.12
14.14
13.1r.vi
I.73
14.03
13.96
13.7c
13.57
13.57
,
13.55
''9r 13.31 p
--
.16.27
17.22
15.40
15.30
15.84
15.59
15.17
15.26
15.18
15.57
15.58
15.85
16.14
16.05
15.95
12.36
15.51
-
-
01.0
00 O.
rIND as
411.
41..
following the encl of the statement week. The FNMA auction yield Is the average
yield In a b4-weekly auction lot short-term forward commitments for government underwritten
mortgages; figures exclude
graduated payment mortgages GNMA yields are average net yields to Investors
on morlgage-backed
securities for immediate delivery, assuming prepayment In 12 years
on pools of 30-year FHANA mortgages carrying the coupon rate 50 basis points below the current FHANA ceiling.
FR 1367(1/82)
Select•d Interest Rohm
July 16, 1982
Percent
federal
funds
PerkXI
Short Term
Treasury bills
CDs
secondary
secondary
auction
market
market
3-month
6-month
3-month 1-year
4
5
3
2
Long-Term
comm.
P4Par
mon th
6
money
market
mutual
fund
bank
prime
bin
7
U.S. government constant
maturity yields
3-year
10-year
9
10
11
corporate
Asa utility
recently
of
12
30-year
municipal
Bond
Buyer
13
home modegoe
secondary mantel
pdrruwy
GNMA
FNMA
cony.
security
auction
16
14
15
1981-High
Low
20.06
12.04
16.72
10.20
15.05
10.64
15.85
10.70
18.70
11.51
11.33
il,31
17.32
11.84
20.64
15.75
16.54
12.55
15.65
12.27
15.03
11.81
17.72
13.98
13.30
9.49
18.63
14.80
19.23
14.84
17.46
13.18
1982--High
Low
15.61
12.42
14.41
11.46
13.51
11.66
14.36
11.59
15.64
12.94
fir.tg,
LA.d.in
13.89
11.77
16.86
15.75
15.01
13.70
14.81
13.51
14.63
13.13
16.34
15.11
13.44
11.82
17.66
16.63
18.04
16.27
16.56
15.17
1981-June
19.10
14.73
13.22
13.95
16.90
0.54
16.92
20.03
14.29
13.47
12.96
14.81
10.67
16.70
16.17
15.02
July
Aug.
Sept.
19.04
17.82
15.87
14.95
15.51
14.70
13.91
14.70
14.53
14.40
15.55
15.06
17.76
17.96
16.84
/7.70
/7.sy
a.9C
17.04
17.17
16.55
20.39
20.50
20.08
15.15
16.00
16.22
14.28
14.94
15.32
13.59
14.17
14.67
15.73
16.82
17.33
11.14
12.26
12.92
16.83
17.29
18.16
16.65
17.63
18.91
15.76
16.67
17.06
Oct.
llov
Dec.
15.08
13.31
12.37
13.54
10.86
10.85
13.62
11.20
11.57
14.01
11.53
11.47
15.39
12.48
12.49
/4.10
15.32
14.33
12.09
18.45
16.84
15.75
15.50
13.11
13.66
15.15
13.39
13.72
14.68
13.35
13.45
17.24
15.49
15.18
12.83
11.89
12.90
18.45
17.83
16.92
18.13
16.64
16.92
16.61
15.10
15.51
1912--Jan.
Feb.
gar.
13.22
14.78
14.68
12.28
13.48
12.68
12.77
13.11
12.47
12.93
13.71
12.62
13.51
15.00
14.21
/4 qo
N.62,
12.01
13.11
13.49
15.75
16.56
16.50
14.64
14.73
14.13
14.59
14.43
13.86
14.22
14.22
13.53
15.88
15.97
15.19
13.28
12.97
12.82
17.40
17.60
17.16
17.80
18.00
17.29
16.19
16.21
15.54
Apr.
Nay
June
14.94
14.45
14.15
12.70
12.09
12.47
12.50
11.98
12.57
12.86
12.22
12.31
14.44
13.80
14.46
/Y.3i
/5 ys-
13.74
13.49
n.a.
16.50
16.50
16.50
14.18
13.77
14.48
13.87
13.62
14.30
13.37
13.24
13.92
15.44
15.24
15.82
12.59
11.95
12.45
16.89
16.68
16.70
16.27
17.22
5
12
19
26
15.53
14.97
14.67
13.70
12.57
12.32
12.27
11.53
12.39
12.05
12.07
11.66
12.78
12.24
12.19
11.68
14.31
13.82
13.92
13.49
it/.c
/4.00
/129
13.59
13.75
13.65
13.29
16.50
16.50
16.50
16.50
14.06
13.70
13.78
13.66
13.87
13.51
13.58
13.59
13.39
13.13
13.25
13.20
15.29
15.31
15.17
15.20
12.04
11.82
11.96
11.99
16.78
16.63
16.67
16.63
2
9
16
23
30
13.43
13.60
14.24
14.17
14.81
11.79
12.13
12.20
12.70
13.01
11.86
12.17
12.39
12.94
12.98
11.59
12.12
12.50
13.03
13.42
13.52
13.81
14.10
15.00
15.25
/41.41
12.94
13.02
13.05
13.01
13.17
16.50
16.50
16.50
16.50
16.50
13.86
14.03
14.29
14.89
14.91
13.81
13.96
14.13
14.63
14.65
13.50
13.70
13.80
14.18
14.13
15.39
15.59
16.11
16.19
16.03
12.13
12.40
12.63
12.62
12.58
16.65
16.70
16.71
16.73
16.87
7
14
21
28
14.47
12.59
12.78
12.98
15.13
Ns-7
13.14
16.50
14.74
14.47
15.88p
12.47
13.12
ii.fti
'Lao
'1.47
ø.l313,514
14:0Y
13.96
13,40
16.43
114.
14.61
13.86
L/ebr
12.59
11.95
11.77
12.81
12.28
12.12
14.50
14.19
14.03
14.03
13.70
13.57
1982-May
June
July
Deily-- luly
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
2
/5-
/3.0Sp
/clog
a.•
IA/4
/3.99
I
/3.41
13.75-1
15.16
14.93
14.06
/4/.079
0.11
/3.33
93,a,
16.S-0
16.50
16.50
16.50
--
NOW Weekly data tor columns 1.2. 3, and 5 dwough 11 are statement week averages. Weekly data in cot
in 4 we average rates set in the auction of b-month bills that will be issued on the Thursday So4lowing the
end of the statement week Data in column 7 ate taken from Donoghues Money Fund Report. Columns 12
and 13 we t-day quotes for Friday and Thursday, respctively, following ihe end of the statement week.
Column 141$ an average of contract Interest retie on commitments for conventional first mortgagee with
110 percent loan-to-value ratio, merle by a semi*,of insured savings and loan associations on the Friday
14.77
14.30
14.4.
/4.0i
1347? )3,Si r
12.34
••••••
.1MAID
Age/.
••10
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•••••
16.27
••••••
41/4/0.
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•••••••
17.22
••••=,
=NM
•fe.
15.40
15.30
15.84
15.59
15.17
15.26
15.18
15.57
15.58
15.85
16.14
16.05
15.95
/5S1
•••••11.
•••••
••••••••
•••••
diMPIM
••••
following the end of trio statement week. The FNMA auction yield is the average yield in•bl-weekly moolion for short-term forward commitments for government underwritten mortgages, figures exclude
graduated payment mortgages GNMA yields are average net yields to investors on mortgaoabacked
securities for immediate delivery, assuming prepayment In 12 yews on pools of 30-year FliNVA mortgagee carrying the coupon rate 50 basis points below the current FHANA crating.
FR 1367 (1182)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
tiA
/cal-
14114W;A
t).11°
,
0)14 •
A%yti
(,e)il
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•
For release on delivery
9:30 AM, E.D.T.
July 20, 1982
Statement by
Paul A. Volcker
Chairman, Board of Governors of the Federal Reserve System
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
before the
Committee on Banking, Housing, and Urban Affairs
United States Senate
July 20, 1982
-2distribution over time of the seasonal component in money behavior.
Short-
run money growth is variable under both the alternative and current techniques
of seasonal adjustment, illustrating the inherently large "noise" component
of the series.
However, the redistribution of the seasonal component under
the alternative technique does on average tend to moderate month-to-month
changes somewhat.
The Board will continue to publish seasonally adjusted estimates
for M1 on both current and alternative bases at least until the annual
review of seasonal factors in 1983.
method will be available shortly.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
A detailed description of the alternative
BRIEFING NOTES
Uninsured Deposits
Amount
Number
Number
Number
Number
uninsured
uninsured
of banks
of S&Ls
of credit unions
$251 million
1082
20 (approximately)
28 (approximately)
113 ($93 million)
Discount Window
Receiver's certificates issued
172
Discount window loans
1 ($670,000)
Applications made for
discount window
2
Discount rate
Basic rate
1st 60 days
1% increase
next 90 days
1% increase
after 150 days
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
CIA0440.4-14.0A 1#4
/25L4a4A7`"
2. q
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P
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,51>
Pricing of Federal Reserve Services
1.
1981.
The Federal Reserve implemented pricing in January,
Since that time, two issues have proven to be very
controversial:
--
Basing ACH fees on mature rather than current
volume costs; and
-
Relying on operational improvements (which take
time) to reduce float rather than pricing it
immediately.
As a result of this controversy, the Board and Reserve
Banks have made the following decisions:
a.
ACH fees will, in 1985, fully recover all costs
evenmature volume level is not attained.
This cost recovery will be phased-in: 40% in 1982,
60% in 1983, 80% in 1984, and 100% in 1985 for full
cost recovery.
b.
Float reduction efforts scheduled or currently
underway should reduce float to $1 billion or
less by the end of 1982.
(Currently, float
averages $2 billion per day.)
Any remaining
float will likely be explicitly priced sometime
in 1983.
2.
Two recurring areas of GAO and industry concern related
to pricing are:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
revenue matching; and
--
Electronic check collection
2-
If the objectives established in the 1982 Reserve Bank
business plans are realized and the programs discussed in them
are successful, Reserve Banks as a group will be covering all
costs and a part of the PSAF by the fourth quarter, 1982.
The
gap between revenue and costs (including the PSAF) was around
20 percent in April.
Electronic Check Collection, in its current mandatory
version, is not viable due to industry opposition, legal problems
and a low benefit cost ratio.
A voluntary version of ECC is
currently under study.
3.
New areas of controversy will arise with the planned
restructuring of the Interdistrict Transportation System (ITS)
for check collection.
Two controversial components of this
plan are:
Noon presentment (where presentment of checks
for collection will change from 9:00 to 11:00 A.M.
currently to noon); and the
Check relay concept, where checks deposited at a
local Reserve Bank prior to its deposit deadline
are also considered to have been deposited prior
to the deposit deadline of the collecting (and
distant) Reserve Bank.
Correspondent banks are likely to argue that the System is
using its regulatory powers to present checks later as a way of
making its check service more attractive to depositors (by offering
a later deposit deadline).
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
3-
_
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Private air courier firms view the System's check
relay concept as a competitive threat since check volume
may shift from their transportation network to ITS.
One
large air courier has threatened to take its case to Congress.
Historice Data on Key Federal Reserve System Factors
1974 - 1981
(dollars in millions)
1/
Average Number of
Personnel
(CY)
1974
Volume
Unit Cost
Cost Per 2/
Thousand
Checks
/
Total
Expenses
Adjusted
for
Inflation
4/
AverageEmployee
Salary
Comparison
Fed.
Federal
Gov't
Government
Outlays
Employment
(CY)
;CY)
Checks Processed
Currency &
Sorting
& Counting
Coin
Sorting
& Counting
Transfer
of Funds
26,567
10,822,312
6,757,716
13,659,762
14,509,574
$10.73
$477,870
$ 9,782
$267,912
$2,680,833
1975
599.3
26,341
'.1,411,337
6,551,093
13,611,463
17,486,436
$10.57
$477,265
$10,581
$324,245
$2,736,250
1976
658.4
25,186
12,291,386
7,015,040
12,688,840
20,767,969
$10.14
$498,402
$11,518
$364,473
$2,745,417
1977
681.9
24,221
13,199,676
8,172,097
13,947,759
24,246,957
$10.19
$487,649
$12,260
$400,506
$2,725,750
1978
714.7
23,390
14,157,153
8,469,772
16,475,922
28,8•72,694
•$ •9.58
$476,303
$13,195
$448,368
$2,745,000
1979
762.3
15,061,106
8• ,864,726
18,172,482
35,102,318
$ 9.48
$468,326
$14,124
$490,997
$2,766,250
1980
865.9
23,431
15,702,445
9,513,931
17,702,899
43,256,221
$10.20
$488,233
$15,330
$576,675
$2,861,000
1981
969.1
23,690
14,804,300
10,279,810
16,959,000
50,472,626
$11.44
$500,312
Si
$657,204
$2,783,750
Si
1/
- Adjusted for comparability over time
2/
- Functional Cost through 1976 PACS Cost from 1977-1981
/
Calculated using GNP deflator
4/
- Excludes officers and outside agency help
AAGR8.5%
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-1.6%
4.6%
6.2%
3.1%
19.5%
0.7%
8.3%
BOARD OF GOVERNORS OF 1HE FEDERAL RESERVE SYSTEM
TREND IN EXPENSES AND EMPLOYMENT
1974
.
7Tota1 Expenses (less COLAJ
1975
30,030,463 33,875,243
1976
38,204,988
1977
1978
41,600,939
44,873,896
1979
48,047,691
1980
53,236,013
1981
58,560,740
% Change
1980-81
10.0
Average
Annual
Incr ase % Change
19
81 1974-81
10.0
.95
k.
,
p.f
i
Salaries—
Retirement (less COLA)
Insurance
Tbtal Personal Services
Number of Employees
Retiree COLA
Total Operating Expenses
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
21,552,323 24,017,515
26,514,723
29,021,842
31,212,936
33,572,061
37,069,785
41,014,846
1)
9.6
90.0
(2.4)
16.7
195.5
1,488,953
2,029,873
3,325,133
2,982,397
3,556,458
4,078,087
4,506,812
4,400,046
336,917
477,213
583,981
638,923
686,685
689,919
778,967
949,823
21.9
16.0
181.9
23,378,193 26,524,601
30,333,837
32,643,162
35,456,079
38,340,067
42,355,564
46,364,715
9.5
10.3
98.3
10.2
97.9
,361
1,443
1,465
1,473
1,469
1,447
1,516
-0-
-0-
-0-
1,762,142
2,070,000
3,270,000
4,550,000
878,000
33,875,243
38,204,988
43,350,081
46,943,896
51,270,226
57,786,013
59,438,740
30,030463
Or
•
mop
61.•
1,491) (1.6)
(80.7)
2.9
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Federal Reserve System
Key Indicators
1974 - 1981
Average Annual Growth Rate
Percent Change
Total Expenses
Employment
8.5%
-1.6%
Checks - Processed
Cost Per Thousand Checks
4.6%
0.9%
Average Employee Salary
8.3%
Total Expenses Adjusted for
Inflation (GNP Deflator)
027%
7 )
Federal Government Outlays
13.7%
1
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15.0o
14;
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13,30
3_03c60,ti viteq- 14.511 igtiroz,.LIV3
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ikett
City
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
(
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•11110
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,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
.
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en,u, 1
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In Ai.?2
-
Changes in the Velocity of M1
(In percent, at an annual rate)
2-Quarter Moving Average
01
3-Quarter Moving Average
4-Quarter Moving Average
03
04
Q1
02
03
04
01
Q2
Q2
Q4
5.3P -1.2
-2.5
4.9
6.41)
2.7
-1.6
5.7
3.7P
4.2
1.4
3.5
5.7
-1.07 0.3
2.0
4.3
02
1960
9.5
1961
-0.91-
3.1
5.0
5.8
1962
6.6
4.7
4.1
3.2
5.8
5.5
4.7
3.2
5.8
5.2
5.3
3.9
1963
1.4
1.7
2.9
3.4
2.5
1.7
2.3
3.0
2.7
2.4
2.1
2.5
1964
4.5
4.2
0.8
-1.2
4.1
3.8
2.4
0.1
3.7
3.8
2.6
1.5
1965
4.0
7.3
4.7
4.3
2.3
4.4
6.2
4.7
2.4
3.1
4.3
5.8
1966
4.8
3.5
4.4
6.6
4.5
3.8
4.6
5.1
4.7
3.9
4.6
5.0
1967
2.8
-1.3
-0.9
1.2
4.1
1.3
-0.9
0.2
3.6
2.7
0.9
-0.1
1968
2.9
4.3
2.8
-0.6
1.8
3.6
3.0
1.0
2.7
2.8
1.9
1969
0.2
2.9
4.9
2.8
0.3
1.4
3.9
1.5
1.2
2.5
2.8
1970
0.0
1.0
1.9
-1.1T
1.9
0.7
1.3
2.4
1.9
0.9
0.0-r-
1971
2.3
3.4
-0.8
2.1
2.2
0.9
2.4
2.1
1.2
0.8
2.7
1972
4.3
4.0
1.8
1.6
3.0
3.9
2.8
1.8
3.0
3.0
2.8
1973
5.4
5.2
3.6
3.7
4.4
5.0
3.6
3.4
4.5
P
5.4
1974
1.6
1.6
5.5
2.9
2.6
3.3
2.5
4.1
2.6
3.6
3.6
3.0
1975
0.017 1.2
6.3
8.3
1.41' 1.3
3.7
6.8
2.8
2.0
3.1
4.8
1976
7.3
3.2
1.2
2.7
7.7
4.7
3.0
1.6
6.7
5.7
4.2
2.9
1977
4.0
5.1
4.5
2.3
3.6
4.2
5.1
3.1
2.6
3.9
4.5
3.7
1978
0.2
5.4
6.8
5.6
1.8
3.4
4.8
7.0
2.6
3.9
3.5
5.5
1979
7.2
1.4
-0.9
4.2
6.0
3.4
1.7
0.8
7.0
3.5
3.2
2.3
1980
4.6? 3.7
-0.3
0.2
3.9P
3.8
1. 1".
0.8
1.9?
3.4
2.2T 1.9
1981
8.1
4.3
4.8
4.5
3.9
6.4P
1.6
3.9
2.2
5.67)
1982
-5.7
-3.6
-0.2
-2.8
-1.3
0.6
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-r
3.1P
-1.47- 1.3
F
5,7?
4.5
BOARD OF GOVERNORS
•
Or THE
FEDERAL RESERVE SYSTEM
Office Correspondence
To
Steve Axilrod
From
Dana Johnson
Date
Subject:
July 20, 1982
Current Interest Rates
The prevailing prime rate is now 16 percent, with
virtually all
money center banks having announced changes by the
close of business today.
The 3-month Treasury bill rate was 10.66 percent
at the close,
down 48 basis points from yesterday's auction avera
ge.
This translates
to a 11.11 percent yield, on an investment yield
basis.
Late this afternoon, 3-month CDs were quoted at
about 13 percent
in secondary trading.
This morning, the Desk reported an average yield
in secondary trading around 12.75 percent.
At that time, top 10 banks
other than Continental and Chase were reportedly
writing new 3-month CDs
with yields in the 12.40--.50 percent area.
https://fraser.stlouisfed.org vra. w
Federal Reserve Bank of St. Louis
44-447-t+
•
f•
BANK PRIME AND CD RATES
PRIME RATE AND 3-MONTH CD RATE
PERCENT
27
• PRIME RATE
▪ CD RATE
em=e11
1111.1.41
23
11.mm...we
1
I
t /1
I\
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V til
1
1 i
11
ti
If
A
V
19
1111•101.11.1.011
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kl
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a 15
1
/ \I"-\\k/l;
I
i'
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V
11===.1•111
11
emmememi
7
PRIME RATE MINUS CD RATE
PERCENT
-
2
4
0
1980
WEEKLY DATA
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
11141_11111111111111 4
1381
1982
CHART 2
7/19/82
. ,Troasury Bill and CD Rates
Investment Yield Basis
3-MONTH TREASURY BILL AND CD RATES
Percent
24
WEEKLY
22
20
1,1,v,,„,„
1
I
t
1%
18
k
1.
1
i
VIEWS ij
1C
CD
ft ant
%, %NI
if TREASURY r
/ BILL If
A
I
it/
I
r
14
12
'I
via
eil•O•
10
11
MOM
if
8
3-MONTH CD MINUS 3-MONTH TREASURY BILL
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Basis points
430
300
200
100
1980
1981
1982
Nomm
I
PERCENT
SELECTED INTEREST RATES
Ifilm••••••110
32
= PRIME
= THREE-MONTH CD
= THREE-MONTH TREASURY BILL
r
immom
••••••••••
22
IVI%
Vi
.%
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1
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or-•32r..4010
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2
1
BANK PRIME LESS THREE-MONTH CD
8
4
4.
0
_
4
THREE-MONTH CD LESS THREE-MONTH TREASURY BILL
410•1•111=1110•111.1.
Waommassma
6
11••••••••••11
4
mommmil
2
o
1874
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1876
1878
1880
1882
CHAIRMAN VOLCKER
For Information Only
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
To
Board of Governors
From
The Division of Research and
Statistics
(Thomas F. Brady)
Date
Subject:
July 16, 1982
Short-term Business Lending in
May At Rates Below The Prime Rate
- FOR INFORMATION ONLY -
Data relating to the pricing of short-term business loans in May
are summarized in the attached table.
As shown in the first line, the share
of gross short-term business loans extended at rates below the prime rate by 48
large banks rose to over 78 percent in May from 62 percent in November, while
the spread between the rate on such loans and the prime rate widened somewhat from 61 basis points to 84 basis points.
Loans made below prime typi-
cally are priced off of money market rates and the increased share of loans
made below prime reflect in part an increase in the prime rate relative to
money market rates between the February and May survey weeks.
In addition,
the increase appears to reflect bank's continued greater willingness to make
such loans.
Thus, the share of loans made below prime in May 1982 exceeds
the proportion made in several earlier surveys, for example those for February
and August 1981, when the spread between the prime rate and money market rates
was wider.i! The recent increase in below-prime lending at 48 large banks was
centered entirely at money center banks.
At non money center banks, the share
of loans made below prime fell between August 1981 and May 1982.
1/ Recently, loans made below prime have begun to include varying amounts of
loans made below money market rates. Presumably many of these are restructured
loans. For the last three surveys of 1981, restructured loans are estimated to
have accounted for around 6 percentage points of the share of loans made below
prime. This estimate fell to under four percentage points in the survey for
February 1982 and to less than one percentage point in the May survey.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
.
-2 -
N
It
Short-term credit at more traditional maturities such as 90 days
frequently is offered to large creditworthy borrowers under revolving
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
credit arrangements that give the option of taking down loans at rates based
on prime or on market rates such as LIBOR.
Many such loans are booked at
foreign branches of U.S. banks and are not reflected in the data reported
in the table.
ERCIAL AND INDUSTRIAL
SELECTED CHARACTERISTICS OF SHORT-TERM COMM
LOANS MADE BY 48 LARGE BANKS
4111...N1
Feb.
2-7
1981
Aug.
May
3-8
4-9
Nov.
1982
May
Feb.
3-8
176
1978
1979
1980
1980
Nov.
Aug.
3-8
4-8
32.9
47.1
64.7
20.3
71.5
38.0
75.0
85.0
62.3
78.6
16.4
100
206
212
65
181
65
136
218
61
8.4
81
1934
4683
898
2811
894
3714
5379
5339
loans made below prime
674
6777
746
312
223
593
248
580
367
234
622
loans made at or above prime
221
401
173
1.0
.7
1.2
.7
.9
.7
0.6
0.8
loans made below prime
1.3
.7
1.4
3.0
3.2
1.9
2.7
1.7
2.5
3.7
1.6
loans made at or above prime
3.5
2.1
3.4
Percent of gross loan extensions
made at rates below prime
Spread between prime rate and
weighted average rate on loans
made below prime (basis points)
Average loan size ($1,000)
-
Average maturity (months)1
-
Survey of Terms of Bank Lending.
rted by banks; calculations for earlier
repo
s
e
rate
prim
on
d
base
are
ions
ulat
Beginning August 1979, calc
periods employ the prevailing prime rate.
rity (demand loans).
mes exclusive of loans with no stated matu
volu
loan
by
hted
weig
are
es
riti
matu
Average
Source:
Note:
1.
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Federal Reserve Bank of St. Louis
Targeted and Actual Growth of
Money and Bank Credit
(Percent changes, at seasonally adjusted annual rates)
FOMC Objective
198104 to 198204
198104
to June '82
Actual Growth
198104
to 198202
1981H1,
to 1982H1
M1
2-1/2 to 5-1/2
5.6
6.8
4.7**
M2
6 to 9
9.4
9.7
9.7
M3
6-1/2 to 9-1/2
9.7
9.8
10.5
Bank Credit*
6 to 9
8.0
8.3
8.4
of December 1981
The base for the bank credit target is the average level
This base was adopted
and January 1982, rather than the average for 198104.
interbecause of the impact on the series of shifts of assets to the new
has been
national banking facilities (IBFs); the 1981H1-to-1982H1 figure
adjusted for the impact of the initial shifting of assets to IBFs.
**
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Federal Reserve Bank of St. Louis
Adjusted for impact of shifts to new NOW accounts in 1981.
NME116.
dide--44d 4,-)1J-AY4 fai/t.t.4
• io-e.
46/633
6,74V
y
- /16
"• Te
15
3
6s.
-
67Qg
_7,o e? t•
7/Q02,
-___Y./
-/1
--/ RI
,'7I/
2X6i
754 /
--- •.5
/a
-O. V
77e?
2 4/
rifd
?i 44
-
1-4 I/
7.2 c?i
-/D_Ii
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Federal Reserve Bank of St. Louis
•i/
_
.5.2-
ie .i9
9
PROJECTIONS OF ECONOMIC ACTIVITY FOR 1982 AND 1983
FOMC
Feb. HumphreyHawkins Report
FR Staff
R. 1982
V
4.44.A••••••
Fourth quarter to fourth quarter growth rate (percent)
Money (M1)
1982
2-1/2 - 5-1/2
5 I/
11,5
4-55
1983
5.5
n.a.
2-1/2 - 5-1/2
n.a.
NominalGNP'
1982
7.5
C1 /
13
114G
2.-rfr-7i
1983
0— 1 'iz
1-/-2----V-1/2
Real GNP
1982
1983
3 4b,
-2-.3-
.4,
4kY
fld 7
/
Li• q
4-5-9
/13iLl _
GNP Deflator
1982
7t4
4r:a
-Sr.&
1983
74
C I
1982,---I
.
X
\r163
7.2
5.12
Level, fourth quarter
Unemployment Rate
(percent)
1982
4m. crAi
41.444,---11m41-2
3?
o
1983
I. -Re-pre-ment-s---eriti—Trtri-nt--of-range.. j..cuh;4/
• 14 •19(tt_.4
2./ Administration projections refer to the CPI for urban wage earners and
cl rical workers; other forecasts refer to the CPI for all urban consumers.
n a. - not available
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tgirk.4C:"eot
6
„, r
Union Calendar No. 227
REporr
96m CONGRESS 1. HOUSE OF REPRESENTATIVES J
96-396
No.
18t Session j
SECOND REPORT ON MONETARY POLICY FOR 1979
JULY 27, 1979.—Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. REUSS, from the Committee on Banking, Finance and
Urban Affairs, submitted the following
REPORT
together with
SUPPLEMENTAL VIEWS and DESSENTING VIEWS
Submitted herewith is the second report of the Committee on Banking, Finance and Urban Affairs pursuant to Public Law 95-523, the
Full Employment and Balanced Growth Act of 1978. This legislation
amended the Federal Reserve Act to require the following:
MONETARY POLICY
In furtherance of the purposes of the Full Employment
and Balanced Growth Act of 1978, the Board of Governors
of the Federal Reserve System shall transmit to the Congress,
not later than February 20 and July 20 of each year, independent written reports setting forth (1) a review and analysis of recent developments affecting economic trends in the
Nation; (2) the objectives and plans of the Board of Governors and the Federal Open Market Committee with respect to
the ranges of growth or diminution of the monetary and
credit aggregates for the calendar year during which the report is transmitted, taking account of past and prospective
developments in employment, unemployment, production, investment, real income, productivity, international trade and
payments, and prices; and (3) the relationship of the aforesaid objectives and plans to the short-term goals set forth in
the most recent Economic Report of the President pursuant
to section 3(a)(2)(A) of the Employment Act of 1946 and
to any short-term goals approved by the Congress. In addi-
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2
Board
tion, as a part of its report on July 20 of each year,the and
es
of Governors shall include a statement of its objectivtion of
inu
plans with respect to the ranges of growth or dim
the monetary and credit aggregates for the calendar year fole reports
lowing the year in which the report is submitted:Thtransmitbe
required under the two preceding sentences shall ate to the
Sen
the
in
rred
refe
ted to the Congress and shall be
irs, and in
Committee on Banking, Housing, and Urban Affa
on Banking,
the House of Representatives to the Committee consult with
Finance and Urban Affairs. The Board shall er, each such
each such Committee on the reports and,thereafta report conCommittee shall submit to its respective bodyrespect to the
taining its views and recommendations with
this Act shall
Federal Reserve's intended policies. Nothing in plan
s with rebe interpreted to require that the objectives and the monetary
spect to the ranges of growth or diminution ofsubmitted unand credit aggregates disclosed in the reports
ernors and the
der this section be achieved if the Board of Gov
they cannot
Federal Open Market Committee determine that
conditions:
or should not be achieved because of changisngwith, and reProvided, That in the subsequent consultationgress pursuant
ports to, the aforesaid Committees of the Con
ude an explato this section, the Board of Governors shall incl
deviations from
nation of the reasons for any revisions to or
such objectives and plans.
eral Reserve Board,
By most projections, including those of the Fed ther with continun toge
the U.S. economy now faces an early recessioin
the worst case, in 1979
ing inflation. The Board has estimated, that, mployment may rise by
the real output may fall by 2 percent, une7 percent, while inflation
over 1.5 million persons to yearend rate of ws these possibilities with
accelerates to 11 percent. Your committee vieictions of inflation genedeep concern, particularly because past predssions have turned out to
rally have been low and nearly all past rece
be more serious than predicted.
ign power bears sole
No individual, agency, corporation or fore
tributing influences inresponsibility for our present condition. Con
management disputes, poor
clude the recent OPEC price actions,labor- many years. The moneweather last winter and mistaken policies over
also played a role. Since
tary policies of the Federal Reserve have maintained the Federal
November 1, 1978, the Federal Reserve has
equence,the money supply
funds rate near or above 10 percent. In consch had grown at an annual
(including ATS and NOW accounts), whito September 1978, at first
6
rate of 8.3 percent from September 197
wth fell to an annual rate
decelerated sharply. Adjusted money gro
ough March 1979. But in the
of 3.8 percent from September 1978 thrlerated, business loan demand
April—June quarter of 1979 inflation acce eral Reserve's fixed interestsurged,and the consequence,given the Fed
etary growth, especially in
rate policy, was a sharp recovery of mon
June.
e reported to Congress that its
In February 1979, the Federal Reserv fourth quarter of 1978 to the
objective for monetary growth from the and 4.5 percent, assuming a
1.5
fourth quarter of 1979 -was between equivalent to 3 percent of M1.
growth of ATS and NOW accounts
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8
This translates to a range of 4.5 to 7.5 percent growth in M1 plus
ATS and NOW accounts, and agrees with your committee's recommendation of 6 percent growth in that aggregate this year. Measured
monthly, the shift to ATS and NOW accounts, from the fourth quarter of 1978 to June 1979, has been about 2 percent of Ml, while M1
has grown at a rate of 3.7 percent per year. Accordingly, the money
supply adjusted for ATS and NOW accounts has been growing at
5.7 percent per year, slightly below your committee's recommendation
and near the middle of the Federal Reserve's announced range.
Your committee repeats its view, expressed in its report to the
Congress last March, that monetary policy should consistently promote economic stability, and not alternate between stimulus and rethe
straint. Your committee fears that a policy of simply pegging on.
Federal funds rate may not be compatible with this recommendati
al
In the period from September 1978 through March 1979, the Feder y
mone
funds rate was set too high. This policy caused the growth of thetion
acinfla
er
quart
ne
supply to fall dangerously. In the April—Ju
rate.
al
annu
t
celerated and real GNP began to decline at a 3.3-percen
rate, the
Given the Federal Reserve's policy of pegging the funds econ
omic
the
se
Becau
ly.
money supply responded by accelerating rapid
d
shoul
ve
outlook is for both recession and inflation the Federal Reser
focus on keeping to the money supply targets it has presented.
NED TO RECESSION
A. MONETARY POLICY SHOULD NOT BE DESIG
to wring
Your committee continues to believe that policies designed unemhigh
inflation out of the economy with negative growth and , rendering
tment
inves
ployment cannot work. Such policies suppress
and prices
progress toward higher productivity and lower unit costs
of American
difficult. Recessions weaken the competitive position ts, a weaker
industry, and thereby set the stage for larger trade defici
dollar and higher monetary growth and inflation.
ies that
Moreover, as your committee has argued in the past, polic
selfare
sion
reces
attempt to cure inflation quickly by courting
inten
of
defeating. No democratic government can long bear the cost
the tens of
tional unemployment and foregone output mounting toavoided only
be
billions of dollars. Antirecessionary fiscal policies can turn requires
by avoiding a serious recession in the first place, which in destabilizing
a policy of long-term monetary moderation to avoid of recession.
swings and inflationary trends that aggravate the evils ct monetary
Your committee trusts that the Federal Reserve will condumind.
policy over the next 6 months with this reality firmly in
PRECEDENCE OVER EFFORTS
B. A STABLE MONETARY POLICY SHOULD TAKE
R
TO PROP UP THE INTERNATIONAL DOLLA
the leVel
In November of 1978, the Federal Reserve acted to raisein foreign
r
of short-term interest rates, so as to support the dolla last autumn
exchange markets. Without doubt,the initial intervention
r has rewas timely and successful. Since then, however, the dolla
increases
er
sumed its decline, and it is increasingly doubtful that furth
exchange rate
in interest rates can achieve more than a short delay in
recomadjustment, and this only at a high cost. Your committee
onary
flati
mends that the Federal Reserve promote a strong nonin
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Federal Reserve Bank of St. Louis
4
dollar, that it not
domestic economy as the means of supporting the
to relieve disorderly
intervene in the foreign exchange markets excepther
use of the shortmarket conditions, and that it refrain from furt ose of propping up
term interest rates under its control for the purp
nflationary,
the dollar. We firmly believe that a strong, steady, noni
ore America's
investment-oriented expansion, and that alone, can rest
strength to the
competitive position in international trade and to achieving this
American dollar. Monetary policy should be geared
long-run objective.
RVE BOARD'S ECONOMIC PROJECTIONS
C. PUBLICATION OF THE FEDERAL RESE
IS AN IMPORTANT STEP FORWARD
y 17, the Federal
In the report submitted to the Congress on Julial
projections for
Reserve Board for the first time published offic inflation, and the
of
nominal and real gross national project, thet rate comm
ittee has long
r
You
.
rate of unemployment in 1979 and 1980
has done so in every
sought and often requested this information—itt began under House
hearing sihce regular monetary policy oversigh
that this step constiCongressional Resolution 133 in 1975. We feel cy
sight, and we
tutes a definite improvement in monetary poli over
Federal Reserve's
look forward to a steady increase in the scope ofethe
the Congress and
economic expertise which may be made availabl to
the American people in the future.
on its monetary tarThe law requires the Federal Reserve to reportThe Federal Reserve
gets for 1980. In this the report is disappointing. given to retention of
merely indicates that tentative approval has been
ation is offered. This is
the present targets through 1980. No justificittee's recommendation
particularly distressing in view of your comm m monetary growth tarin its report of March 12, 1979 that long-terests that the Federal Regets should be adopted. Your committee requing a supplement to the
serve promptly correct this defect by issufor 1980.
ets
report,fully explaining its monetary targ
EEMENTS SHOULD BE MENTIONED
D. OVERNIGHT REPURCHASE AGR
your committee recomIn its report to the Congress last March,diately to monitor overmended that the Federal Reserve begin imme
een commercial banks
night repurchase agreements—agreements betwresale of securities that
and
and large depositors on the daily purchase e of Ml. The Federal Resur
mea
may impart a downward bias to the
endation, and we thereserve has not responded as yet to this recomm
fore renew it with increased urgency.
E. CONCLUSIONS
e than when your comThe economic outlook today is markedly worsunder the Humphreyss
mittee submitted its first report to Congre recommendation we made
ral
Hawkins law 4 months ago. Yet the gene ld pursue moderation and
at that time, that the Federal Reserve shou
valid. Roller coaster moneconsistency in monetary policy, remains to cure inflation by a sharp
tary policies do not work, whether they seek
unemployment at the cost of
rise in unemployment or to eliminate nomy currently has relatively
sharply accelerating inflation. The eco
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Federal Reserve Bank of St. Louis
5
high capacity utilization, high interest rates, and sharply rising resource prices: a situation that closely resembles the summer of 1974.
The Federal Reserve has, as it did then, the power to push us over the
brink into a deep recession or accelerating inflation, or both. Or it can
pursue a policy of stable economic growth and moderate monetary expansion, guiding the economy toward the high levels of investment
that we need to cure our unacceptably low productivity and high
unemployment.
Your committee agrees with the Federal Reserve that its previously
established growth ranges for the monetary aggregates for 1979 are
still appropriate. We are, however, disappointed that the Federal Reserve has failed to set longer-term targets for progressive deceleration
in monetary growth, such as we recommended in our report of March
12, 1979. Because, as your committee stated in that earlier report,
achievement of the interim 1983 goals of the Humphrey-Hawkins Act
(4 percent unemployment and 3 percent inflation) would be promoted
by steady deceleration in the average annual rate of monetary expansion over the next 5 years, we renew our recommendation for the establishment of the long-term targets we specified in the report of March
12,1979, as follows:
Recommended percent growth 4th quarter to 4th quarter 111 (adusted)
1978-83 1
Percent
1978
1979
1980
1981
1982
1983
7.6
6.0
5.0
4.0
3.0
8.0
Assuming continuation of the present approximately 3 percent velocity growth trend.
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Federal Reserve Bank of St. Louis
SUPPLEMENTAL VIEWS OF HON. S. WILLIAM GREEN 1
I am in general agreement with the committee's report on monetary
policy for 1979. However, I believe there are current developments
which deserve fuller consideration because of their impact on inflation
and the Federal Reserve's ability to control the money supply.
First, while money supply during the time period covered by Chairman Miller's report was below or within 1979 target growth ranges,
the most recent trend would soon push it out of those ranges. Based on
preliminary information for July, the money supply is pushing the
upper limit of the growth range and threatens to break out. If the current pace continues for the balance of 1979, money supply growth will
be well beyond the 41/2-percent upper limit of the growth range set
for 1979. Obviously, this will push the already intolerable rate of inflation even higher, and such monetary expansion is contrary to the
Federal Reserve's February recommendation that moderate steady expansion is essential for long-term economic stability. Although one
month of monetary growth may not be a good indicator of longer term
money growth because of statistical problems, the Federal Reserve
should be alerted and any trend toward a faster pace of monetary expansion must be countered immediately by the Federal Reserve.
Second, the Federal Reserve's task has been complicated by international financial problems. The dollar has fallen back to the "prerescue" levels of October 1978 because of international lack of confidence in and uncertainty over President Carter's energy and economic
policies. President Carter advertised his speech as "the turning point"
and it was for the dollar: a turn downward. A more decisive response
on the energy situation from the President—specifically, decontrol of
oil prices—would have had a more positive impact. Because of the
President's indecisiveness, the Federal Reserve has recently had to
provide more support for the dollar by raising the discount rate 1/2
percentage point, raising the Federal funds rate target and intervening
in foreign exchange markets. These moves are neither appropriate nor
adequate to dealing with the fundamental problems caused by our failure to come to grips with our rapidly changing energy situation.
Finally, I consider it appropriate to comment on the Federal Reserve's "monetization" of the Federal deficit. The Federal budget de.
termines the level of the Government's deficit or surplus. That,in turn,
is significant for our overall economic well-being. It is theoretically
possible to run a major deficit without an inflationary impact if the
Federal Reserve System does not increase the money supply. But, in
practice, the Federal Reserve simply cannot take the political heat
that often results when Federal deficit financing "crowds out" private
sector borrowing. As a result, major Federal deficits almost invariably have an ultimate inflationary impact when the Federal Reserve
System creates money to finance such deficits. In the first budget resolution, the House adopted a $23.3 billion deficit level. I believe that a
lower deficit could have been reached and would make the Fed's job
easier.
S. WILLIAM GREEN.
J. WILLIAM STANTON.
1 Although many minority memlNers wcold have joined in sIzning these views, including
myself, time constraints did not provide the opportunity to circulate them to all members.
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Federal Reserve Bank of St. Louis
(6)
•
SECOND REPORT ON MONETARY POLICY FOR 1979
DISSENTING VIEWS OF RON PAUL
In the committee's report on the first Governors' report of 1979,
there appeared a recommendation for reinflation of the money supply
to avoid recession. The Federal Reserve, unfortunately, seems to have
taken this advice, since it appears that the monetary aggregates are
growing considerably faster than they were earlier this year. The result, as the present committee report makes clear, is that "the U.S.
economy now faces an early recession together with continuing inflation." Political manipulation of money can only lead to price inflation,
recession (or depression), or stagflation, as I warned in my dissenting
views to the first committee report. I had hoped that my prediction
of an inevitable recession would not be fulfilled so promptly, but apparently the Fed moves fast.
It is worth reemphasizing that it is Government's control of our
money that is the cause of our problems, for both the Fed's report to
the Congress and the committee's report implicitly denies this. The
committee report states:
No individual, agency, corporation or foreign power bears
sole responsibility for our present condition. Contributing influences include the recent OPEC price actions, labor-management disputes, poor weather last winter and mistaken policies over many years.
The committee adds, almost as an afterthought, that "The monetary policies of the Federal Reserve have also played a role." That is
the understatement of the decade. The Fed has been increasing the
money supply for decades, and the result is ever-worsening price inflation. There could have been no other result, and there will be no
other result until Government is removed from the monopolistic control of money it enjoys and the people endure.
During his testimony before the committee, Chairman Miller—now
Treasury Secretary Miller—repeatedly blamed OPEC for at least a
significant part of our present price inflation. Apparently the Eizenstat memorandum suggesting that OPEC be painted as the enemy has
been adopted by the Federal Reserve as well as the administration.
The claim, however, is preposterous. On January 1, 1974, the OPEC
price of crude oil was $10.95 per barrel. Gold was $112.75 per ounce.
An ounce of gold would buy 10.3 barrels of OPEC crude. Today.
OPEC crude is $20 per barrel, and gold is over $300 per ounce. In
constant gold dollars, a barrel of OPEC crude oil is less expensive
'today than it was 5 years ago. For the same ounce of gold, one can buy
five more barrels of oil in July 1979 than one could in January 1974.
Oil is cheaper today than it was in 1974—in terms of gold. In terms of
paper dollars it has doubled in price, but that is the fault of the dollars,
not the Arabs. It is not the crude that is becoming more valuable, but
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Federal Reserve Bank of St. Louis
(7)
8
the dollars that are becoming worth less. OPEC is able to demand and
get higher dollar prices simply because of the inflationary monetary
policies that the Federal Reserve is pursuing. It is completely in error
to blame either price inflation or money inflation on OPEC. Is it any
wonder that the Arabs are now reportea to be the principal purchasers
of gold on the bullion market? Their confidence in the dollar is rightfully waning.
A fortiori it is wrong to blame "labor-management disputes."
Neither labor unions nor businesses have the power to print money.
There can be a general price rise only if there is an increase in the
supply of money or a decrease in the demand for money. There can be
an increase in the supply of money only if the Government wills it, and
the demand for money falls only when the people have lost confidence in it due to the inflationary policies of the Government. To shift
the blame to labor or business is to use the Eizenstat ploy on a domestic
rather than international level. The fact is that it is the Government
that is responsible for the depreciation of our money since it has
dictatorial powers over our money supply.
Most astonishing of all is the Federal Reserve's and the committee's
contention that "poor weather" is to blame for our inflation. For decades we have heard how the weather is to blame for crop failures and
other snafus in Communist nations, and it is somewhat sinister that we
are now officially blaming the weather for inflation. Will the next step
be to blame "enemies of the people"? All sort of factors can affect
particular prices, but only one can affect prices in general: the money
supply. The weather certainly cannot increase or decrease the money
supply—that is the sole prerogative of the Government. Blaming the
weather is using the Eizenstat method on the cosmic level, and someone needs to point it out.
The committee is absolutely correct when it states that the "policies of the Federal Reserve" have played a role in our inflation. It, is
also 100 percent accurate when it blames"mistaken (government) policies over many years." These mistaken policies must be first correctly
identified before they can be rooted out. The committee presumes, without warrant and against the evidence, that the Fed can pursue correct
policies. Even if we assure that the Fed can calculate accurate figures
on which to base its policies (a very doubtful assumption), the Fed
cannot act either wisely or well. Any policy the Fed pursues at this
point will contribute either to inflation or recession. It cannot steer a
stable course because its actions are inherently destablizing. It is only
the grace of God and the incredible resilience of the market economy
that have kept the policies of the Fed from destroying us already. It
is the height of presumptuousness to believe that any political institution can properly manipulate the money supply. Inflations and recessions will continue until we adopt a sound monetary system that does
to
not require the intervention or activity of the Government except, to
the extent that the Government should intervenue in any situation:
punish the perpetrators of fraud and the users of force. But this Government, as presently organized. is in no position to start prosecuting
the 11FerS of fraud and force in the monetary system.
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Federal Reserve Bank of St. Louis
0
I
For release on delivery
Wednesday, July 21, 1982
10:00 AM, EDT
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Federal Reserve Bank of St. Louis
Statement by
Paul A. Volcker
Chairman, Board of Governors of the Federal Reserve System
before the
Committee on Banking, Finance and Urban Affairs
House of Representatives
July 21, 1982
I am pleased to have this opportunity once again to
discuss monetary policy with you within the context of recent
and prospective economic developments.
As usual on these
occasions, you have the Board of Governors' "Humphrey-Hawkins"
Report before you.
This morning I want to enlarge upon some
aspects of that Report and amplify as fully as I can my thinking
with respect to the period ahead.
In assessing the current economic situation, I believe
the comments I made five months ago remain relevant.
Without
repeating that analysis in detail, I would emphasize that we
stand at an important crossroads for the economy and economic
policy.
In these past two years we have traveled a considerable
way toward reversing the inflationary trend of the previous
decade or more.
I would recall to you that, by the late 1970s,
that trend had shown every sign of feeding upon itself and
tending to accelerate to the point where it threatened to
undermine the foundations of our economy.
Dealing with inflation
was accepted as a top national priority, and, as events developed,
that task fell almost entirely to monetary policy.
In the best of circumstances, changing entrenched patterns
of inflationary behavior and expectations -- in financial markets,
in the practices of business and financial institutions, and in
labor negotiations -- is a difficult and potentially painful
process.
Those, consciously or not, who had come to "bet" on
rising prices and the ready availability of relatively cheap
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Federal Reserve Bank of St. Louis
0
2
•
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Federal Reserve Bank of St. Louis
credit to mask the risks of rising costs, poor productivity,
aggressive lending, or over-extended financial positions have
found themselves in a particularly difficult position.
The pressures on financial markets and interest rates
have been aggravated by concerns over prospective huge volumes
of Treasury financing, and by the need of some businesses to
borrow at a time of a severe squeeze on profits.
Lags in the
adjustment of nominal wages and other costs to the prospects
for sharply reduced inflation are perhaps inevitable, but have
the effect of prolonging the pressure on profits -- and indirectly on financial markets and employment.
Remaining doubts
and skepticism that public policy will "carry through" on the
effort to restore stability also affect interest rates, perhap:
most particularly in the longer-term markets.
In fact, the evidence now seems to me strong that the
inflationary tide has turned in a fundamental way.
In stating
that, I do not rely entirely on the exceptionally favorable
consumer and producer price data thus far this year, when the
recorded rates of price increase (at annual rates) declined to
/
2 and 21
31
/
2%, respectively. That apparent improvement was magnified
by some factors likely to prove temporary, including, of course,
the intensity of the recession; those price indices are likely
to appear somewhat less favo-able in the second half of the
year.
What seems to me more important for the longer run is
that the trend of underlying costs and nominal wages has begun
to move lower, and that trend should be sustainable as the
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-3
economy recovers upward momentum.
While less easy to
identify -- labor productivity typically does poorly during
periods of business decline -- there are encouraging signs
that both management and workers are giving more intense
attention to the effort to improve productivity.
That effort
should "pay off" in a period of business expansion, helping
to hold down costs and encouraging a revival of profits, setting
the stage for the sustained growth in real income we want.
I am acutely aware that these gains against inflation
have been achieved in a context of serious recession.
Millions
of workers are unemployed, many businesses are hardpressed to
maintain profitability, and business bankruptcies are at a
postwar high.
While it is true that some of the hardship can
reasonably be traced to mistakes in management or personal
judgment, including presumptions that inflation would continue,
large areas of the country and sectors of the economy have been
swept up in more generalized difficulty.
Our financial system
has great strength and resiliency, but particular points of
strain have been evident.
Quite obviously, a successful program to deal with
inflation, with productivity, and with the other economic and
social problems we face cannot be built on a crumbling foundation
of continuing recession.
As you know, there have been some
indications -- most broadly reflected in the rough stability
of the real GNP in the second quarter and small increases in the
leading indicators -- that the downward adjustments may be drawing
4-
-
,
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to a close.
The tax reduction effective July 1, higher social
security payments, rising defense spending and orders, and the
reductions in inventory already achieved, all tend to support
the generally held view among economists that some recovery is
likely in the second half of the year.
I am also conscious of the fact that the leveling off
of the GNP has masked continuing weakness in important sectors
of the economy.
In its early stages, the prospective recovery
must be led largely by consumer spending.
But to be sustained
over time, and to support continuing growth in productivity and
living standards, more investment will be necessary.
as you know, business investment is moving lower.
At present,
House building
has remained at depressed levels; despite some small gains in
starts during the spring, the cyclical strength "normal" in that
industry in the early stages of recovery is lacking.
Exports
have been adversely affected by the relative strength of the
dollar in exchange markets.
I must also emphasize that the current problems of the
American economy have strong parallels abroad.
Governments
around the world have faced, in greater or lesser degree, both
inflationary and fiscal problems.
As they have come to grips
with those problems, growth has been slow or non-existent, and
the recessionary tendencies in various countries have fed back,
one on another.
In sum, we are in a situation that obviously warrants
concern, but also has great opportunities.
Those opportunities
lie in major part in achieving lasting progress -- in pinning
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down and extending what has already been achieved -- toward
price stability.
In doing so, we will be laying the base for
sustag recovery over many years ahead, and for much lower
interest rates, even as the economy grows.
Conversely, to
fail in that task now, when so much headway has been made,
could only greatly complicate the nroblems of the economy over
time.
I find it difficult to suggest when and how a credible
attack could be renewed on inflation should we neglect completing
the job now.
Certainly the doubts and skepticism about our
capacity to deal with inflation -- which now seem to be yielding
would be amped, with unfortunate consequences for financial
markets and ultimately for the economy.
I am certain that many of the questions, concerns and
dangers in your mind lie in the short run -- and that those in
good part revolve around the pressures in financial markets.
Can we look forward to lower interest rates to support the
expansion in investment and housing as the recovery takes hold?
Is there, in fact, enough liquidity in the economy to support
expansion -- but not so much that inflation is reignited?
Will, in fact, the economy follow the recovery path so widely
forecast in coming months?
These are the questions that we in the Federal Reserve
must deal with in setting monetary policy.
As we approach
these policy decisions, we are particularly conscious of the
fact that monetary policy, however important, is only one
instrument of economic policy.
Success in reaching our common
objective 5f a strong and prosperous economy depends upon more
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-6-
than appropriate monetary policies, and I will touch this
morning on what seem
to me appropriately complementary
policies in the public and private sectors.
The Monetary Targets
Five months ago, in presenting our monetary and credit
targets for 1982, I noted some unusual factors could be at
work tending to increase the desire of individuals and businesses
to hold assets in the relatively liquid forms encompassed in the
various definitions of money.
Partly for that reason -- and
recognizing that the conventional base for the M1 target of the
fourth quarter of 1981 was relatively low -- I indicated that
the Federal Open Market Committee contemplated growth toward
the upper ends of the specified ranges.
Given the "bulge"
early in the year in Ml, the Committee also contemplated that
that particular measure of money might for some months remain
above a "straight line" projection of the targeted range from
the fourth quarter of 1981 to the fourth quarter of 1982.
As events developed, M1 and M2 both remained somewhat above
straight line paths until very recently.
M3 and bank credit
have remained generally within the indicated range, although
close to the upper ends.
(See Table I.)
Taking the latest full
month of June, M1 grew 5.6% from the base period and M2 9.4%,
close to the top of the ranges.
To the second quarter as a
whole, the growth was higher, at 6.8% and 9.7%, respectively.
Looked at on a year-over-year basis, which appropriately tends
to average through volatile monthly and quarterly figures, M1
during the first half of 1982 averaged about 4-3/4% above the
7
first half of 1981 (after accounting for NOW account shifts
early last year).
On the same basis, M2 and M3 grew by 9.7
and 10.5 percent, respectively, a rate of growth distinctly
faster than the nominal GNP over the same interval.
In conducting policy during this period, the Committee
was sensitive to indications that the desire of individuals
and others for liquidity was unusually high, apparently reflecting concerns and uncertainties about the business and
financial situation.
One reflection of that may be found in
unusually large declines in "velocity" over the period -that is, the ratio of measures of money to the gross national
product.
M1 velocity -- particularly for periods as short as
three to six months -- is historically volatile.
A cyclical
tendency to slow (relative to its upward trend) during recessions
is common.
But an actual decline for two consecutive quarters,
as happened late in 1981 and the first quarter of 1982, is rather
unusual.
The magnitude of the decline during the first quarter
was larger than in any quarter of the entire postwar period.
Moreover, declines in velocity of this magnitude and duration
are often accompanied by (and are related to) reduced shortterm interest rates.
Those interest rate levels during the
first half of 1982 were distinctly lower than during much of
1980 and 1981, but they rose above the levels reached in the
closing months of last year.
More direct evidence of the desire for liquidity or precautionary balances affecting M1 can be found in the behavior
of NOW accounts.
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As you know, NOW accounts are a relatively
-8-
new instrument, and we have no experience of behavior over the
course of a full business cycle.
We do know that NOW accounts
are essentially confined to individuals, their turnover relative
to demand accounts is relatively low, and, from the standpoint
of the owner, they have some of the characteristics of savings
deposits, including a similarly low interest rate but easy
access on demand.
We also know the great bulk of the increase
in M1 during the early part of the year -- almost 90% of the
rise from the fourth quarter of 1981 to the second quarter of
1982 -- was concentrated in NOW accounts, even though only
about a fifth of total M1 is held in that form.
In contrast
to the steep downward trend in low-interest savings accounts
in recent years, savings account holdings have stabilized or
even increased in 1982, suggesting the importance of a high
degree of liquidity to many individuals in allocating their
funds.
A similar tendency to hold more savings deposits has
been observed in earlier recessions.
I would add that the financial and liquidity positions of
the household sector of the economy, as measured by conventional
liquid asset and debt ratios, has improved during the recession
period.
Relative to income, debt repayment burdens have declined
to the lowest level since 1976.
are clearly mixed.
Trends among business firms
While many individual firms are under strong
pressure, some rise in liquid asset holdings for the corporate
sector as a whole appears to be developing.
The gap between
internal cash flow (that is, retained earnings and depreciation
allowances) and spending for plant, equipment, and inventory
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9_
-
has also been at an historically low level, suggesting that a
portion of recent business credit demands is designed to
bolster liquidity.
But, for many years, business liquidity
ratios have tended to decline, and balance sheet ratios have
reflected more dependence on short-term debt.
In that per-
spective, any recent gains in liquidity appear small.
In the light of the evidence of the desire to hold more
NOW accounts and other liquid balances for precautionary rather
than transaction purposes during the months of recession,strong
efforts to reduce further the growth rate of the monetary aggregates appeared inappropriate.
Such an effort would have
required more pressure on bank reserve positions -- and
presumably more pressures on the money markets and interest
rates in the short run.
At the same time, an unrestrained
build-up of money and liquidity clearly would have been inconsistent with the effort to sustain progress against inflation,
both because liquidity demands could shift quickly and because
our policy intentions could easily have been misconstrued.
Periods of velocity decline over a quarter or two are typically
followed by periods of relatively rapid increase.
Those increases
tend to be particularly large during cyclical recoveries.
Indeed,
velocity appears to have risen slightly during the second quarter,
and the growth in NOW accounts has slowed.
Judgments on these seemingly technical considerations
inevitably take on considerable importance in the target-setting
process because the economic and financial consequences (including
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-10-
the consequences for interest rates) of a particular M1 or M2
increase are dependent on the demand for money.
Over longer
periods, a certain stability in velocity trends can be observed,
but there is a noticeable cyclical pattern.
Taking account of
those normal historical relationships, the various targets
established at the beginning of the year were calculated to be
consistent with economic recovery in a context of declining
inflation.
That remains our judgment today.
Inflation has,
in fact, receded more rapidly than anticipated at the start of
the year potentially leaving more "room" for real growth.
On
that basis, the targets established early in the year still
appeared broadly appropriate, and the Federal Open Market Committee decided at its recent meeting not to change them at this
time.
However, the Committee also felt, in the light of developments
during the first half, that growth around the top of those ranges
would be fully acceptable.
Moreover -- and I would emphasize
this -- growth somewhat above the targeted ranges would be
tolerated for a time in circumstances in which it appeared that
precautionary or liquidity motivations, during a period of
economic uncertainty and turbulence, were leading to stronger
than anticipated demands for money.
We will look to a variety of
factors in reaching that judgment, including such technical facto/
as the behavior of different components in the money supply, the
growth of credit, the behavior of banking and financial markets,
and more broadly, the behavior of velocity and interest rates.
-11-
I believe it is timely for me to add that, in these
circumstances, the Federal Reserve should not be expected to
respond, and does not plan to respond, strongly to various
"bulges" -- or for that matter "valleys"monetary growth
that seem likely to be temporary.
As we have emphasized in the
past, the data are subject to a good deal of statistical "noise"
in any circumstances, and at times when demands for money and
liquidity may be exceptionally volatile, more than usual caution
is necessary in responding to "blips."*
We, of course, have a concrete instance at hand of a
relatively large (and widely anticipated) jump in M1 in the
first week of July -- possibly influenced to some degree by
larger social security payments just before a long weekend.
Following as it did a succession of money supply declines, that
increase brought the most recent level for M1 barely above the
June average, and it is not of concern to us.
It is in this context, and in view of recent declines
in short-term market interest rates, that the Federal Reserve
yesterday reduced the basic discount rate from 12 to 111
/
2 percent.
*In that connection, a number of observers have noted
that the first month of a calendar quarter -- most noticeably
in January and April -- sometimes shows an extraordinarily
large increase in M1 -- amplified by the common practice of
multiplying the actual change by 12 to show an annual rate.
Those bulges, more typically than not, are partially "washed
out" by slower than normal growth the following month. The
standard seasonal adjustment techniques we use to smooth out
monthly money supply variations -- indeed, any standard
techniques -- may, in fact, be incapable of keeping up with
rapidly changing patterns of financial behavior, as they
affect seasonal patterns. A note attached to this statement
sets forth some work in process developing new seasonal adjustment techniques.
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-12-
In looking ahead to 1983, the Open Market Committee
agreed that a decision at this time would -- even more
obviously than usual -- need to be reviewed at the start of
the year in the light of all the evidence as to the behavior
of velocity,or money and liquidity demand,during the current
year.
Apart from the cyclical influences now at work, the
possibility will need to be evaluated of a more lasting change
in the trend of velocity.
The persistent rise in velocity during the past twenty
years has been accompanied by rising inflation and interest
rates -- both factors that encourage economization of cash
balances.
In addition, technological change in banking --
spurred in considerable part by the availability of computers -has made it technically feasible to do more and more business
on a proportionately smaller "cash" base.
With incentives
strong to minimize holdings of cash balances that bear no or
low interest rates, and given the technical feasibility to do
so, turnover of demand deposits has reached an annual rate of
more than 300, quadruple the rate ten years ago.
Technological
change is continuing, and changes in regulation and bank practices
are likely to permit still more economization of Ml-type balances.
However, lower rates of interest and inflation should moderate
incentives to exploit that technology fully.
In those conditions,
velocity growth could slow, or conceivably at some point stop.
To conclude that the trend has in fact changed would
clearly be premature, but it is a matter we will want to evaluate
carefully as time passes.
For now, the Committee felt that the
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-13-
existing targets should be tentatively retained for next year.
Since we expect to be around the top end of the ranges this
year, those tentative targets would of course be fully consistent
with somewhat slower growth in the monetary aggregates in 1983.
Such a target would be appropriate on the assumption of a more
or less normal cyclical rise in velocity.
With inflation
declining, the tentative targets would appear consistent with,
and should support, continuing recovery at a moderate pace.
The Blend of Monetary and Fiscal Policy
The Congress, in adopting a budget resolution contemplating
cuts in expenditures and some new revenues, also called upon
the Federal Reserve to "reevaluate its monetary targets in
order to assure that they are fully complementary to a new
and more restrained fiscal policy."
I can report that members
of the Committee welcomed the determination of the Congress to
achieve greater fiscal restraint, and I want particularly to
recognize the leadership of members of the Budget Committees
and others in achieving that result.
In most difficult
circumstances, progress is being made toward reducing the
huge potential gap between receipts and expenditures.
But I
would be less than candid if I did not also report a strong
sense that considerably more remains to be done to bring the
deficit under control as the economy expands.
The fiscal
situation as we appraise it, continues to carry the implicit
threat of "crowding 5ut" business investment and housing as
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-14-
the economy grows -- a process that would involve interest
rates substantially higher than would otherwise be the case.
For the more immediate future, we recognized that the need
remains to convert the intentions expressed in the Budget
Resolution into concrete legislative action.
In commenting on the budget, I would distinguish
sharply between the "cyclical" and "structural" deficit
that is, the portion of the deficit reflecting an imbalance
between receipts and expenditures even in a satisfactorily
growing economy with declining inflation.
To the extent the
deficit turns out to be larger than contemplated entirely
because of a shortfall in economic growth, that "add on"
would not be a source of so much concern.
But the hard
fact remains that, if the objectives of the Budget Resolution
are fully reached, the deficit would be about as large in
fiscal 1983 as this year even as the economy expands at a
rate of 4 to 5 percent a year and inflation (and thus inflation
generated revenues) remains higher than members of the Open
Market Committee now expect.
In considering the question posed by the Budget Resolution,
the Open Market Committee felt that full success in the budgetary
effort should itself be a factor contributing to lower interest
rates and reduced strains in financial markets.
It would thus
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-15-
assist importantly in the common effort to reduce inflationary
pressures in the context of a growing economy.
By relieving
concern about future financing volume and inflationary expectations,
I believe as a practical matter a credibly firmer budget posture
might permit a degree of greater flexibility in the actual shortterm execution of monetary policy without arousing inflationary
fears.
Specifically, market anxiety that short-run increases
in the Ms might presage continuing monetization of the debt
could be ameliorated.
But any gains in these respects will
of course be dependent on firmness in implementing the intentions
set forth in the Resolution and on encouraging confidence among
borrowers and investors that the effort will be sustained and
reinforced in coming years.
Taking account of all these considerations, the
Committee did not feel that the budgetary effort, important
as it is, would in itself appropriately justify still greater
growth in the monetary aggregates over time than I have anticipated.
Indeed, excessive monetary growth -- and perceptions thereof -would undercut any benefits from the budgetary effort with
respect to inflationary expectations.
We believe fiscal
restraint should be viewed more as an important complement
to appropriately disciplined monetary policy than as a
substitute.
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-16-
Concluding Comments
In an ideal world, less exclusive reliance on monetary
policy to deal with inflation would no doubt have eased the
strains and high interest rates that plague the economy and
financial markets today.
To the extent the fiscal process
can now be brought more fully to bear on the problem, the
better off we will be -- the more assurance we will have that
interest rates will decline and keep declining during the
period of recovery, and that we will be able to support the
increases in investment and housing essential to healthy,
sustained recovery.
Efforts in the private sector -- to
increase productivity, to reduce costs, and to avoid inflationary
and job-threatening wage increases -- are also vital, even
though the connection between the actions of individual firms
and workers and the performance of the economy may not always
be self-evident to the decision makers.
We know progress is
being made in these areas, and more progress will hasten full
and strong expansion.
But we also know that we do not live in an ideal world.
There is strong resistance to changing patterns of behavior
and expectations ingrained over years of inflation.
The slower
the progress on the budget, the more industry and labor build
in cost increases in anticipation of inflation or Government
acts to protect markets or impede competition, the more highly
speculative financing is undertaken, the greater the threat that
available supplies of money and credit will be exhausted in
financing rising prices instead of new jobs and growth.
Those
in vulnerable competitive positions are most likely to feel the
-17-
impact first and hardest, but unfortunately the difficulties
spread over the economic landscape.
The hard fact remains that we cannot escape those dilemmas
by a decision to give up the fight on inflation -- by declaring
the battle won before it is.
Such an approach would be trans-
parently clear -- not just to you and me -- but to the investors,
the businessmen and the workers who would, once again, find
their suspicions confirmed that they had better prepare to
live with inflation, and try to keep ahead of it.
The reactions
in financial markets and other sectors of the economy would,
in the end, aggravate our problems, not eliminate them.
would strike me as the cruelest blow of all to the millions
who have felt the pain of recession directly to suggest, in
effect, it was all in vain.
I recognize months of recession and high interest rates
have contributed to a sense of uncertainty.
postponed investment plans.
Businesses have
Financial pressures have exposed
lax practices and stretched balance sheet positions in some
institutions -- financial as well as non-financial.
The
earnings position of the thrift industry remains poor.
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But none of those problems can be dealt with successfully
by re-inflation or by a lack of individual discipline.
It is
precisely that environment that contributed so much to the
current difficulties.
In contrast, we are now seeing new attitudes of cost containment and productivity growth -- and ultimately our industry
will be in a more robust competitive position.
Millions are
p-
-18-
benefitting from less rapid price increases -- or actually
lower prices -- at their shopping centers and elsewhere.
Consumer spending appears to be moving ahead, and inventory
reductions help set the stage for production increases.
Those are developments that should help recovery get
firmly underway.
The process of disinflation has enough
momentum to be sustained during the early stages of recovery
and that success can breed further success as concerns about
inflation recede.
As recovery starts, the cash flow of
business should improve.
And, more confidence should encourage
greater willingness among investors to purchase longer debt
maturities.
Those factors should, in turn, work toward reducing
interest rates, and sustaining them at lower levels, encouraging
in turn the revival of investment and housing we want.
I have indicated the Federal Reserve is sensitive to the
special liquidity pressures that could develop during the
current period of uncertainty.
Moreover, the basic solidity
of our financial system is backstopped by a strong structure
of governmental institutions precisely designed to cope with
the secondary effects of isolated failures.
The recent problems
related largely to the speculative activities of a few highly
leveraged firms can and will be contained, and over time, an
appropriate sense of prudence in taking risks will serve us well.
We have been through -- we are in
a trying period.
But
too much has been accomplished not to move ahead and complete
the job of laying the groundwork for a much stronger economy.
As we look forward, not just to the next few months but to long
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-19-
in renewed stability, in
years, the rewards will be great:
growth, and in higher employment and standards of living.
That vision will not be accomplished by monetary policy alone.
But we mean to do our part.
*
*
*
*
* *
*
*
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Table I
Targeted and Actual Growth of
Money and Bank Credit
(Percent changes, at seasonally adjusted annual rates)
FOMC Objective
198104 to 198204
198104
to June '82
Actual Growth
198104
to 198202
1981H1
to 1982H1
M1
2-1/2 to 5-1/2
5.6
6.8
4.7**
112
6 to 9
9.4
9.7
9.7
M3
6-1/2 to 9-1/2
9.7
9.8
10.5
Bank Credit*
6 to 9
8.0
8.3
8.4
The base for the bank credit target is the average level of December 1981
and January 1982, rather than the average for 198104. This base was adopted
because of the impact on the series of shifts of assets to the new international banking facilities (IBFs); the 1981H1-to-1982H1 figure has been
adjusted for the impact of the initial shifting of assets to IBFs.
** Adjusted for impact of shifts to new NOW accounts in 1981.
Appendix
Alternative Seasonal Adjustment Procedure
For some time the Federal Reserve has been investigating ways
to improve its procedures for seasonal adjustment, particularly as they
apply to the monetary aggregates.
In June of last year, a group of pro-
minent outside experts, asked by the Board to examine seasonal adjustment
techniques, submitted their recommendations.
'
The committee suggested,
among other things, that the Board's staff develop seasonal factor
estimates from a model-based procedure as an alternative to the widely
used X-11 technique that provides the basis for the current seasonal
adjustment procedure,
'
and release the results.
The Board staff has been developing a procedure using statistical
models tailored to each individual series.2/
The table on the last page
compares monthly and quarterly average growth rates for the current M1
series with those of an alternative series from the model-based approach.
Differences in seasonal adjustment techniques do not change
the trend in monetary growth, but, as may be seen in the table, they do
alter month-to-month growth rates owing to differing estimates of the
1/
See Committee of Experts on Seasonal Adjustment Techniques, Seasonal
Adjustment of the Monetary Aggregates (Board of Governors of the Federal
Reserve System, October 1981).
2/
The current seasonal adjustment technique has most recently been
summarized in the description to the mimeograph release of historical
money stock data dated March 1982. Detailed descriptions of the X-11
program and variants can be obtained from technical paper no. 15 of the
U. S. Department of Commerce (rev. February 1967) and from the report
to the Board cited in footnote 1.
3/
The model-based seasonal adjustment procedures currently under review by
the Board staff use methods based on the well-developed theory of statistical regression and time series modeling. These approaches allow
development of seasonal factors that are more sensitive than the current
factors to unique characteristics of each series, including, for example,
fixed and evolving seasonal patterns, trading day effects, within-month
seasonal variations, holiday effects, outlier adjustments, special events
adjustments (such as the 1980 credit controls experience), and serially
correlated noise components.
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-2distribution over time of the seasonal component in money behavior.
Short-
run money growth is variable under both the alternative and current techniques
of seasonal adjustment, illustrating the inherently large "noise" component
of the series.
However, the redistribution of the seasonal component under
the alternative technique does on average tend to moderate month-to-month
changes somewhat.
The Board will continue to publish seasonally adjusted estimates
for M1 on both current and alternative bases at least until the annual
review of seasonal factors in 1983.
method will be available shortly.
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A detailed description of the alternative
Growth Rates of M1 Using
1
Current and Alternative L
Seasonal Adjustment Procedures
(Monthly Average - Percent Annual Rates)
1981
Current
1982
Alternative
9.8
1.4
Jan.
4.3
Feb.
7.5
16.0
Mar.
14.3
Apr.22.6
-10.3
May
-.II
June
2.2
2.8
July
4.8
Aug.
5.3
Sept.
0.3
3.1
0.0
Oct.
4.7
Nov.
9.7
11.1
12.4
15.4
Dec.
(Quarterly Average
QI
;IsII
QIII
QIV
4.6
9.2
0.3
5.7
3.5
9.6
0.9
5.5
Jan.
Feb.
Mar.
Apr.
May
June
Current
Alternative
21.0
11.4
11.0
4.5
-1.6
1.3
Percent Annual Rates)
QI
Qi.
II
10.4
9.5
1/
_
Current monthly seasonal factors are derived using an X-11/ARIMAbased procedure applied to monthly data.
2/
_
Alternative monthly seasonal factors are derived using a modelbased procedure applied to weekly data.
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BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
To Chairman Volcker
Date July 16 3 1982
Subject:
From Division of Research and Statistics
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The attached background material has been prepared for your
Humphrey-Hawkins testimony on July 20 and 21. Updated information on
Is
housing starts and interest rates w411 be provided on Monday -when- they
become available.'
•
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TABLE OF CONTENTS
Page
NONFINANCIAL DEVELOPMENTS
Prospects for Economic Activity
Gross National Product and Related Items
Current Economic Indicators
Household Sector Indicators
Business Spending Indicators
Automobile Production and Sales
Industrial Production Indexes
Capacity Utilization Rates: Manufacturers and Materials Producers
Housing Market Indicators
Residential Building Permits and Housing Starts
Nonfarm Establishment Employment
Household Employment and Unemployment
Recent News on Prices and Inflation Prospects
Average Hourly Earnings Index
Labor Productivity and Costs
Consumer Prices
Producer Prices
Sensitive Spot Prices
Private Economic Forecasts
Governmental Economic Forecasts
FINANCIAL DEVELOPMENTS
Monetary Aggregates and Bank Credit
Monetary Aggregates with Detailed Components
Adopted and Actual Longer-Run Monetary Growth Rates
Bank Reserves
Monetary Base and Reserve Aggregates
Reserve Aggregate Measures
Composition of Growth in Total Reserves
Composition of Total Reserves
Discount Window Borrowing
Velocity Growth
Bank Credit with Components
Short- and Intermediate-Term Business Credit
Characteristics of Short-Term Business Loans
Merger-Related Bank Credit Developments
Net Funds Raised in Credit Markets
Sources and Uses of Funds by Nonfinancial Corporations
Selected Household Borrowing
Saving and Small Time Deposit Growth
Selected Activities of Savings and Loan Associations
Adverse Actions on Corporate Securities
Business Bankruptcies
Selected Financial Market Quotations
Selected Interest Rates
Recent Failures of Dealers and One Bank
1
3
4
5
6
7
8
9
10
11
12
13
14-18
' 19
20
21-22
23-24
25
26
27
28
29
30
31
32
33
34
35
36
37-41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
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Federal Reserve Bank of St. Louis
-
-2Page
BUDGET DEVELOPMENTS
• •
Federal Budget Baseline and Alternative Initiatives.
Administration Budget Initiatives--February Budget
Congressional Budget Deficit Reducing Initiatives
Senate Finance Committee Revenue Raising Bill
Reconciliation of the First Budget Resolution and the June/July
Greenbook FY1983 Deficit
Reconciliation of the Administration and the June/July Greenbook
FY1983 Deficit
Federal Unified Budget and Gross National Product
Federal Borrowing and Credit Markets
Administration and Congressional Long-Run Economic Assumptions • •
Military Spending in the Reagan Budget
Defense Spending Indicators
June Greenbook Federal Sector Accounts
i
i
•
•
56
57
58
59
60
61
62
63
64
65
66
• 67
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
NONFINANCIAL DEVELOPMENTS
,
i
I
•
..
PROSPECTS FOR ECONOMIC ACTIVITY
1.
There have been some signs recently that the contraction in economic
activity is easing.
Production cutbacks have improved inventory posi-
tions, housing starts have revived a bit, and consumer spending posted
a perceptible gain in the second quarter.
spread weakness in capital spending.
However, there is wide-
Meanwhile the underlying rates of
increase in prices and wages continue to improve.
2.
The staff expects real GNP to rise at a 2-3/4 percent annual rate in the
second half of the year.
a.
,
A sizable increase in personal consumption expenditures is expected
to provide the main impetus to recovery.
Much of the rebound in
consumption is attributable to the July 1 tax cvt, whichfboosts
-
household disposable income by around $30 billion at an annual
rate.
In addition, the downward trend in inflation this year has
shored up real incomes, and the reduced debt burden
of households
leaves more room for credit-financed spending.
4
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
b.
Sharp cutbacks in production since last fall have eliminated most of
the inventory overhang.
On a constant-dollar basis, manufacturing
and trade stocks in May were only slightly above the level in the
first quarter of 1981.
The liquidation is likely to continue for
several months, but the completion of the correction over the second
half of the year will provide some support to growth in orders and
production.
c.
However, owing to persistent weakness in some sectors, the recovery
is likely to be relatively sluggish.
The increase in real GNP pro-
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-2-
jected by the staff for the next year-and-a-half is about half
that of previous recoveries.
• Business fixed investment will probably be held down by high
interest rates, other financial stresses, and low utilization
rates.
Investment apparently contracted sharply in the second
quarter, and near-term indicators point to further declines in
real outlays this year.
• Purchases by state and local governments, which typically have
expanded during recovery periods, are likely to decline further
in real terms, in response to reduced federal support and weakness in tax collections.
• The strong dollar and weakness in foreign economic activity are
expected to damp export demand this year.
3.
Increases in food and energy prices are expected to raise aggregate
inflation measures over the next few months.
However, the underlying
rate of inflation should continue to slow, owing to extensive slack
in labor and product markets and improved inflation expectations.
-
-3-
GROSS NATIONAL PRODUCT AND RELATED ITEMS
(Percentage change from preceding period,
annual rate)
19801
19811
Q1
1982
Q2f
H2f
Constant dollars
-.3
.9
-3.7
.7
2.7
Final sales
.1
.1
2.0
-1.3
1.2
Personal consumption
.6
1.1
3.4
1.4
-4.3
3.6
.9
-13.8
-9.1
-12.9
-22.1
-10.0
-3.8
15.8
GNP
Business fixed investment
Residential fixed investment
/
4.3
A
1.6
1.9
.0
-6.4
-.6
9.4
9.8
.0
6.9
8.4
Inventory investment2
-5.93
16.23
-36.8
-19.5
Net exports2
23.33
26.03
31.5
44.8
GNP implicit deflator
9.7
8.9
3.8
6.1
5.5
GBP fixed -weighted price index
9.7
9.0
4.7
3.8
6.1
Personal saving rate (percent)
5.63
5.33
5.4
5.7
6.14
Government purchases
Current dollars
GNP
;
I
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
31.34
Addenda:
1. Percent changes are from fourth quarter to fourth quarter
2. Level of spending, billions of dollars.
3. Annual average.
4. Half year average.
f -- Forecast, June 1982 Greenbook.
-4-
CURRENT ECONOMIC INDICATORS
Industrial
Production
Personal
Income
Retail Sales
Current Constant
Dollars
Dollars
----Percent change, annual ratel---1979
1980
1981
1.2
-2.5
-1.7
12.3
11.0
10.2
9.6
6.8
5.4
-.5
-3.3
-1.1
Auto Sales
Total Domestic Imported
Housing
Starts
--Millions of units, annual rate-10.7
9.0
8.6
8.4
6.6
6.2
2.3
2.4
2.3
1.75
1.29
1.08
.
1981-Q1
Q2
Q3
Q4
8.4
1.9
1.4
-16.6
11.8
8.7
12.9
7.5
15.4
7.2
4.9
-5.0
6.4
2.1
-1.8
-10.3
10.0
7.9
9.0
7.4
7.3
5.6
6.9
5.1
2,7
2.3
2.1
2.2'
1.40
1.17
.96
.87
1982-Q1
Q2
-11.7
-6.9
4.0
n.a.
.5
13.3
-2.8
n.a.
8.1
7.5
5.'9
5.5
2.2
2.0
.92
n.a.
----Percent change, monthly rate---1981-Jan.
Feb.
Mar.
.7
.3
.2
1.1
.8
1.0
1.5
1.3
1.1
.9
.6
.4
9.3
10.3
10.3
6.9
7.3
7.7
2.4
2.9
2.6
1.59
1.29
1.32
Apr.
May
June
-.1
.5
.1
.6
.6
.7
.2
.1
1.1
-.1
-.1
.8
8.1
7.9
7.6
5.8
5.7
5.4
2.3
2.2
2.2
1.30
1.17
1.05
July
Aug.
Sept.
.7
-.2
-1.3
1.5
1.0
.8
.0
.8
-.2
-.7
.3
-1.1
8.2
10.1
8.8
5.9
7.9
6.9
2.3
2.1
2.0
1.04
.95
.90
Oct.
Nov.
Dec.
-1.6
-1.9
-2.0
.5
.7
.0
-1.6
.4
-.2
-2.0
.1
-.4
7.2
7.7
7.3
5.1
5.4
4.9
2.0
2.3
2.4
.85
.86
.88
1982-Jan.
Feb.
Mar.
Apr.
May
June
-1.9
1.6
-.8
-1.1
-.6
-.7
.2
.6
.4
.3
.7
n.a.
-1.4
2.5
-.2
1.2
2.7
-1.5
-2.1
2.4
.2
1.3
1.9
n.a.
8.0
8.5
7.9
7.3
8.4
6.9
5.6
6.2
5.9
5.5
6.4
4.8
2.4
2.3
2.0
1.8
2.0
2.2
.89
.95
.93
.89
1.09
n.a.
1. Annual figures are calculated from fourth quarter to fourth quarter.
figures are at compound annual rates.
n.a. - not available
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Quarterly
-5-
HOUSEHOLD SECTOR INDICATORS
(Seasonally adjusted)
Real Disposable
Personal Income
Real Consumption
Debt Service
Burdenl
--percent change, annual rate3--
Personal
Saving Rate2
percent
1977
1978
1979
1980
1981
5.0
3.9
2.0
.8
2.2
5.0
4.8
2.0
.6
1.1
21.5
22.3
22.5
21.8
20.8
1981-Q1
3.0
5.8
21.4
4.6
Q3
2.6
3.3
20.5
5.2
1982-Q1
.0
3.4
20.4
5.4
---percent change, monthly rate--1982-Jan.
-.3
Mar.
.3
.3
5.6
5.2
5.3
5.6 .
/ 5.3
percent
n.a.
5.4
1. Consumer installment and mortgage debt repayments as a percent of
disposable personal income.
2. Monthly figures are based on centered 3-month moving averages.
3. Percent change at compound annual rate; annual figures are calculated
from fourth quarter to fourth quarter.
n.a. - not available
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
BUSINESS SPENDING INDICATORS'
(Seasonally adjusted)
Nondefense Capital Goods
Orders
Current Constant Shipments
Dollars
Dollars
Nonresidential Construction
Contracts2
Put-in-place
Manufacturing and Trade
Inventories
Change in
InventoryChange
Book Value
Sales Ratio3
(Annual Rate)
(Annual Rate)
Billions of 1972 dollars
Billions of dollars
Percent change
29.1
5.2
2.2
-3.3
20.0
0.0
-5.0
-5.1
26.7
41.5
20.8
12.223.3
-2.1
-1.7
10.0
17.4
8.3
5.0
12.4
7.2
-2.5
5.8
1.60
1.63
1.69
1.69
45.8
48.2
31.9
36.2
Percent change, quarterly rate
1982-Q1
1.9
.2
-6.4
.8
1.3
-4.6
3.2
.9
-.5
-4.4
26.8
-22.1
14.7
-4.5
-8.2
-5.3
-2.6
8.0
2.7
4.2
1.6
-1.3
11.0
12.5
1.0
1.63
1.66
1.69
1.76
IW
44.6
35.1
53.3
11.8
1.5
-16.6
1.75
-20.5
3.7
.7
12.7
7.1
17.8
1.68
1.69
1.70
37.9
55.0
66.9
13.7
8.2
-18.9
1.76
1.76
1.76
32.6
34.7
-31.9
Percent change, monthly rate
1981-July
Aug.
Sept.
4.3
2.0
-6.8
4.5
2.4
-3.9
-2.7
2.7
-23.3
-13.2
2.8
-9.7
39.7
Oct.
Nov.
-8.8
13.4
--(20.2
3.8
1982-Jan.
Feb.
Mar.
Apr.
May
-3.4
-5.9
7.9
-2.9
-7.9
-7.8
-10.5
13.3
5.2
-16.2
-9.2
3.3
-.3
-5.9
4.6
1.6
.2
6
-1.2 '
-1.5-26.3
-27.5-26.9
Y.Wj
1.73
-4.8
-.3 •
4.5
29.5
1.75
3.5
-.6
-11.5
-52.5
n.a.
n.a.
2.0
-15.2
1. Annual percent changes are calculated from fourth quarter to fourth quarter; inventory changes are based on
end-of-period data.
2. Derived by FRB staff from BCD contracts and orders data.
3. Based on constant dollar data; annual and quarterly figures represent averages of monthly data.
n.a. - not available
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1
1
CrN
7-
_
AUTOMOBILE PRODUCTION, SALES, AND INVENTORIES
(Millions of units; seasonally adjusted at annual rates)
Sales
U.S.
Production
Domestic
Japanese'
Other
Foreign
Total
U.S. &
Foreign
Stock
of Domestic
Cars2
1976
1977
1978
8.5
9.3
9.2
8.6
9.1
9.3
.9
1.4
1.4
.6
.7
.7
10.1
11.1
11.3
1.49
1.79
1.81
1979
1980
1981
8.3
6.3
6.2
8.4
6.6
6.2
1.8
1.9
1.9
.6
.5
.5
10.7
9.0
8.6
1981-Q1
Q2
Q3
Q4
6.1
7.2
6.6
5.0
7.3
5.6
6.9
5.1
2.1
1.8
1.7
1.8
.5
.5
.4
.4
10.0
7.9
9.0
7.4
1.80
1.53
1.54
.
1.16
/
1.53
1.53
(1.54
1982-Q1
Q2
4.1
5.5
5.9
5.5
1.8
1.6
.4
.4-
'8.1
7.5
1.21
1.26
1982-Jan.
Feb.
Mar.
Apr.
May
June
3.6
4.1
4.7
5.1
5.6
5.9
5.6
6.2
5.9
5.5
6.4
4.8
1.9
1.9
1.6
1.4
1.7
1.7
.4
.4
.4
.4
.4
.4
8.0
8.5
7.9
7.3
8.4
6.9
1.40
1.27
1.21
1.21
1.15
1.26
NOTE: Because of rounding, components may not add to totals.
1. The Japanese Ministry of International Trade and Industry announced that
Japan will continue to limit exports to the U.S. to 1.68 million units for
the year ending April 1, 1983.
2. End of period.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-8-
INDUSTRIAL PRODUCTION INDEXES
Final Products
Total
Consumer
Goods
Business
Equipment
Defense
and Space
Equipment
Intermediate
Products
-
Materials
annual rate
1980
Ql
Q2
Q3
Q4
.4
-19.8
-5.8
19.3
-3.2
-12.9
.5
11.6
7.0
-8.7
3.6
9.4
5.2
.8
1.3
9.7
-1.5
-28.9
4.8
15.7
.7
-26.8
-14.9
32.4
1981
Ql
Q2
Q3
Q4
8.4
1.9
1.4
-16.6
1.4
6.3
-1.5
-13.2
9.1
9.4
3.9
-9.4
2.0
4.1
4.3
11.4
9.9
-4.1
.3
-17.2
13.4
-1.9
2.5
-24.1
1982
QI
Q2
-11.8
-6.6
-8.6
5.9
-17.7
-21.9
2.4
4.8
-9.5
-6.4
-14.1
-10.4
monthly rate
1981
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
.1
-.7
-.2
-1.4
-1.6
-1.8
-2.0
-.3
.3
-.7
-1.2
-.9
-1.7
-1.4
.9
.6
-.2
-1.0
-1.2
-.9
.0
-.3
.9
.2
.2
1.5
.8
1.6
-.8
.9
.4
-1.4
-2.1
-1.8
-1.9
.4
.9
-.1
-1.8
-2.6
-2.7
-3.8
1982
Jan.
Feb.
Mar.
Apr.
May
June
-1.9
1.6
-.8
-1.0
-.6
-.7
-1.7
1.5
-.2
.5
.8
.1
-3.8
-.3
-1.5
-2.4
-2.5
-2.7
-1.7
1.2
.5
-.1
.6
-.4
-1.7
2.1
-.8
-1.2
-.6
-.7
-1.3
2.4
-1.4
-1.7
-1.0
NOTE:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Quarterly percentage changes are based on averages of seasonally adjusted monthly
figures.
-9
CAPACITY UTILIZATION RATES:
MANUFACTURERS AND MATERIALS PRODUCERS
(Percent)
Q2
1982
Mar.
Apr.
May
71.6
70.3
71.6
70.7
70.4
69.8
71.0
69.1
66.3
68.6
67.1
66.3
65.5
86.2
77.2
73.2
72.4
73.2
72.6
726
72.1
94.5
51.0
47.4
57.0
51.0
53.4 1
57.8
59.7
88.8
73.8
72.0
69.7
71.8
70.4
69.6
69.0
88.4
68.2
66.7
64.2
66.4
64.9
64.1
63.7
100.7
55.3
62.9
48.8
59.8
54.1
48.0
44.4
Nondurable materials
91.6
77.5
75.0
73.3
75.3
74.4
73.2
72.4
Energy materials
88.8
82.7
82.9
80.0
81.8
80.4
80.2
79.5
1980
Low
Ql
87.2
74.9
Primary processing
90.1
Advanced processing
1978-80
High
June
Manufacturing industries
All industries
Motor vehicles and parts
Industrial materials producers
Total
Durable materials
Raw steel
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
HOUSING MARKET INDICATORS
Period
Soldl
(thousands of
units)
New Homes
Sales Price
Change
from year
earlier
Average2
(percent)
(dollars)
Existing Homes
For
sale3
(thousands of
units)
Soldl
(thousands of
units)
Average
price
(dollars)
1973
1974
1975
1976
1977
1978
1979
1980
1981
633
519
550
647
820
818
709
545
436
36,700
40,300
44,300
48,300
54,500
62,200
71,400
78,600
85,500
9.0
9.8
10.1
8.9
12.9
14.1
14.8
10.1
8.8
422
350
316
358
408
419
402
342
278
2,334
2,271
2,450
3,001
3,572
3,863
3,701
2,881
2,350
32,800
35,800
39,000
42,200
47,100
55,100
64,000
72,700
78,000
1981-Q3
Q4
369
401
85,900
87,300
7.4
8.7
304
272
2,253
1,923
79,700
77,600
1982-Q1
387
88,000
5.6
269
1,933
79,200
1982-Jan.
Feb.
Mar.
Apr.
May
399
376
385
345
391
275
274
269
264
258
1,860
1,950
1,990
1,910
1,910
79,800
78,800
79,100
79,400
80,900
I
--,
CD
I
1. Monthly and quarterly data are at seasonally adjusted annual rates.
2. Census Bureau estimate for current price of a constant-quality single-family home sold with
ten important characteristics the same as the average price home sold'in 1977. Monthly data are not
,
available.
3. Seasonally adjusted, end of period.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
,
-11.-
RESIDENTIAL BUILDING PERMITS AND HOUSING STARTS
(Thousands of units, seasonally adjusted annual rates)
Permits issued 1/
Total
Period
1973
1974
1975
1976
1977
1978
1979
1980
1981
Singlefamily
Multifamily
Housing starts
To al
Singlefamily
Multifamily
1820
1074
929
1296
1676
1800
1552
1191
986
882
644
670
894
1125
1183
981
710
564
937
431
259
402
551
618
571
481
421
2045
1338
1160
1.537
1987
2020
1745
1292
1084
1132
888
892
1162
1451
1433
1194
852
705
913
450
268
375
536
587
551
440
379
1981-Q3
Q4
885
759
501
422
383
337
962
865
644
537
317
328
1982-Q1
Q2
815
924
449
486
367
438
920
956
594
601
327
355
1982-Jan.
Feb.
Mar.
Apr.
May
Jun.
803
792
851
879
944
948
450
436
460
450
488
519
353
356
391
429
456
429
885
945
931
882
1075
911
592
568
621
566
631
607
293
377
310
316
444
304
1.
1973-1977 based on 14,000 permit-issuing places; 1978 to date based
on
16,000 permit-issuing places.
• am,
11:11 t
2:4hAt.
Lhag
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±1,....MatAiraf
air"ft..nr
falablaz.
Federal Reserve Bank of St. Louis
ofc
,SALli
.
•-•
-12-
NONFARM ESTABLISHMENT EMPLOYMENT
(In thousands; seasonally adjusted)
Total
Change from
preceding
period
Manufacturing
Nonfarm Payroll Employment
Change from
Change from
preceding
preceding
Construction
period
period
Trades
and
Services
Change from
preceding
period
1979-Q1
Q2
Q3
Q4
89,006
89,678
90,167
90,444
837
672
489
277
21,052
21,132
21,064
20,922
222
80
-68
-142
4,362
4,459
4,508
4,507
17
97
49
-1
36,901
37,198
37,391
37,729
402
297
193
338
1980-Q1
Q2
Q3
Q4
90,859
90,336
89,924
90,535
415
-523
-412
611
20,857
20,291
19,897
20,105
-65
-566
-394
208
4,527
4,324
4,267
4,293
20
-203
-57
26
38,032
38,046
38,229
38,499
303
14
183
270
1981-Q1
Q2
Q3
Q4
90,945
91,172
91,360
90,954
410
227
188
-406
20,172
20,314
20,319
19,892
67
142
5
-427
4,274
4,230
4,148
4,066
-19
-44
-82
-82
38,796
39,065
39,302
39,408
297
269
237
106
1982-Ql
Q2
90,408
90,081
-546
-326
19,430
19,085
-462
-345
3,958
3,961
-108
3
39,519
39,578
111
59
1982-Jan.
Feb.
Mar.
Apr.
May
June
90,460
90,459
90,304
90,083
90,151
90,010
-182
-1
-155
-221
68
-141
19,517
19,454
19,319
19,169
19,114
18,971
-159
-63
-135
-150
-55
-143
3,966
3,974
. 3,934
3,938
3,994
3,952
-60
8
-40
4
56
-42
39,461
39,537
39,559
39,513
39,606
39,615
103
76
-22
-46
93
9
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Federal Reserve Bank of St. Louis
-13-
HOUSEHOLD EMPLOYMENT AND UNEMPLOYMENT
Civilian
Labor Force
Change from
preceding
period
Total
employment
(in thousands)
Change from
Total
preceding
Unemployment
period
Change from
preceding
period
Unemployment Rate
(percent)
Men, 25+
Total
1979-Q1
Q2
Q3
Q4
104,327
104,316
105,624
105,972
832
-11
1,308
348
98,206
98,349
99,112
99,653
801
143
763
541
6,121
5,967
6,152
6,319
31
-154
185
167
5.9
5.7
5.8
6.0
3.3
3.2
3.3
3.5
1980-Q1
Q2
Q3
Q4
106,454
106,771
107,204
107,523
482
317
433
319
99,784
98,953
99,006
99,498
131
-831
53
492
6,670
7,818
8,198
8,025
351
1,148
380
-173
6.3
7.3
7.6
7.5
3.9
5.0
5.4
5.0
1981-Q1
Q2
Q3
Q4
108,107
108,835
108,667
109,156
584
728
-168
489
100,125
100,784
100,654
100,043
627
659
-130
-611
7,892
8,050
8,013
9,113
-133
158
-37
1,100
7.4
7.4
7.4
8.3
4.9
4.8
4.9
5.9
1982-Q1
Q2
109,130
110,168
-26
1,038
99,554
99,740
-489
186
9,576
10,428
463
852
8.8
9.5
6.4
7.1
1982-Jan.
Feb.
Mar.
Apr.
May
June
108,879
109,165
109,346
109,648
110,666
110,191
-305
286
181
302
1,018
-475
99,581
99,590
99,492
99,340
100,117
99,764
-321
9
-98
-152
777 .
-353
9,298
9,575
9,854
10,307
10,549
10,427
-273
277
279
453
242
-122
8.5
8.8
9.0
9.4
9.5
9.5
6.3
6.3
6.6
6.9
6.9
7.5
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Federal Reserve Bank of St. Louis
•
•
%
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-14-
Recent news on prices suggests that inflation will accelerate in the second
half of 1982.
Why do you expect inflation to moderate again in 1983?
Inflation was particularly low in the first half of this year
because of moderate price increases for food and the weakness in petroleum
markets.
Incoming evidence suggests a firm up of meat and gasoline prices.
Nevertheless, large price increases for food and energy are not likely to
be sustained, and the steady decline in inflation outside the food and
energy sectors under way since 1980 is expected to continue as labor cost
pressures abate and economic activity recovers at a moderate pace. ,
1.
Food price developments
a.
Much of the runup in food prices in recent months has been pnfined
s
to the livestock sector where significant production cutbacks have
reduced supplies below year earlier levels.
The resulting increases
in meat prices at the farm level began to show up at retail in the
second quarter.
b.
A deceleration in labor costs for the food industry has led to a
sharp slowdown in the prices of processed foods that account for
two—thirds of total food in the CPI; this trend is expected to
continue into 1983, holding down the overall rate of food price
increase.
2.
Energy price developments
a.
Gasoline prices likely rose 6 percent during May and June, but
recent surveys suggest that they have since levelled off.
%
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Federal Reserve Bank of St. Louis
-15-
.
Leaner petroleum inventories, induced by the high cost of credit
and weak outlook for petroleum demand, have reduced the buffer
between unexpected surges in buying or selling; this may tend to
make prices volatile in the short run.
c.
Nevertheless, the longer-run picture for energy prices will be
colored by sagging world demand for petroleum superimposed on a
background of tenuous discipline among OPEC members; these factors
should hold down the relative price of petroleum.
d.
Of course, any widening of present Mid-Eastern conflicts could .
result in sharp oil price increases and a consequent burst/of
domestic inflation.
3.
Further progress in bringing down the overall rate of inflatiod can be
expected as the economy begins to recover at a moderate pace.
a.
The low level of utilized resources minimizes the likelihood that
underlying inflationary pressures will be rekindled.
b.
Furthermore, the significant decline in inflation during the first
half of 1982 will continue to bring down wage and benefit increases,
as COLAs will be smaller and inflation expectations have been lowered.
Over the next two years, unit labor costs are expected to rise at
half the 10 percent pace that prevailed from 1979 through 1981.
o
Hourly wage rates for production workers rose at a 6-1/4 percent
annual rate in the first six months of this year, compared
with 8 percent in 1981; this was the smallest increase in almost
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Federal Reserve Bank of St. Louis
-
-16-
a decade.
The increase in earnings for white collar workers
also has slowed considerably.
o
Fringe benefits also appear to have risen at a slower pace
this year with total hourly compensation increasing at about
an 8 percent annual rate in the first quarter.
o
Economic recovery should be accompanied by significant
improvement in labor productivity, thereby further easing
labor cost pressures.
.
i
i
a
.
-
-17-
Selected Measures of Economic Slack
(End of Period)
Official
GNP
Gapl
Alternative
GNP
Gap2
Capacity
Utilization
Rate 3
Unemployment
Rate
1975
5.8
76.1
8.3
1976
4.8
80.0
7.8
1977
2.6
82.6
6.7
1978
.8
86.4
5.9
1979
2.0
84.4
6.0
1980
5.1
4.7
79.1
7.4'
1981
7.0
6.2
74.8
8.3
1982P
9.2
8.0
71.7
1983P
9.2
7.6
73.7
a
,
;
9.5'
9.1
1. Percent of real GNP.
2. Assuming potential output grows at an annual rate of 2-1/2 percent from
1980 on, rather than 3 percent used in the CEA's estimate.
3. Manufacturing sector.
p. Projected (based on June Greenbook GNP forecast).
r
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Federal Reserve Bank of St. Louis
-18-
ONS
SURVEYS OF (CPI) INFLATION EXPECTATI
(Percent)
Period
Actual
Inflation'
University of
Michigan
(SRC)2
Livingston3
6.3
1977-Q4
5.8
6.5
1978-Q1
Q2
Q3
Q4
6.4
9.9
7.6
9.1
7.4
7.8
8.3
8.1
1979-Q1
Q2
Q3
Q4
10.2
12.5
14.0
14.3
9.1
11.1
10.3
10.3
1980-Q1
Q2
Q3
Q4
16.5
13.1
7.7
12.9
11.9
9.1
8.5
9.3
1981-Q1
Q2
Q3
Q4
10.8
7.5
12.0
7.7
7.7
7.4
7.0
6.9
1982-Q1
3.2
5.7
3.4
3.0
-3.3
3.0
12.0
5.6
5.5
6.0
5.4
5.0
5.9
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Federal Reserve Bank of St. Louis
1982-January
February
March
April
May
June
6.7
7.1
8.5
9.6
/
10.1
810.3
i
,
8.6
7.2
5.7
g period, compound annual rate.
1. CPI; percent change from precedin
the question: "By about what percent
2. Average increase for responses to
the average, during the next 12
do you expect prices (CPI) to go up, on
months?"
of the CPI by "informed" business
3. Average 12-month ahead forecast
l Reserve Bank of Philadelphia from
economists. Constructed by the Federa
for the last month of the period
disaggregated Livingston data; data are
indicated.
-1SJuly 16, 1982
Average Hourly Earnings Index* •
Production workers private nonfarm industries
Per cent changes; based on seasonally adjusted indexes
Period 1
Total
private
nonfarrt
Manufacturing
Contract
construction
Transportation.
and public
utilities
Total
trade
Services
Changes over year
1973
1974
1975
1976
1977
1978
1979
1980
1981
6.3
9.1
7.4
7.3
7.5
8.4
8.0
9.6
8.4
6.4
10.4
8.7
7.4
8.3
8.5
8.7
10.9
8.8
5.0
8.0
5.0
6.8
4.1
7.6
6.7
7.7
8.1
June 1981June 1982
6.9
7.8
6.9
9.0
8.1
9.2
7.3
6.5
7.1
7.4
9.6
7.0
7.6
7.1
7.6
9.3
8.5
7.1
9.1
6.8
Half-yearly changes at compound annual rates
_
1979:
1st half
I. half
7.6
8.4
9.0
8.3
7.4
6.1
6.4
11.6
1980:
1st half
2nd half
9.5
9.7
10.9
10.9
7.4
8.1
8.3
10.4
8.8
8.7
1981:
1st half
2nd half
8.9
7.9
9.4
8.2
7.4
8.9
10.0
7.0-
8.1
6.1
9.0
9.3
1982:
1st half
6.3
7.7
5.7
6.6
5.1
5.9
,
f
9.4
9.6
Quarterly changes at compound annual rates
1981-Q1
Q2
Q3
Q4
9.3
8.5
8.5
9.4
9.4
8.7
9.2
5.7
8.9
9.1
11.0
6.4
9.1
7.1
8.0
9.1
8.9
9.3
1982-Q1
Q2
6.5
6.2
6.6
2.4
5.9
6.4
6.7
6.4
10.0
6.5
10.1
4.0
2.6
-4.5
6.7
4.0
3.4
3.0
2.7
7.6
12.1
9.6
11.3
3.5
6.7
2.7
1.3
10.5
10.6
Monthly changes
1981:
1982:
October
November
December
January
February
March
April
May
June
4.7
9.0
3.9
11.6
.9
3.5
7.6
10.6
2.3
5.5
8.1
11.1
8.5
16.3
2.0
6.4
29.3
-17.5
1.6
8.2
5.0
8.3
1.6
9.9
NOTES: *Excludes effects of fluctuations in overtime pi-erniums in manufacturing and of shifts of 'workers betweien industries.
1 For periods of longer than one month the changes are based on quarterly averages of final quarter of preceding
period to final quarter of period indicated.
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Federal Reserve Bank of St. Louis
FR 712-N Rev. att81
-20-
LABOR PRODUCTIVITY AND COSTS, NONFARM BUSINESS SECTOR
(Percent change at annual rates; based on seasonally adjusted data)
Compensation
per hour
From
From
previous
year
period
earlier
Output
per hour
From
From
previous
year
period
earlier
Unit
labor costs
From
From
previous
year
period
earlier
1979-QI
QII
QIII
QIV
9.2
9.8
9.8
9.9
10.9
10.4
8.6
9.7
-.1
-.8
-1.0
-.9
-.9
-1.6
-1.1
-.2
9.3
10.7
11.0
10.9
11.9
12.1
9.7
9.9
1980-QI
QII
QIII
QIV
9.7
9.9
10.1
10.1
10.3
11.3
9.0
9.8
-.6
-1.0
.2
.2
.3
-2.9
3.6
-.2
10.4
11.0
9.9
9.9
9.9
14.6
5.3
i
10.1
1981-QI
QII
QIII
QIV
10.5
10.0
10.2
9.3
11.7
9.6
9.5
6.3
1.2
2.3
.9
-.8
4.4
1.4
-1.7
-6.9
9.2
7.6
9.2
10.1
17.0
•' 8.1
11.5
14.1
8.3
7.9
-1.7
.5
10.2
7.3
1982-QI
Peak-to-peak changes: 1
1948-Q4
1953-Q2
1957-Q3
1960-Q2
1969-Q4
1973-Q4
-
1953-Q2
1957-Q3
1960-Q2
1969-Q4
1973-Q4
1980-Q1
5.7
4.6
4.2
4.9
7.0
9.0
2.7
1.7
2.3
2.5
2.5
.7
1. These time periods represent the intervals between NBER-designated
business cycle peaks.
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Federal Reserve Bank of St. Louis
2.9
2.8
1.8
2.4
4.4
8.3
CONSUMER PRICES
(Percent change; based on seasonally adjusted indexes)
All
Items
Relative Importance'
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
1975-Dec.
1976-Dec.
1977-Dec.
1978-Dec.
1979-Dec.
1980-Dec.
1976
1977
1978
1979
1980
1981
May 1980-May 1981
May 1981-May 1982
100.0
All Items
Less Food,
Energy, and
Homeownership4
Food
Energy
ItemsL
All Items
Less Food
and Energy
Home
Purchase2
Contract
Mortgage
Interest
Cost2,3
16.6
11.1
72.3
9.6
10.8
49.8
100.0
-.7
10.8
22.0
34.7
27.6
20.0
6.8
5.5
6.9
7.5
9.9
9.4
5.1
6.3
7.9
10.8
10.8
8.5
16.2
12.0
9.2
8.2
9.6
6.1
4.8
6.8
9.0
13.3
12.4
8.9
.6
8.0
11.8
10.2
10.2
4.3
6.9
7.2
8.0
37.4
18.1
11.9
6.1
6.4
8.5
11.3
12.1
9.6
9.8
6.7
8.8
4.8
13.2
-2.2
9.5
8.7
Annual changes
4.3
8.4
11.2
15.8
11.4
1.2
5.3
6.2
Experimental
CPI
Changes over quarter at compound annual rates
n.)
1981-Q1
Q2
Q3
Q4
9.6
8.1
12.8
5.4
5.3
2.2
7.7
1.7
49.1
4.7
3.0
-2.4
6.4
11.6
15.0
5.6
-8.8
8.7
12.4
-5.7
11.6
30.7
38.3
2.8
8.2
9.6
11.2
8.5
10.7
5.9
10.1
7.5
1982-Q1
1.0
3.9
-8.0
3.0
-1.9
-6.5
5.4
2.7
.5
.4
.5
.6
.4
.4
.1
.2
-.2
.6
Monthly changes, not annualized
1982-Jan.
Feb.
Mar.
Apr.
May
.3
.2
-.3
.2
1.0
.7
.6
-.4
.3
.8
.4
-.8
-1.7
-2.6
1.6
.3
.4
.0
.8
.9
-.4
.4
-.4
1.2
2.6
-.2
.1
-1.6
1.8
.2
1. December 1981 weights, in percent.
2. Not seasonally adjusted.
3. Represents the stream of newly contracted mortgage interest payments; calculated as the product of the
changes in the mortgage rate and house price indexes.
4. Reconstructed series, includes the home maintenance and repair component of homeownership costs.
5. BLS experimental index for "All Items"--CPI-U-X1--which uses a rent substitution measure for homeownership
costs.
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Federal Reserve Bank of St. Louis
Consumer Prices - I
June 22, 1982
Percent changes
Based on seasonally adjusted indexes
All items
Period
1
Relative importancel
100.0
All items less food,energy, and homeownership4
Home
purchase 2
Contracted
mortgage
interest cost 2,3
Food
2
3
4
9,6
10.8
16.6
total
commodities
services
Experimental
CPI 5
6
7
8
9
Energy items 2
5
11.1
100.0.
49.8
23.2
26.6
Q.2
8.2
9.0
6.8
9.4
9.4
9.6
6.1
Changes over year
May 1980- May 1981
May
1981- May
1982
9.8
6.7
5.1
6.2
16.2
12.0
8.P
4.8
13.2
-2.2
Changes over h alf year at cornpou nd annual rate
1980:
1st half
2nd half
14.5
10.3
10,9
11.9
53.3
6.3
6.8
13.5
37.5
1.4
9.7
10.0
7.9
10.7
11.5
9.1
11.0
10.7
1981:
1st half
2nd half
8.8
9.1
-.4
2.9
20.7
19.3
3.8
4.7
24.9
.3
8.9
9.9
7.7
8.1
9.9
11.2
8.3
8.8
Changes over quarter at compou d annual rate
1981:
I
IIT
IV
1982:
I
N.)
9.6
8.1
12.8
5.4
-8.8
8.7
12.4
-5.7
11.6
30.7
38.3
2.8
5.3
2.2
7.7
1.7
49.1
4.7
3.0
-2.4
8.2
9.6
11.2
8.5
6.6
8.8
9.7
6.4
9.9
10.0
12.9
9.6
10.7
5.9
10.1
7.5
1.0
-1,9
-6.5
3.9
-8.0
5.4
5.0
6.3
2.7
1.0
.8
.9
.8
.6
.7
.7
.9
.7
.6
.4
.5
1.3
.9
.9
.9
.8
.6
.8
.9
.7
.6
.6
.4
.2
.6
.3
.4
.7
.5
.3
.7
.6
.4
.1
.2
- 2
.6
Monthly changes not at annual rate
1981:
July
August
September
October
November
December
1.1
.8
1.1
.4
.5
.4
1.8
.4
.7
-.7
-.8
.1
3.2
1.8
3.2
-.1
.8
January
February
March
April
May
.3
.2
-.3
.2
1.0
-.4
.4
-.4
1.2
2.6
-.2
.o
.7
.5
.7
.3
.1
.1
.4
.1
.2
-.5
-.2
.1
.5
S.
1982:
1
2
3
4
5
.1
-1.6
1.8
.2
.7
.6
-.4
.3
-1.7
-2.6
.5
.4
.5
.6
.e
1.6
.4
.4
December 198t weights, in percent.
Not seasonally adjusted.
Represents the stream of newly contracted mortgage interest payments; calculated as the product of the changes in the mortgage rate and house price indexes.
Reconstructed series, includes maintenance and repairs.
BLS experimental measure for "All items" with the CPI rent index substituted for home ownership.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
FR 712p (Rev. 1 1/81)
PRODUCER PRICE INDEXES
(Percent change; based on seasonally adjusted indexes)
Total
Relative Importance 2
100.0
Consumer
Foods
21.9
Energy
Finished
Goods Less
Food &
Energy
12.7
65.3
Intermediate
Materials'
Crude Materials
Nonfood
Food
94.7
50.6
49.4
Annual changes
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
1975-Dec.
1976-Dec.
1977-Dec.
1978-Dec.
1979-Dec.
1980-Dec.
1976
1977
1978
1979
1980
1981
3.7
6.9
9.2
12.8
11.8
7.1
-2.5
6.9
11.7
7.4
7.5
1.4
11.5
12.1
8.5
58.0
27.8
14.3
5.6
6.3
8.3
9.4
10.7
7.6
6.3
6.4
8.3
16.7
12.4
7.4
-3.4
1.4
18.3
10.6
8.6
-14.0
10.4
6.2
15.4
26.1
19.1
10.4
June 1980-June 1981
June 1981-June 1982
10.5
3.5
8.0
3.8
20.0
-7.9
9.1
5.7
10.6
1.2
8.8
-1.7
26.7
-4.0
Changes over quarter at compound annual rates
1981-Q1
Q2
Q4
12.8
7.1
3.4
5.5
5.1
3.5
1.6
-3.9
56.6
3.5
-3.6
9.0
8.8
9.0
5.6
8.1
13.8
8.0
5.2
2.7
-15.6
6.4
-18.2
-25.5
34.3
16.1
1.1
-6.0
1982-Q1
Q2
.3
4.7
6.0
11.7
-18.0
-16.2
2.5
6.5
-1.4
-1.8
23.3
24.3
-18.1
8.7
4.4
.7
.2
3.5
2.7
-.6
-.9
-2.0
-2.0
-.2
1.7
.6
Q3
Monthly clianges, not annualized
1982-January
February
March
April
May
June
.5
-.3
-.1
.1
0
1.0
1.1
.5
-.2
1.6
.7
.5
-.9
-1.7
-2.3
-5.2
-3.1
4.1
.7
-.3
. .3
.-5
.3
.7
...
.2
-.3
-.3
-.8
0
.3
1. Excludes intermediate materials for food manufacturing and manufactured animal feeds.
2. December 1981 weights on a stage of processing basis, as a percentage of respective totals for
finished goods, intermediate materials, and crude materials.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
July 16, 1982
PRODUCER PRICE INDEXES
PERCENT CHANGE; BASED ON SEASONALLY ADJUSTED INDEXES
Stage of Processing Groupings
Period
2
1
Total
3
Consumer
Foods
7
Finished Goods
Excluding Food and Energy
Energy
Crude Materials
8
In
Materials /
Food
Relative importance
CHANGE'S OVER YEAR
I
June 80-June 81
10.5
8.9
20.0
9.1
8.2
10.9
10.6
8.8
June 81-June 82
3.5
3.8
-7.9
5.7
5.6
6.0
1.2
-1.7
-4.0
14.4
10.4
10.8
4.0
-1.6
-6.4
25.3
-5.2
-22.0
23.8
10.0
28.9
24.9
-2.5
-5.7
26.7
CHANGES OVER HALF YEAR AT COMPOUND ANNUAL RATE
1980: 1st
2nd
1981: 18t
2nd
1982: 1st
half
half
half
half
half
12.9
10.9
9.9
4.5
2.5
.8
14.2
4.3
-1.2
8.8
45.4
13.0
27.3
2.5
-17.1
12.5
9.1
8.9
6.8
4.5
12.8
8.0
8.1
6.4
4.6
11.9
11.0
10.8
7.7
4.3
CHANGES OVER QUARTER AT COMPOUND ANNUAL RATE
1981:Q1
Q2
Q3
Q4
1982: Ql
Q2
12.8
7.1
3.4
5.5
5.1
3.5
1.6
-3.9
56.6
3.5
-3.6
9.0
8.8
9.0
5.6
8.1
7.4
8.8
5.4
7.4
11.6
10.0
5.7
9.7
13.8
8.0
5.2
2.7
-15.6
6.4
-18.2
-25.5
34.3
16.1
1.1
-6.0
.3
4.7
6.0
11.7
-18.0
-16.2
2.5
6.5
2.7
6.6
2.1
6.5
-1.4
-1.8
23.3
24.3
-18.1
8.7
.7
.6
.4
.2
-2.2
-2.8
-.6
.5
-.4
.4
.4
.4
.2
-.3
-.2
-.9
-2.0
-.8
.o
.8
.3
4.4
.7
.2
3.5
2.7
-.6
MONTHLY CHANGES NOT AT ANNUAL RATES
1981:
1982:
NOTES:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
November
December
.5
.3
-.7
-.1
1.4
.9
.7
.2
January
February
March
April
May
June
.5
-.2
-.3
.1
.0
1.0
1.1
.5
-.2
1.6
.7
.5
-.9
-1.6
-2.4
-5.2
-3.1
4.1
•7
-.1
.1
.5
.3
.7
1/
2/
.7
.6
.3
.7
.1
-2.0
-.2
1.7
.6
Excludes intermediate materials for food manufacturing and manufactured animal feeds.
December 1981 weights on a stage of procecsing basis, as a percentage of rPspertiv0 totals for finished poods,
intermediate materials, and crude materials.
FR 712-G
Rev. 3/81
-25-
CHART i
JOURNAL OF COMMERCE
INDEX OF SENSITIVE SPOT COMMODITY PRICES'
INDEX. RATIO SCALE, 1947-49=100
275
TOTAL
225
July 13
175
INDEX, RATIO SCALE, 1947-49=100
350
"IMMO
300
INDUSTRIAL MATERIALS
11111111
250
am.*
IMMO
Velf
V
•
I"
200
•-1/4t-Py
GRAINS
160
MJSDMJSD
1981
1980
1. TUESDAY DATA
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
U
J
1982
8
-26-
PRIVATE ECONOMIC FORECASTS
Chase
Wharton
DRI
MerrillLynch
Average
Percent change; seasonally adjusted, annual rate-------
Real GNP
-3.7
0.6
4.0
4.5
-3.7
1.7
4.6
3.1
-3.7
.3
2.2
3.3
-3.7
1.3
4.1
5.3
-3.7
1.0
3.7,
4.1
1.3
3.7
1.4
3.8
.5
3.5
1.7
3.4
1.2
3.6.
1982-Q1
Q2
Q3
Q4
3.8
4.6
5.6
5.8
3.8
5.0
5.8
7.0
3.8
5.5
6.2
6.1
3.8
5.9
5.1
4.9
3.8
5.3
5.7
6.0
81-Q4 to 82-Q4
82-Q4 to 83-Q4
4.9
5.9
5.4
6.1
5.4
6.5
4.9
4.9
5.2
5.9
9.3
8.6
1982-Q1
Q2
Q3
Q4
81-Q4 to 82-Q4
82-Q4 to 83-Q4
GNP Deflator
Percent
Unemployment Rate
1982-Q4
1983-Q4
9.3
8.5
9.3
8.6
9.3
8.5
9.3
8.9
June 24
June 26
July 16
Date of Forecast
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
June 24
-27-
GOVERNMENT ECONOMIC FORECASTS
FR Staff
June 1982
FOMC
July HumphreyHawkins Report
Administration
Mid-Session
Review
Congress'
Fourth quarter to fourth quarter growth rate (percent)
Money (M1)
1982
1983
Nominal GNP
1982
1983
Real GNP
1982
2-1/2 - 5-1/2
5.0
2-1/2 - 5-1/2
5.5
4.5
2-1/2 - 5-1/2
n.a.
5.8
5-1/2 - 7-1/2
8.6
6.9
7.5
7 - 9-1/2
11.6
11.7
0.6
1/2 - 1-1/2
1.6
1.7
3.0
2-1/2 - 4
5.3
4.3
n.a.
•
1983
GNP deflator
1982
1983
4.4
4.4
4-3/4 - 6
6.9
5.1
4 - 5-3/4
6.9
7.0
A
Level, fourth quarter
Unemployment Rate
(percent)
1982
1983
9.5
9 - 9-3/4
9.1
9.1
9.1
8-1/2 - 9-1/2
8.0
8.0
1. First Concurrent Resolution on the Budget.
n.a.--Not available.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
x
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
FINANCIAL DEVELOPMENTS
,
I
.
%
-28MONETARY AGGREGATES AND BANK CREDIT
(Percent annual rates of change)
M1
Fourth quarter to
fourth quarter
1978
Monetary Aggregates
M2
Bank
Credit
M3
8.3
8.2
13.3
1979
7.4
8.4
12.6
1980
7.3
9.2
8.0
1981
5.0
(2.3)1
9.5
8.82
8.2
8.8
1979
7.7
8.5
1980
6.3
8.3
1981
7.0
(4.7)1
9.8
5.7
8.9
9.3
1982--Q1
10.4
9.8
8.7
9.72
Q2
3.1
9.4
10.6
8.92
1981 Q4-June
5.6
9.4
9.7
8.04
1981 Q4-1982 Q2
6.8
9.7
9.8
8.34
6 to 9
4 2
2 to 9
/
61
6 to 9
6 to 9
2 to 1912
/
61
6 to 9
Annual average to
annual average
1978
Recent Periods
1981--Q4
Longer-run ranges
1979 Q4-1980 Q4
1980 Q4-1981 Q4
23
4 to 61
/
31
2 to 61
/
i
5'.82
6 to 95
2 to 91
/
61
6 to 9
2 to 5
1
2/
1981 Q4-1982 Q4
1. Adjusted for the effects of shifts out of savings deposits into other
checkable deposits.
2. Adjusted for shifts of assets from domestic offices to International
Banking Facilities (IBFs).
3. When this range was set, shifts into other checkable deposits in 1980
were expected to have only a limited effect on M1 growth. As the year progressed, however, banks offered other checkable deposits more actively, and
more funds than expected were directed to these accounts. Such shifts are
estimated to have increased M1 growth over 1980 by at least 1/2 percentage
point more than had been anticipated.
4. Calculated from December-January base. Growth from the base period
adjusted for shifts of assets from domestic offices to IBFs since January
is 9.0 percent through June and 9.5 percent through 1982 Q2.
5. Range for bank credit is annualized growth from the December 1981-January
1982 average level to fourth quarter 1982.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Confidential (FR)
Class II-FOMC
Monetary Aogregate
Actual and Current Projections
Billions of dollars, sciasonally adjusted unless otherwise noted
Money stock measures
Date
Mt
M2
M3
currency
nonbank
travelers
checks
1
2
3
4
5
JULY 19, 1982
Major components of money stocVmeasures
Money market
mutual funds, NSA
small
overnight
other
InMitusavings denomtna- general
demand checkable RPs and
lions
deposits deposits Eurodollars deposits tion time. purpose,
only
deposits' and broken
NSA
dealer
12
11
10
9
8
7
8
large
denomMalion time
deposits2
longerterm
RPs
NSA
13
14
MONTHLY LEVELS-SEII
1982--MAR.
APR.
MAY
JUNE
448.3
452.4
451.5
450.9
1865.2
1880.7
1897.5
1906.9
2235.8
2258.1
2278.7
2294.7
125.1
126.3
127.4
128.4
4.4
4.4
4.5
4.5
233.0
233.0
232.6
230.7
85.7
88.6
87.0
87.3
43.0
40.4
42.8
42.8
350.7
350.5
350.9
349.8
870.0
881.7
894.1
900:8
159.2
161.9
164.3
168.6
31.5
31.5
32.8
33.7
312.6
317.1
321.4
328.4
31.5
34.2
32.3
31.0
2.6
9.0
6.7
2.3
8.6
10.0
9.3
8.9
10.8
9.4
8.7
10.5
4.7
6.6
6.5
10.6
9.5
0.0
9.3
9.1
-5.0
2.9
-5.8
-3.9
27.0
32.6
45.2
7.5
-30.8
-15.2
51.4
-1.9
-25.8
0.6
8.3
-1.0
17.0
7.1
7.2
14.2
107.7
63.1
21.2
23.6
129.4
106.8
-26.1
27.9
23.4
-2.6
16.4
20.2
-51.5
18.9
-44.1
-6.3
% ANNUAL GROWTH
QUARTERLY
1981--32D
4TH
1982--1ST
2ND
QTR.
QTR.
QTR.
QTR.
t•.)
%.0
QUARTERLY-AV
1981--32D
4TH
1982--1ST
2ND
QTR.
QTR.
QTR.
OR-
0.3
5.7
10.4
3.1
8.3
8.9
9.8
9.4
11.2
9.3
8.7
10.6
4.7
4.3
7.9
9.3
9.5
0.0
0.0
18.6
-7.5
-0.2
-0.5
-5.9
21.2
27.6
48.9
19.6
14.9
-44.1
63.6
-9.3
-22.8
-11.7
9.4
1.1
16.7
12.4
3.2
14.7
91.5
74.2
33.8
20.9
69.0
132.8
-2.5
15.2
30.6
3.5
8.9
19.0
-30.8
0.0
-29.9
3.7
2.7
11.0
-2.4
-1.6
11.2
10:0
10.7
5.9
11.3
12.0
10.9
8.4
4.8
11.5
10.5
9.4
27.9
0.0
27.3
0.0
-7.7
27.2
0.0
40.6
-2.1 -21.7
-9.8
4.1
2.8
-72.6
71.3
0.0
7.2
-0.7
1.4
-3.8
14.8
16.1
16.9
9.0
24.6
20.4
17.8
31.4
39.3
0.0
49.5
32.9
17.9
17.3
16.3
26.1
-36.9
102.9
-66.7
-48.3
MONTHLY
1982--MAR.
APR.
MAY
JUNE
WEEKLY LEYELS-$BIL
-
1982--JUNE
2
9
16
23
30
453.3
455.0
452.1
449.7
445.4
128.3
128.3
128.4
128.4
128.5
JULY
7
451.3
128.9
232.8
232.9
231.6
229.8
227.3
42.1
87.7
41.2
89.3
87.6 * 42.3
43.3
87.0
44.5
85.2
166.8
168.7
168.9
169.0
168.4
34.2
34.0
33.5
33.9
33.3
232.4
85.6
41.5
169.0
33.7
.
1/
2/
..,
-1-AGREEMENTS.
REPURCHASE
INCLUDES RETAIL
TIME DEFIOSITS HELD BY MONEY MARKET MUTUAL FUNDS,
LARGE DENOMINATION TIME DEPOSITS AT ALL INSTITUTIONS LESS LARGE DENOMINATION
THRIFT INSTITUTIONS, DOMESTIC AND FOREIGN BANKS AND FOREIGN OFFICIAL INSTITUTIONS.
-30ADOPTED AND ACTUAL LONGER-RUN GROWTH RATE RANGES IN MONETARY AGGREGATES
(Percent; actual rates shown in parentheses)
M1
March 1975-March
QII 1975 - QI'
QIII 1975 - QIII
QIV 1975 -QIV
1976 - QI
QI
QII 1976 - QI'
QIII 1976 - QIII
QIV 1976 -QIV
1977 - QI
QI
QII 1977 - QII
QIII 1977 - QIII
QIV 1977 -QIV
1978 - QI
QI
QII 1978 - QI'
QIII 1978 - QIII
QIV 1978 -QIV
QIV 1979 -QIV
1976
1976
1976
1976
1977
1977
1977
1977
1978
1978
1978
1978
1979
1979
1979
19792
19803
5 5 5 21
4/
2/
41
21
4/
2
/
41
21
4/
2/
41
4 4 4 4 4 2 3
2/
11
( 9.7)
2
/
2(5.3) 8/
1
7/
2 -101
1
( 9.6)
2
/
-101
2
1
2(5.4) 8/
1
7/
( 9.3)
2
1
2 -10/
/
2(4.6) 71
1
7/
2(10.9)
/
2 -101
1
2(5.8) 7/
1
7/
2 -10 (11.0)
1
7 (6.5) 7/
7 (6.8) 71
2(10.8)
/
2 - 91
/
2 -10 (11.1)
1
2(8.0) 7/
/
61
2(7.9) 7 -10 ( 9.8)
/
61
( 8.8)
2
/
2(7.7) 7 - 91
/
61
( 8.6)
2
/
2(8.2) 7 - 91
/
61
2 - 9 ( 8.5)
/
2(8.0) 61
/
61
2 - 9 ( 8.7)
/
2(7.2) 61
/
61
2 - 9 ( 7.6)
/
2(5.1) 61
/
61
2 - 9 ( 7.7)
/
2(4.8) 61
/
61
2 - 9 ( 8.2)
/
6 (5.3) 61
6 (5.5) 5 - 8 ( 8.3)
5 -8
2
1
4/
Ml-A
QIV
QIV
QIV
1979 - QIV
1980 - QIV
1981 - QIV
19804
19815
19826
M2
2 - 6 (5.0)
1
3/
2(1.3)
/
3 - 51
Ml-B
4 - 61
2(7.3)
/
3/
2 - 6 (2.3)
1
2
/
2½- 51
M3
'Bank Credit'
12 (12.3)
10
12 (12.0)
10
12 (11.5)
9
12 (12.7)
9
12 (12.8)
9
11 (12.5)
9
2(12.7)
1
9 - 11/
2(11.7)
1
2-11/
1
8/
2-11 (10.5)
1
s/
2-11 (10.0)
1
8/
( 9.5)
2
/
101
8
2-10 ( 9.5)
1
7/
2-10 ( 8.7)
/
71
2-10 ( 8.6)
1
7/
2-10 ( 8.7)
1
7/
6 - 9 ( 8.1)
6 - 9
•M2
6 - 9 ( 9.2)
6 - 9 ( 9.5)
6 - 9-
( 3.2)
2
1
2- 9/
1
6/
61
( 3.1)
2
/
2- 91
/
6 - 9 ( 3.7)
6 - 9 ( 4.3)
6 - 9 ( 5.0)
5 - 8 ( 5.8)
7 -10 ( 6.9)
7 -10 (11.1)
7 -10 (11.4)
7 -10 (12.1)
7 -10 (12.7)
7 -10 (13.5)
2(14.1)
/
7/
2-101
1
2(13.6)
1
2-11/
1
8/
2(13.8)
1
2-11/
1
8/
2(12.3)
/
2-101
1
7/
2
/
2-101
1
7/
M3
Bank Credit
2(10.0) 6 - 9 (8.0)
/
2- 91
/
61
2(11.4) 6 - 9 (8.8)7
/
2- 91
/
61
6 - 98
2
/
2- 91
1
6/
credit.
1. Prior to 1977 the bank credit proxy was used as the target measure for bank
un range for
2. At the February 1979 meeting the FOMC adopted a QIV: 1978 - QIV: 1979 logger-r
accounts in
M1 of 1-1/2 to 4-1/2 percent. This range anticipated that shifting to ATS and NOW
meeting it was
New York State would slow M1 growth by 3 percentage points. At the October
points. Thus, the
noted that ATS/NOW shifts would reduce Ml by no more than 1-1/2 percentage
longer-run range for M1 was modified to 3-6 percent.
1980, the monetary
3. Adopted on a preliminary basis at the July 1979 meeting. In February
target ranges adopted.
aggregates on which these targets were based were redefined and new
expected to
4. When these ranges were set, shifts into other checkable deposits in 1980 were
ed, however, banks
have only a limited effect on growth of Ml-A and Ml-R. As the year progress
were directed to
offered other checkable deposits more actively, and more funds than expected
d Ml-B
Such shifts are estimated to have decreased Ml-A growth and increase
these accounts.
ted.
growth each by at least 1/2 percentage point more than had been anticipa
deposits into other
5. Adjusted for the effects of shifts out of demand deposits and savings
and
At the February FOMC meeting, the target ranges for observed Ml-A
checkable deposits.
ranges, were
Ml-B in 1981 on an unadjusted basis, expected to be consistent with the adjusted
-4-1/2 to-2 and 6 to 8-1/2 percent, respectively.
6. As of January 1982, Ml-B was relabeled Ml.
ional Banking Facil7. Adjusted for shifts of assets from domestic banking offices to Internat
ities.
8. Range for bank credit is annualized growth from the December 1981-January 1982 average
level through the fourth quarter of 1982.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Bank Reserves
JULY 19, 1982
Seasonally Adjusted
Nonborrowed
Period
Total
reserves
Nonborrowed
reserves
1
2
RISONO
plus extended
credal
3
-
Monetary
base
Total
mowed
Merv's
Adjustment
borrowings2
4
5
6
7
Excess
MONTHLY LEVELS-MULLIONS
1982--M1R.
APR.
MAY
JUNE
361
273
359
326
1,248
1,323
941
1,101
40,923
40,851
41,244
41,303
41,188
672
149
232
226
597
916
1,189
825
918
1,523
40,978
40,605
540
165
985
488
41,090
41,181
41,329
41,457
39,534
39,613
40,212
40,253
39,842
39,858
40,388
40,357
168,460
169,751
171,027
172,135
40,728
40,908
40,971
41,132
7.0
2.1
5.6
3.6
13.5
10.7
-3.6
7.3
16.7
9.0
-2.0
5.2
4.9
5.1
6.4
8.7
6.3
3.1
5.2
4.0
4.0
3.2
8.3
2.2
7.9
10.5
0.4
5.6
9.2
11.7
0.3
4.8
4.3
3.9
8.0
7.3
3.1
3.5
7.9
2.6
4.8
2.7
4.3
3.7
12.2
2.4
18.1
1.2
14.4
0.5
16.0
-0.9
4.1
9.2
9.0
7.8
3.1
5.3
1.8
4.7
172,306
171,521
172,286
172,136
172,582
172,574
171,607 ,,-
PERCENT ANNUAL GROWTH
QUARTERLY
1981--3RD
4TH
1982--1ST
2ND
QTR.
QTR.
QTR.
QTR.
QUARTERLY-1V
1981--3R0
4TH
1982--1ST
2ND
QTR.
QTR.
Q2R.
QTR.
MONTHLY
1982r-MAR.
APR.
MAY
JUNE
-
WEEKLY LEVELS-MULLIONS
NOTE:
1982--JUNE
2
9
16
23
30
41,595
41,000
41,476
41,529
41,785
40,547
39,696
40,547
40,515
40,169
40,679
39,811
40,651
40,611
40,262
JULY
7
14
41,518
40,770
40,446
40,212
40,533
40,282
•
RESERVE SERIES HAVE BEEN ADJUSTED TO REMOVE DISCONTINUITIES ASSOCIATED WITH CHANGES IN RESERVE REQUIREMENT RATIOS.
1/ EXTENDED CREDIT CONSISTS OF BORROWING AT THE DISCOUNT WINDOW UNDER THE TERMS AND CONDITIONS ESTABLISHED FOR THE EXTENDED
CREDIT PROGRAM TO HELP DEPOSITORY INSTITUTIONS DEAL WITH SUSTAINED LIQUIDITY PRESSURES. BECAUSE THERE IS NOT THE SAME
NEED TO REPAY SUCH BORROWING PROMPTLY AS THERE IS WITH TRADITIONAL SHORT-TERM ADJUSTMENT CREDIT, THE MONEY MARKET IMPACT
OY EXTENDED CREDIT IS SIMILAR To THAT OF moNBORROWED RESERVES.
2/ INCLUDES SEAcr
BORRONINGS.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-32—
STRICTLY CONFIDENTIAL (FR)
Class K- FOMC
7/19/82
The Monetary Base and Reserve Aggregates
Seasonally Adjusted
MONETARY BASE
Billions of dollars
180
170
160
1
1 1
1
1
11
1
1
1
1
1
1
1
1
1
1
1981
1
1
1
1
1
1
150
1982
RESERVE AGGREGATES
Billions of dollars
44
Shaded area is adjustment and seasonal borrowing
42
TOTAL RESERVES
REQUIRED RESERVES
40
NONBORRO WED RESERVES 1
38
1
JF
1
1
1
MA
MJ
1
J
1981
1 Includes extended credit
1
A
1 1 1
SON
1
DJ
1
1
FM
1 1
1
1
AMJJ
1982
1
1
A
1
1
1
SOND
-
-33RESERVE AGGREGATE MEASURES'
(Percent annual rates of change)
Reserve Aggregates
Nonborrowed2
Total
Monetary Base
3
St. Louis
Board
Memo: Currency
share of growth in
Board Base"'
Fourth quarter to
fourth quarter
1979
2.5
0.1
7.7
8.1
6.9
1980
7.1
(6.0)
7.8
(6.6)
8.8
(8.5)
8.2
6.9
1981
4.3
7.5
4.9
4.3
4.1
1981--Q1
5.5
11.0
5.2
4.5
3.8
Q2
4.2
-2.7
5.8
7.3
Q3
4.0
9.2
4.3
3.7
3.5
Q4
3.2
11.7
3.9
1.9
3.2
1982--Q1
8.3
0.3
8.0
10.3
5.9
Q2
2.2
4.8
7.3
9.1
6.9
22.2
-2.5
11.6
12.7
5.0
-10.2
-17.6
3.4
10.2
5.8
March
4.8
14.4
4.1
5.0
3.6
April
2.7
0.5
9.2
10.9
8.6
May
4.3
16.6
9.0
10.0
7.8
June
3.7
-0.9
7.8
9.9
7.0
Quarterly averages
,
5.8
Monthly
1982--January
February
Figures in parentheses reflect growth adjusted for the impact of the
elimination of weekend reserve avoidance activities.
1. Seasonally adjusted and adjusted for changes in reserve requirements.
2. Includes extended credit.
3. Compound rates of growth; rates in other columns are calculated on a simple
basis.
by share of
4. Rate of growth in currency component of the money stock weighted
currency in the monetary base.
Note:
https://fraser.stlouisfed.org
Federal
Reserve Bank of St. Louis
I
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
COMPOSITION OF GROWTH IN TOTAL RESERVES1
Fl
CONTRIBUTIONS TO ANNUAL GROWTH RATES
IN TOTAL RESERVES
I. percentage points)
ANNUAL GROWTH RATES
(in percent)
I
Components of Required Reserves
Nonborrowed
reserves
plus
extended
credit
1
Total
reserves
2
Transactions
Excess Required deposits
reserves reserves in M12
4
3
5
Savings
and
small
time3
6
MEMO:
Contribution
Sf the lag in
accounting to
growth in
total
reserves4
(in
Large
time3
7
Other
8
percentage
points)
9
1
1981--JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
1982--JAN.
FEB.
MAR.
APR.
MAY
JUNE
5.9
14.8
13.2
21.4
6.7
8.5
11.7
6
14.4
0.5
16.0
I.
-0.3
3.3
2.5
15.1
-5.8
1.0
11.3
22.2
-10.2
4.8
2.7
4.3
3.7
0.1
3.2
0.7
2.7
3.7
-0.5
-3.9
LA)
3.7
11.5
5.7
2.0
-0.7
2.9
-3.3
1.7
-2.6
-1.0
12.0
19.3
-6.9
3.1
5.3
-1.0
4.7
7.8
4.2
14.1
-7.7
4.2
1.7
-3.0
-1.3
-0.4
0.5
1.9
0.2
2.1
4.0
2.5
5.4
4.8
4.3
3.4
0.5
-1.3
3.0
2.4
2.2
I.
0.3
2.0
5.0
2.8
6
-9.5
4.7
IS
-2.0
3-MONTH GROWTH
RATES
Dec. '81 to
Mar. '82
-2.0
5.5
5.1
0.4
3.5
2.9
1.9
-3.1
Mar. 82 to
June 82
5.2
3.6
-0.3
-2.5
0.4
1. SE ASONALLY ADJUSTED AND
tkh ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS.
2. EXCLUDES A SMALL AMOUNT OF RESERVES BEHIND THESE ACCOUNTS AT QUARTERLY REPORTERS, THRIFTS, AND
I OF FOREIGN BANKS FOR WHICH A BREAKDOWN OF RESERVES BY COMPONENT
AGENCIES AND BRANCHES
tI
IS NOT PRESENTLY
AVAILABLE SUCH RESERVES ARE INCLUDED IN "OTHER".
3. FIGURES FOR MEMBER COMMERCIAL BANKS ONLY. THE SMALL AMOUNT OF SUCH RESERVES FOR NONPERSONAL SAVINGS AND TIME DEPOSITS AT NONMEMBER INSTITUTIONS IS INCLUDED IN "OTHER".
4. CHANGE IN REQUIRED RESERVES USING LAGGED ACCOUNTING LESS CHANGE IN REQUIRED RESERVES USING
CONTEMPORANEOUS ACCOUNTS.
t tII
II
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
COMPOSITION OF TOTAL RESERVES'
LEVEL
(in millions
of dollars)
COMPOSITION OF TOTAL RESERVES
(in millions of dollars)
Required
reserves
4
39,281
Transactions
deposits
in M12
5
20,639
Savings
and
small
time3
6
7,923
Large
time3
7
5,446
Other
8
5,274
MEMO:
Required
reserves
under
contemporaneous
reserve
accounting
(in millions
of dollars)
9
39,347
340
39,387
20,662
8,013
5,567
5,145
39,382
39,810
292
39,518
20,593
8,068
5,752
5,105
39,683
39,156
40,312
414
39,898
20,782
8,055
5,863
5,198
39,957
OCT.
39,375
40,118
278
39,840
21,078
8,072
5,880
4,809
39,682
NOV.
39,652
40,150
344
39,805
21,341
8,136
5,836
4,493
40,092
DEC.
40,040
40,527
319
40,208
21,480
8,143
5,935
4,650
40,333
1982--JAN.
39,957
41,277
418
40,859
21,956
8,215
6,017
4,671
41,050
FEB.
39,370
40,927
304
40,623
21,690
8,353
6,094
4,487
40,532
MAR.
39,842
41,090
361
40,728
21,831
8,436
6,124
4,336
40,665
APR.
39,858
41,181
273
40,908
21,890
8,622
6,135
4,261
41,150
MAY.
40,388
41,329
359
40,971
21,788
8,785
6,205
4,192
40,990
JUNE
40,357
41,457
1
326
41,132
21,743 _
8,933
6,378
4,078
1. SEASONALLY ADJUSTED AND ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS.
2. EXCLUDES A SMALL AMOUNT OF RESERVES BEHIND THESE ACCOUNTS AT QUARTERLY.. REPORTERS.
THRIFTS, AND AGENCIES AND BRANCHES OF FOREIGN BANKS FOR WHICH A BREAKDOWN OF RESERVES BY
COMPONENT IS NOT PRESENTLY AVAILABLE. SUCH RESERVES ARE INCLUDED IN "OTHER".
3. FIGURES FOR MEMBER COMMERCIAL BANKS ONLY. THE SMALL AMOUNT OF SUCH RESERVES FOR NONPERSONAL SAVINGS AND TIME DEPOSITS AT NONMEMBER INSTITUTIONS IS INCLUDED IN "OTHER".
41,033
I
1
1
Nonborrowed
reserves
plus
extended
credit
1
37,588
Total
reserves
2
39,619
JULY
38,051
39,727
AUG.
38,471
SEPT.
1981--JUNE
Excess
reserves
3
338
1
Components of Required Reserves
1
(..)
vi
1
-36DISCOUNT WINDOW BORROWING BY TYPE
(millions of dollars, not seasonally adjusted)
1
Total
Extended
Surcharge
Other
Memo: Selected Interest Rates
FFFederal
Discount
Discount
Funds
Rate
Rate
Spread
Rate
1980--Q3
788
176
-
612
9.83
10.35
Q4
1,686
1
191
1,494
15.85
11.78
4.07
1981--Q1
1,233
35
48
1,150
16.57
13.00
3.57
Q2
1,868
7
124
1,737
17.78
13.62
4.16
Q3
1,518
128
35
1,355
17.50
14.00
3.58
,
Q4
827
250
17
560
13.59
14.00/
1.59
1,518
197
-
1,321
13.22
12.00
1,790
232
-
14.78 ,
12.00.
2.78
1982--January
February
1,558
_
.
.52
1.22
_
March
1,555
308
_
1,247
14.68
12.00
2.68
April
1,479
279
_
1,200
14.94
12.00
2.94
May
1,129
177
_
952
14.49
12.00
2.49
June 2
1,048
132
-
916
13.43
12.00
1.43
9
1,304
115
-
1,189
13.60
12.00
1.60
16
929
104
-
825
14.24
12.00
2.24
23
1,015
96
-
919
14.17
12.00
2.17
30
1,616
93
-
1,523
14.81
12.00
2.81
July 7
1,072
87
-
985
14.47
12.00
2.47
14
558
70
_
488
13.18
12.00
1.18
1. Unpublished data. This series includes credit extended to individual institutions affected by exceptional circumstances and credit extended to institutions
facing protracted liquidity strains.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
VELOCITY T1
GNP/M1
SEASONALLY ADJUSTED PERCENT ANNUAL RATES OF GROWTH 1/
JAN
FEB
MAR
APR
MAT
JUNE
JULY
JULY 13, 1982
AUG
SEPT
OCT
NOV
DEC
1959
:QI
.
.
1960
QII
QIIIQIT :
8.0
-4.3
8.6
ANN.
:
.
•
10.4
0.2
-2.5
.
•
0.6
5.6
4.3
7.2
.
•
4.5
:
5.9
3.4
4.7
.
1.6 .
4.0
.
•
1.2
2.2
3.5
3.2
.
.
2.5
.
.
5.7
2.6
-1.1
-1.3 .
.
1.5
.
.
9.2
5.4
4.0
.
4.6 .
5.9
4.9
2.0
6.8
6.4 .
.
5.1
-0.9
-1.6
-0.2
.
2.3 .
-0.1
3.4
5.2
0.4
.
-1.5 .
1.9
1.9
3.9
5.8
-0.3
2.9
0.3
1.7
2.0
-4.1
0.0
8.6
-1.8
0.3
3.8 :
2.7
:
4.8
3.2
0.3
2.8
2.8
.
7.9
2.5
4.6
6.7
5.5
1974
.
.
-3.5
6.7
4.3
.
1.4 .
2.2
1975
.
•
-1.4
3.8
8.7
7.9
4.8
1976
.
•
6.6
-0.4
2.8
2.5 .
•
2.9
1977
.
.
5.5
4.7
5.2
1978
.
0.9
9.9
1979
:
6.9
5.2
MI.= =ID
1961
ONO
•MMI, MID MOM ••••
1962
1963
4=1.41Me=MIIM.OP
1964
4••
••••
1965
1966
•••••=• ••=1, Moe miir
1967
:
1968
1969
1970
.
•
Mir •••••=b 4Mir
1971
•••••••• 4m. Ms, •••
1972
1973
n-
4•111,41•11..M 4•11. •=p,
1980
1981
1982
p --
-2.4 .
•
-0.6
.
•
3.7
3.6
7.5 :
5.6
-4.1
2.4
4.0 :
2.3
2.1
-2.7
3.0 :
1.9
13.2
-4.6
10.7
-1.2 :
(18.9)(-1.1)(11.4)(-0.2)
:
10.1
3.5p
•
.
:
projected
1/ SIMPLE ANNUAL RATES OF GROWTH, QUARTERLY GROWTH RATES BASED ON QUARTERLY AVERAGE DATA,
ANNUAL GROWTH RATES CALCULATED FROM
FOURTH QUARTER AVERAGE TO FOURTH QUARTER AVERAGE.
NOTE: THE VELOCITY FIGUREs IN PARENTHESES ARE CONSTRUCTED WITH Ni DATA ADJUSTED
FOR ESTIMATED SHIFTS INTO OTHER CHECKABLE
DEPOSITS IN 1981 FROM 01HER THAN nFmAmn DEPOSITS.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1.4
4.5
(7.4)
-----
1
JULY 13# 1982
VELOCITY V2
GNP/M2
SEASONALLY ADJUSTED PERCENT ANNUL RATES OF GROWTH 1/
FEB
JAN
APR
MAR
MAY
JUNE
JULY
AUG
SEPT
OCT
NOV
DEC
.•
1959
.
.
1960
•
.
1961
4M,411.1MDIMMIIMI
1962
••• *EP OM .••••••
02 I
7.4
0 IT
AWN.
Q II
QII/
5.6
-6.,
-3.8
-5.7
.
-8.0 .
-2.5
1.2
0.0
4.0 :
0.3
3.6 : -----
•
.
0.3
-2.2
-2.0
-4.2 :
-2.0
:
-3.5
-2.5
-0.5
-0.8 :
-1.8
:
1.5
-1.3
-3.3
-4.4 :
-1.9
•
4.2
1.0
0.8
3.1
4.1
1.5
3.0
3.2 :
3.0
-3.5
-5.5
-2.3
0.0 :
-2.8
2.0
5.6
0.3
-2.5
2.5
3.5
4.9
-1.0 :
2.5
2.7
2.2
0.0
-8.2 :
-0.9
2.2
-8.6
-4.0
-3.6 :
-3.5
0.5
-0.3
-4.3
-0.8 :
-1.2
1973
5.7
0.8
3.1
6.1
4.0
1974
-4.5
5.0
3.5
0.3 :
1.1
-5.9
-4.8
1.8
1.3
-1.9
-0.5
-6.3
-3.8
-4.6
-3.8
1.0
0.3
2.3
-1.0
1963
1964
4M411.1”..•
1965
4•410.10
1966
411PANIDAMAID
1967
mer4MAMM
-----
MP
•
1968
1969
ANIAIMMOMMIGM.
1970
iMaW41•4110.M.
•
40041M4.1.4iMAMP
1971
•
1972
1975
•
2
2.3
1.3
•
1976
1977
4ModMwelMdiMmMi,
1978
...WMPOOD.MmMID
.
.
0.8
10.9
3.8
6.5
5.6
1979
4MMIloodMI.m.mm
.
.
4.9
-4.6
2.2
2.9
1.4
.
4.6
-6.2
-2.7
5.1
flI.
•
10.4
-7.3
2.6
-4.3
•
9.6
1980
1981
1982
P
•••=•••••••
2.5p
1.3
•
•
projected
1/ SIMPLE ANNUAL RATES OF GROWTH, QUARTERLY GROWTH RATES BASED OR QUARTERLY AVERAGE DATA, ANNUAL GROWTH RATES CALCULATED FROM
FOURTH QUARTER AVERAGE TO FOURTH QUARTER AVERAGE.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
a•ml•
VELOCITY V3
GNP/m3
sEAsoNALLT ADJUSTED PERCENT ANNUAL RATES OF GROWTH 1/
JAN
1959
FEB
NAB
APR
HAT
JUNE
JOLT
JULY 13, 1982
AUG
SEPT
NOV
OCT
DEC
2
.‘
Q I
:
Q /I
0II/
0 IV :
5.6
6.7
3.9 :
ANN.
1960
:
7.5
-3.8
-6.0
-8.5 .
•
-2.7
1961
.
.
-4.7
0.5
-0.5
3.5 :
-0.3
1962
.
•
-0.3
-3.2
-2.3
-4.8 :
-2.6 '
1963
•
•
-4.3
-3.4
-1.3
-1.8 :
-2.7
1964
:
0.5
-1.6
-4.2
-5.6 :
-2.7
1965
;
3.2
0.5
-0.5
2.1 .
.
1.4
1966
.
•
3.7
-0.3
1.9
5.0 .
.
2.6
:
-6.2
-6.1
-2.7
-0.3 .
•
-3.8
-.
1967
•••.•iM MD MD
1968
s
1.6
6.2
-0.8
-4.2 .
.
0.7
1969
:
4.0
5.3
9.2
1.8 .
.
5.2
1970
:
3.8
-1.0
-5.1
-12.5 .
•
-3.7
1971
:
-1.1
-7.7
-4.6
-5.2 :
-4.6
1972
:
0.0
-1.7
-5.6
-1.4 .
.
-2.2
1973
:
2.0
-3.9
-1.7
3.4 .
•
-0.1
1974
•
.
-6.8
0.0
0.0
.
0.6 .
-1.6
:
-5.2
0.6
5.2
2.0 :
0.7
•
.
2.6
-5.1
-2.9
•
-1.7 .
-1.8
:
2.3
0.0
0.0
-3.5 :
-0.3,
:
-2.0
7.0
1.2
•
4.3 .
2.6
1979
:
3.4
-4.5
0.9
.
0.9 .
1
0.1'
1980
:
4.0
-7.6
-1.7
3.2 .
.
-0.0
:
6.6
-7.3
-0.3
-4.6 :
-1.4'
:
8.4
4
1975
1976
-----
1977
1978
-----
-.M0••••••••
1981
.
1982
p -- projected
MD
.11•40,••40
%,
-----
----- ,_---
m...464111.4m
3.9p
.
•
.
1/ SUIPLE ANNUAL RATES OF GROWTH, QUARTERLY GRoNTff RATES BASED ON QUARTERLY AVERAGE DATA, ANNUAL GROWTH RITES CALCULATED FROM
FOURTH QUARTER AVERAGE TO FOURTH QUARTER AVERAGE.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
I
LA)
D
1
Growth in the Velocity of M1
(Fourth quarter over fourth quarter)
Percent
Percent
A
9
9
8
7
7
6
6
5
5
A
4
4
. .
'
3
3
1•1101•11W
2
2
1
1
0
0
173 1
171
1 69 1
1 67 1
1 65 1
1_ 63 1
1 61 1
FOMC A -- Administration
F
Note: Velocity for 1981 is calculated with M1 data adjusted for
deposits. Forecasts growth ranges for 1982 and 1983, denoted by
target growthranges for Ml. The GNP forecast of the FOMC is the
individual forecasts.
1
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1
175 1
177 1
179 1
181 1
183 1
shifts into OCD from other than demand
shaded areas, are based on the FOMC's
midpoint of the range of member's
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
—41—
Cyclical Growth in the Velocity of M1
(percent, at annual rates)
Growth From Trough to
Trough
2 quarters
following
4 quarters
following
6 quarters
following
61 Ql
5.0
5.9
5.4
70 Q2
3.4
2.7
3.2
75 Ql
6.3
6.9
5.0
80 Q3
11.0
8.4
1.8
,
I
Note: Rates of growth from 80 Q3 trough to 2 quarters and 4 quarters
later calculated with shift—adjusted data.
F
41a
Behavior of Velocity During
4 Quarters After Cyclical Troughs
(Seasonally adjusted annual rates of growth)
Ouarters After Trough
Trough
1
M1
2
3
Avg
4
1949 Oct (04)*
13.1
8.0
20.7
12.4
13.6
1954 May (02)*
0.8
5.7
8.8
5.8
5.3
1958 Apr (02)*
7.8
6.6
3.1
8.0
6.4
1961 Feb (01)
5.6
4.3
7.2
5.9
5.8
1970 Nov (04)
8.6
-1.8
0.3
3.8
1975 Mar (01)
3.8
8.7
7.9
6.6
2.7
,
6.7
1980 July (03)
3.0
13.2
-4.6
10.7
Avg
6.1
6.4
6.2
7.6
1949 Oct (04)*
13.5
9.0
22.5
13.1
14.5
1954 May 02)*
-0.6
5.4
9.1
5.6
4.9
1958 Apr (02)*
4.9
6.7
2.9
7.9
5.6
1961 Feb (01)
1.2
0.0
4.0
0.3
1.4
1970 Nov (04)
2.2
-8.6
-4.0
-3.6
-3.5
1975 Mar (01)
-4.8
1.8
1.3
-0.5
-0.6
1980 July (03)
5.1
10.4
-7.3
2.6
2.7
Avg
3.1
3.5
4.1
3.6
3.6
5.6'
8
6.6
M2
*Old M1 and M2 definitions
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•
41b
Changes in the Velocity of M1
(In percent, at an annual rate)
2-0uarter Moving Average
01
02
03
04
3-Quarter Moving Average
01
02
4-Quarter Moving Average
Q3
04
01
Q2
6.4P
2.7
-1.6
5.7
3.7P
1960
9.5
1961
I .
3.1
5.0
5.8
-1.4T
1.3
3.5
5.7
-1.0T
1962
6.6
4.7
4.1
3.2
5.8
5.5
4.7
3.2
5.8
1963
1.4
1.7
2.9
3.4
2.5
1.7
2.3
3.0
1964
4.5
4.2
0.8
-1.2
4.1
3.8
2.4
0.1
3.7
02
Q4
2.6
1.5
0.3
3.8
1965
,
1966
4.8
S.
2.8
1968
2.9
4.3
2.8
1969
0.2
2.9
4.9
1970
0.0
1.0
1.9
1971
2.3
3.4
1972
4.3
4.0
3.5
4.4
6.6
4.5
3.8
4.6
-1.3 -0.9-0.9
5.1
4.7
0.2
3.6
3.?
1.8
3.6
3.0
1.4
1.0
s
2.8P
0.3
1.4
3.9
3.1P
1.5
1.2
2.5
2.8P
-1.1T
1.9
0.7
1.3
-0.1T
2.4
1.9
0.9
0.01
-0.8
2.1
2.2
I
2.4
0.8
0.8
2.7
1.8
1.6
3.0
3.9
2.8
2.1
4.5
5.4P
-0.6
S
5
1.8
3.0
3.6
3.4
19733.6
5.7P5.0
4.6
1974
1.6
1.6
5.5
2.9
2.6
3.3
2.5
4.1
2.6
3.6
1975
0.0T
1.2
6.3
8.3
1.4T
1.3
3.7
6.8
2.8T
2.0
3.1
4.8
1976
7.3
3.2
1.2
1977
4.0
5.1
4.5
2.3
3.6
4.2
5.1
3.1
2.6
1978
0.2
5.4
6.8
5.6
1.8
3.4
4.8
7.0
2.6
S.
7.2
1.4
-0.9
4.2
6.0
3.4
1.7
0.8
7.0
0.2
3.9P
3.8
1.5T
0.8
1.9
3.4
2.2T
1.9
1980
4.6P
1981
8.1
4.3
1982
-5.7
-3.6
2.71.6
3.1P 4.8
4.5
3.9
-0.2
-2.8
6.4P 1.6
6.7
3.9
-1.3
5
2.2
5.6
5
4.5
IS
NOTE: Changes are for the period ending in the indicated quarter--e.g., the last number
shown for 2-0uarter growth is for the period 1981:04 to 1982:Q2. P denotes reference
cycle peak; T denotes reference cycle trough.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
41c
Changes in the Velocity of M2
(In percent, at an annual rate)
2-0uarter Moving Average
01
5.5
1960
1961
3-Quarter Moving Average
03
04
Ql
1.8P -4.8
-6.9
1.4
0.6
2.0
02
-6.1T -1.5
4-Quarter Moving Average
03
04
01
Q2
Q3
Q4
2.4P -0.7
-5.8
2.4
0.8P
3.8
-2.5
-3.7
1.7
-5.4T -4.2
-2.8
0.3
02
-6.0T -3.7
1962
2.2
-0.9
-2.1
-3.1
1.4
0.7
-1.3
-2.8
1.4
0.5
0.0
-2.0
1963
-3.9
-3.0
-1.5
-0.7
-3.2
-3.4
-2.2
-1.3
-3.0
-3.1
-2.7
-1.8
1964
0.4
0.1
-2.3
-3.9
0.1
-0.2
-1.0
-3.0
-0.6
-0.3
-1.0
-1.9
1965
-0.1
2.6
0.9
2.0
-1.2
0.3
2.0
1.6
-1.2
-0.6
0.4
2.3
1966
3.6
2.8
2.3
3.1
2.7
2.9
2.9
2.6
2.3
3.0
1967
-0.2
-4.5
-3.9
-1.2
0.9
-1.9
-3.8
-2.6
1.1
2.'9
2.4
,
-0.7 -2.0
-2.8
1968
1.0
4.3
3.0
-1.1
-0.1
2.5
2.6
1.1
-1.5
1.3 I 2.0
1.4
1969
0.0
3.0
4.2
2.0P
0.1
1.2
3.6
2.5P
'1.5
1.0
2.1
2.5P
1970
0.9
2.5
1.1
-4.1T
2.2
1.3
1.6
-2.0T
2.5
2.2
1.0
-0.8T
1971
-3.0
-3.2
-6.3
-3.8
-2.0
-4.9
-3.5
-5.4
-1.0
-3.7
-4.7
-3.5
1972
-1.6
0.1
-2.3
-2.6
-2.4
-1.1
-1.4
-1.8
-3.9
-1.9
-1.9
-1.2
1973
2.5
3.3
2.0
4.6P
0.2
1.9
3.2
3.3P
0.1
0.4
2.2
3.9P
1974
0.8
0.3
4.3
1.9
1.6
2.2
1.3
2.9
1.4
2.4
2.5
1.1
-2.8T -5.4
-1.5
1.6
-0.7T -3.5
-3.0
-0.6
0.7T -1.7
-2.2
-1.9
1975
1976
0.4
-3.4
-5.2
-4.2
0.9
-1.8
-3.5
-4.9
-0.6
-0.9
-2.3
-3.8
1977
-1.8
0.7
1.3
0.7
-2.5
-1.1
1.2
0.5
-3.4
-1.8
-0.3
0.7
1978
-0.1
5.9
7.4
3.4
0.7
3.6
5.2
7.1
0.6
3.3
3.6
5.5
1979
5.7
0.2
-1.2
2.6
5.1
2.3
0.8
0.2
6.5
2.7
2.3
1.4
1980
3.8P -0.8
-4.5T
1.2
3.2P
0.4
-1.4T -1.3
1.3P
0.9
-0.4T
0.2
1981
7.8
1.6
-2.4P -0.9
4.3
2.7
1.9P -3.0
1.7
1.4
2.7P
0.4
1982
-7.0
-6.1
-3.8
-5.5
-4.7
-3.5
Note: Changes are for the period ending in the indicated quarter--e.g., the last number
shown for 2-Quarter growth is for the period 1981:04 to 1982:Q2. P denotes reference
cycle peak; T denotes reference cycle trough.
https://fraser.stlouisfed.org
kor
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
JULY 19, 1982
Bank Credft
All Commercial Banks
Seasonally adjusted
Total !bans
and investments
(excluding 18F01,2
1
Period
Investments
others2
U.S.gov't
2
3
Selected loan components
Total loans1.2
4
MONTHLY:
business1.2
real estate
6
5
level in billions of dollars
consumer
security
7
8
nonbank
financial
9
Memo-Total
loans and inv.
(including WO
10
1981--NOVEMBER
DECEMBER
1330.3
1319.1
110.3
111.0
231.2
231.4
988.8
976.7
365.6
360.2
283.1
285.7
183.7
185.1
21.0
21.9
30.4
30.2
1330.3
1354.3
1982--JANUARY
FEBRUARY 5/
BIRCH 6/
APEII
MAY
JUNE 7/
1322.9
1335.2
1345.3
1355.4
1364.7
1371.7
114.1
115.1
114.4
116.6
116.3
115.8
231.5
232.0
233.1
234.0
234.9
235.8
977.3
988.0
997.8
1004.8
1013.5
1020.1
362.5
367.8
372.2
375.3
381.1
385.7
287.5
289.8
292.3
293.9
295.5
297.3
185.7
185.7
186.4
186.9
187.4
188.3
20.6
20.8
20.9
20.9
20.6
19.5
31.1
31.4
32.7
33.3
33.2
33.6
1373.5
1390.5
1406.0
1421.0
1435.4
1446.8
annual percentage rate of change
ANNUAL:
1977--YEAR
1978--YEAR
1979--YEAR
1980--YEAR
1981--YEAR
10.8
13.5
12.6
9.1
7.9
-1.0
-6.0
0.7
16.4
0.9
7.1
8.5
9.9
12.0
8.2
14.0
17.9
14.6
7.7
8.7
10.5
16.2
18.0
12.2
12.7
17.7
19.8
14.8
8.5
8.8
18.8
19.1
32.2
-2.8
3.1
19.2
-5.7
-4.0
-3.1
18.4
-2.7
5.6
8.3
1.0
3.8
10.8
13.5
12.6
9.1
8.9
6.6
10.9
6.8
6.4
10.5
13.5
-12.0
-7.8
9.3
4.0
7.2
11.2
5.5
12.2
9.1
6.9
5.1
16.6
17.9
9.2
7.9
10.8
8.0
7.3
2.2
1.3
4.4
4.1
23.8
28.6
-36.2
58.6
2.7
28.7
-5.1
-10.3
6.6
10.9
6.8
10.2
1982--QTR. 1ST
QTR. 2ND
10.1
8.0
11.5
4.9
2.8
4.8
11.5
9.1
16.8
14.9
7.8
6.6
2.8
3.0
-18.3
-26.8
33.1
11.0
14.8
11.4
MONTHLY:
1981--AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
8.5
5.2
5.6
3.3
10.1
-8.2
-24.9
-7.4
-23.5
7.6
8.1
9.7
16.5
13.1
3.6
10.8
7.9
4.5
4.0
42.0
19.4
13.4
10.6
-0.7
17.4
9.5
6.4
5.1
5.5
11.0
5.3
3.9
1.3
2.0
9.1
131.3
80.4
31.4
85.7
51.4
3.8
-22.8
-19.4
-3.9
-7.9
8.5
5.2
5.6
3.3
21.6
1982--JANULNY
FEBRUARY 5/
MARCH 6/
APRIL
MAT
JUNE 7/
9.9
12.1
8.0
9.4
9.0
5.2
33.5
10.5
-9.4
23.1
-3.1
-5.2
1.0
3.1
4.1
4.6
4.6
5.1
9.3
14.4
10.6
9.1
11.3
6.5
16.8
17.9
15.1
10.6
19.1
14.5
6.3
9.6
7.4
5.7
6.5
7.3
3.9
0.0
4.5
3.2
3.2
2.6
-71.2
11.7
5.8
35.8
11.6
49.7
22.0
-3.6
14.5
17.0
11.4
12.5
12.6
12.2
9.1
QUARTERLY:
1981--QTR.
QTR.
QTR.
QTR.
NOTES:
1ST 4/
211D 4/
312D
4TH
0.0
-17.2
-64.1
MONTHLY AVERAGES REFLECT PRORATED AVERAGES OF WEDNESDAY DATA FOE DOMESTICALLY CHARTERED BANKS AND AVERAGES OF CURRENT
AND PREVIOUS MONTH-END DATA FOR FOREIGN-RELATED INSTITUTIONS. LOANS ARE ADJUSTED TO EXCLUDE DOMESTIC INTERBANK LOANS.
INCLUDES LOANS SOLD 20 AFFILIATES.
BEGINNING IN DECEMBER, 1981 OUTSTANDINGS WERE REDUCED DUE TO SHIFTS 0? ASSETS FROM U.S. HAMMING OFFICES TO INTERNATIONAL
BANKING FACILITIES (IBFS). GROWTH RATES ARE ADJUSTED TO ELIMINATE ESTIMATED EFFECTS OF THESE SHIFTS.
3/ BEGINNING IN DECEMBER, 1981 COLUMN 10 SHOWS TOTAL LOANS AND INVESTMENTS INCLUDING AMOUNTS CARRIED IN IMF ACCOUNTS.
4/ ABSORPTION OF A NONEUNR AFFILIATE BY I LIEGE COMMERCIAL BANE, ADDED THE, FOLLOWING 'TO FEBRUARY, 1981 LEVELS: TOTAL LOINS
AND INVESTMENTS, $1.0 BILLION; TOTAL LOANS AND LEASES, $1.0; BUSINESS LOINS, $0.5; REAL ESTATE LOINS, 10.1: AND MCSHANE
FINANCIAL LOANS, $0.1. IN ADDITION, AN ACCOUNTING PROCEDURE CHANGE BY ONE BANK REDUCED BUSINESS LOANS BY $0.1 BILLION IN
APRIL, 1981. ANNUAL RATES HAVE BEEN ADJUSTED FOR THESE AMOUNTS.
5/ THE MERGER OF A MUTUAL SAVINGS BANK WITH I SMALL COMMERCIAL BANK ADDED THE FOLLOWING EGINNING FEBRUARY 24, 1982: TCTAL
LOANS AND SECURITIES, $1.0 BILLION; U.S. TREASURY SECURITIES, $0.1; OTHER SECURITIES, $0.1; TOTAL LOANS AND LEASES, $0.8;
REAL ESTATE LOANS, $0.7 BILLION. GROWTH RATES HAVE BEEN ADJUSTED FOR THESE AMOUNTS.
6/ THE MERGER OF A MUTUAL SAVINGS BANK WITH 1 COMMERCIAL RANK ADDED THE FOLLOWING BEGINNING MARCH 17, 1982: TOTAL LOANS
AND SECURITIES, $0.6 BILLION; U.S. TREASURY SECURITIES, $0.1; OTHER SECURITIES, $0.1; TOTAL LOINS AND LEASES, $0.4;
REAL ESTATE LOINS, $0.4 BILLION. GROWTH RATES HAVE BEEN ADJUSTED FOR THESE AMOUNTS.
7/ THE ACQUISITION OF LOANS BY A COMMERCIAL BANK FROM I NONBANK INSTITUTION INCREASED TOTAL LOINS AND SECURITIES, TOTAL
LOANS AND LEASES, AND LOANS TO INDIVIDUALS $0.5 BILLION BEGINNING JUNE 2, 1982.
1/
2/
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
JULY 19, 1/d2
Short- and Intermediate-Term Business Credit
Seasonally adjusted monthly averages1
,usiness loans at commercia banks excluding accentances 2
Period
total
at U.S.
offices3,4
large
bank s3-4
1
2
foreignrelated
institutions5
small
banks4
foreign
branches6
3
4
5
totaI3,4
8
9
Total
bankers
acceptances
outstanding
10
79.0
79.8
80.3
65.3
67.4
68.5
562.2
566.3
566.3
Commercial
paper
Commercial
paper and
of nonbank loans7
financial
business
6
7
level in billions of dollars
Business
loans at
finance
companies
Total
short and
in
businelis
credit'
11
1981--OCTOBER
NOVEMBER
DECEMBER 9/
356.6
356.7
351.2
185.5
186.1
190.0
49.7
47.8
37.1
121.5
122.8
124.1
10.8
12.2
13.0
367.4
369.0
364.2
50.6
53.3
417.9
421.1
417.5
1982--JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
353.8
358.9
362.6
365.1
371.0
376.6
194.1
197.6
198.5
201.5
205.1
208.9
33.7
34.0
34.2
33.8
33.6
33.7
126.0
127.3
130.0
129.8
132.3
134.0
13.1
13.0
13.9
14.1
14.9
14.2
366.9
371.8
376.5
379.2
385.9
390.8
53.4
55.5
57.3
58.0
59.6
59.7
420.2
427.4
433.8
437.2
445.5
450.5
80.2
80.5
80.5
80.2
80.1
N.A.
68.6
69.6
70.5
72.0
73.8
N.A.
569.1
577.4
584.9
589.4
599.4
N. A.
1978--YEAR
1979--YEAR
1980--YEAR
1981 --YEAR 9/
17.3
17.9
12.7
12.7
14.9
16.9
11.7
11.6
48.5
43.0
19.2
8.4
13.7
12.0
11.8
16.2
annual percentage rate of change
17.3
50.0
25.3
18.7
222.2
45.0
13.0
44.8
25.6
15.2
209.5
44.8
17.8
20.7
14.2
18.2
14.5
12.5
1.0
13.1
32.7
35.4
23.9
25.7
78.4
20.6
13.0
18.3
1981--2ND QTR.
3RD 0Th.
418 QTR. 9/
16.2
19.7
9.3
20.7
17.9
14.1
2.7
38.0
-25.8
14.8
15.3
16.4
11.4
122.2
153.2
15.9
21.8
13.0
47.6
57.9
21.3
19.3
25.9
14.0
19.3
14.7
7.6
26.6
16.6
20.9
20.2
23.3
13.8
1982--1S2 QTR. 9/
2ND QTR.
16.5
15.7
17.3
21.2
0.9
2.6
21.0
12.6
27.7
8.6
16.9
15.5
30.0
16.8
18.5
15.6
1.0
N.A.
11.7
N. A.
15.2
N. A.
1981--AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER 9/
22.1
16.5
9.5
0.3
17.8
22.7
11.1
5.2
3.9
32.9
36.4
53.1
2.4
-45.9
-35.1
14.4
11.1
20.1
12.8
15.6
121.5
96.6
178.7
155.6
78.7
24.0
18.8
13.9
5.2
19.5
62.1
44.3
0.0
37.9
25.3
28.7
21.5
11.9
9.2
20.5
15.4
1.5
3.0
12.2
7.5
17.0
9.3
3.7
38.6
19.6
25.0
17.7
9.5
13.0
18.6
1982--JANUARY
FEBRUARY
MARCH
APRIL
MAT
JUNE
17.9
17.6
13.2
8.9
19.9
17.7
24.4
21.5
5.4
18.6
21.9
22.1
-25.9
15.9
13.0
-5.2
7.8
5.2
24.2
11.4
25.4
-0.9
23.0
15.4
9.2
-9.2
83.1
17.3
68.1
-56.4
17.6
16.7
15.6
9.2
21.6
15.0
2.3
47.2
38.9
14.7
33.1
2.0
15.7
20.5
18.5
9.9
23.1
13.3
-1.5
4.5
0.0
-4.5
-1.5
N.A.
1.8
17.5
15.5
25.5
30.0
N.A.
11.6
17.9
15.0
9.8
20.7
N. A.
N.A.--NOT AVAILABLE.
E--ESTIMATE.
1/
ALL DATA ARE MONTHLY AVERAGES.
COLUMNS 2, 4, 5, AND 7 ARE PRORATED AVERAGES OF WEDNESDAY DATA. COLUMNS 3, 9, AND AO
LBE AVERAGES Of CURRENT AND PREVIOUS MONTH-END DATA.
2/
INCLUDES SMALL AMOUNTS OF ACCEPTANCES HELD BY SMALL BANKS AND FOREIGN BRANCHES FOR WHICH NC DATA ARE AVAILABLE.
EXCLUDES SMALL AMOUNTS OF COMMERCIAL PAPER HELD BY LARGE U.S. BANKS AND FOREJGN-RELATED INSTITUTIONS.
INCLUDES LOANS SOLD TO BANKS' AFFILIATES.
3/
4/
BUSINESS LOANS WERE INCREASED BY $0.5 BILLION AT LARGE BANKS AND REDUCED BY THE SAME AMOUNT AT SMALL BANKS ON
JANUARY 6, 1982, REFLECTING ADJUSTMENTS FOR MERGERS THAT OCCURRED DURING 1981. ABSORPTION OF A NONBANK AFFILIATE
BY A LARGE COSMERCIAL BANK ADDED $0.5 BILLION TO FEBRUARY FIGURES FOR BUSINESS LOANS, AND AN ACCOUNTING PROCEDURE
CHANGE BY ONE BANK SUBTRACTED 10.1 BILLION FROM BUSINESS LOANS FOR APRIL.
5/
U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS, NEW YORK INVESTMENT COMPANY SUBSIDIARIES OF FOREIGN BANKS, AND EDGE
ACT CORPORATIONS.
6/
CREDIT EXTENDED BY FOREIGN BRANCHES OF U.S. CHARTERED BANKS TO NCNBANK U.S. RESIDENTS. INCLUDES AN UNKNOWN AMOUNT
OF CREDIT EXTENDED 10 OTHER THAN NONFINANCIAL BUSINESSES.
7/
SUM OF COLUMNS 6 AND 7.
8/
SUM CY COLUMNS 6, 7, 9, AND 10.
OUTSTANDINGS FOR COLUMNS 1, 2, 3, 4, 6, 8, AND 11 WERE REDUCED BEGINNING DECEMBER, 1981 DUE TO SHIFTS OF ASSETS TO
9/
INTERNATIONAL BANKING FACILITIES (IBFS). GROWTH RATES SHOWN ARE ADJUSTED TO ELIMINATE ESTIMATED EFFECTS OF
THESE SHIFTS.
LA)
AND INDUSTRIAL
SELECTED CHARACTERISTICS OF SHORT-TERM COMMERCIAL
LOANS MADE BY 48 LARGE BANKS
Feb.
2-7
1981
Aug.
May
3-8
4-9
Nov.
2-7
1982
May
Feb.
3-8
1-6
1978
1979
1980
1980
Nov.
Aug.
3-8
4-8
16.4
32.9
47.1
64.7
20.3
71.5
38.0
75.0
85.0
62.3
78.6
81
100
206
212
65
181
65
136
218
61
84
674
1934
4683
898
2811
894
3714
5379
6777
-
746
5339
loans made below prime
221
312
223
593
248
580
367
234
622
-
173
401
loans made at or above prime
1.4
1.3
1.0
.7
1.2
.7
.9
.7
0.6
0.8
.7
loans made below prime
3.4
3.5
3.0
3.2
1.9
2.7
1.7
2.5
3.7
1.6
2.1
loans made at or above prime
Percent of gross loan extensions
made at rates below prime
Spread between prime rate and
weighted average rate on loans •
made below prime (basis points)
Average loan size ($1,000)
Average maturity (months)1
Survey of Terms of Bank Lending.
e rates reported by banks; calculations for earlier
Beginning August 1979, calculations are based on prim
periods employ the prevailing prime rate.
loans).
exclusive of loans with no stated maturity (demand
Average maturities are weighted by loan volumes
Source:
Note:
1.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7/14/82
-45MERGER-RELATED BANK CREDIT DEVELOPMENTS:
($ billions)
1981-1982
Total
1
1 (U.S. and
1foreign banks)
1
U.S. Bank
participation
Estimated credit lines arranged for potential
acquisitions of U.S. nonfinancial
corporations in 1981-19821
54.2
26.8
Estimated takeover lines cancelled or converted
to general corporate purposes by June 11, 19821
27.5
13.2
Takeover-related loans taken down2
25.0
10.4
1. Publicly reported credit lines--mostly arranged in July 1981.
2. Total includes two large loans to Mobil Corporation, the second under lines
made available by repayment of the first. A large volume of these takeover lsans
have been repaid following failure of takeover attempts or due to refinancing
in other markets to reduce borrowing costs. The status of most of the sthaller
loans is unknown, but it is estimated that less than $5 billion is still
outstanding.
•
a
-
IMPACT OF TAKEOVERS ON BUSINESS LOAN GROWTH RATES'
Growth in total business loans at
banking offices in U.S.
Excluding takeover loans
Growth in total business loans at
banking offices in U.S. and
foreign branches of U.S. banks
Excluding takeover loans
First
Half
1981
Third 2
Quarter
11.0
17.9
9.2
16.8
14.9
9.8
12.3
10.0
17.4
14.3
12.9
20.1
12.8
17.2
14.7
11.83
16.4
11.9
17.4
13.7
Fourth 2
Quarter
1982
First 2 Second 2
Quarter
Quarter
1. Seasonally adjusted annual rates in percent.
2. Adjusted for estimated shifts of assets from domestic banking offices to
International Banking Facilities.
3. Assumes that all $1.8 billion takeover loans in first half 1981 were
booked in U.S. and were still outstanding at the end of June.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
June 8, 1982
NET FUNDS RAISED IN CREDIT MARKETS BY SECTOR
(Quarterly data are seasonally adjusted annual rates)
1
1
1
1 Financial 1
All sectors 1
sector 1 Total
Period
Nonfinancial sectors
Households
Domestic
business
U.S.
gov't.
Flow in billions of dollars
171
147
37
102
124
79
107
149
87
1979
1080
1981
476
417
467
82
60
80
394
357
387
1980-Q3
Q4
427
477
63
74
364
404
104
114
107
147
1981-Q1
Q2
Q3
Q4
462
537
512
359
45
120
142
14
417
417
370
346
120
129
110
55
1982-Q1e/
460
54
406
86
State &
local
gov't.
Memo:
11
11 Change in
Kaufman
11
Foreign11 debt proxy!
18
25
22
20
27
24
261
238
274
96
88
32
30
25
25
270
277
106
186
169
135
128
43
56
121
30
23
12
27
33
36
23
7
306
268
300
277
144
120
26
30
267
Percent change in outstandings from previous period (annual rate)
21.1
11.7
14.7
6.0
12.9
6.7
12.4
12.8
9.5
7.6
9.6
8.6
11.9
14.9
15.0
9.4
7.2
10.6
11.8
7.2
11.7
1979
1980
1981
12.7
9.8
10.1
1980-Q3
Q4
9.6
10.5
12.5
14.3
9.3
10.0
7.5
8.1
8.0
10.7
13.8
12.2
10.5
9.5
12.8
12.4
10.4
10.4
1981-Q1
Q2
Q3
Q4
9.9
11.3
10.4
7.1
8.5
22.0
24.6
2.2
10.1
9.9
8.6
7.8
8.3
8.8
7.3
3.6
7.5
13.0
11.5
8.9
17.3
5.6
7.2
15.1
9.3
6.9
3.7
8.2
15.7
16.6
9.8
2.9
11.2
9.5
10.4
9.4
9.0
8.8
9.0
5.6
9.3
14.5
7.5
12.7
8.9
1982-Q1e/
11.3
9.5
10.5
e/ Estimate.
1. The Kaufman "Debt Proxy" comprises all credit market instruments,`deposits, and currency held by the private
domestic nonfinancial sectors.
Source:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Flow of Funds.
-47-
SOURCES AND USES OF FUNDS BY NONFINANCIAL CORPORATIONS
(Billions of dollars, seasonally adjusted annual rates)
1.
2.
3.
less
equals
4. plus
5.' plus
6.% .equals
:1981
Q4
Q3
1979
1980
1981
Capital Expenditures
U.S. Internal Funds & IVA1
Financing Gapl
220.9
175.5
45.4
216.9
184.3
32.6
258.7
221.8
36.9
281.8
227.6
54.2
Net Acq. of Liquid Assets
Other Uses of Funds, Netl
External Financing Needs
17.7
41.7
104.8
13.1
60.5
106.2
12.9
57.4
107.2
Net Funds Raised in Markets
Net Equity Issues
Bonds
Mortgages
Loans & Short-term Paper
104.8
-7.8
24.7
22.6
65.3
106.2
12.9
32.9
20.7
39.7
107.2
-11.5
24.1
21.5
73.1
256.1
225.1
31.0
1982
OP
Q2 proj.
229.1
227.1
231.3
239.1
1.0
66.2
121.4
14.8
18.2
46.4, 96.5
92.2 116.7
34.6
87.3
114.1
121.4
92.2
116.7
16.1
18.0
111.9
25.7
16.6
72.9
29.1
14.4
78.6
114.1
5.0
26.0
14.6
68.4
66.2
46.4
96.5
87.3
8.3
65.0
6.3
7.8
67.1
Memo:
Major Components of Line 5, "Other Uses of Funds, Net":
8.
Total
Uses:
Net Trade Credit
2
Other Fin. Assets
Discrepancy
9.
10.
11.
41.7
10.6
8.1
26.2
Less Sources:
Net direct foreign investment
3.2
Net Change in Taxes
Payable
12.
13.
.11M.
p--preliminary.
1. Excludes net foreign earnings retained abroad.
2. Consumer credit and miscellaneous assets.
Source:
Flow of Funds.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Is.
57.4
10.3
42.5
13.9
50.9
6.0
59.0
15.6
52.7
3.2
18.9
14.1
40.9
-7.0
-16.8
June 3o, '982
-48SELECTED HOUSEHOLD BORROWING
(Seasonally adjusted annual rates)
Period
1
1
Amount of Growth
(billions of dollars)
Consumer
1
1 Installment
Mortgage
Rate of Growth
(percent)
1
Consumer
Mortgage 1 Installment
38.0
61.5
93.0
107.6
114.6
83.4
65.3
7.3
21.0
35.1
41.9
38.7
2.6
20.9
8.6
12.9
17.2
17.0
15.5
9.7
6.8
4.5
12.4
18.4
18.5
14.4
0.9
6.8
1981-Q1
Q2
Q3
Q4
78.2
78.3
64.3
40.5
24.1
25.3
27.8
6.3
8.3
8.2
6.6
4.1
7.8
8.0
8.7
1.9
1982-Q1
Apr.
May
56.9
n.a.
n.a.
6.0
14.1
16.8
5.7
n.a.
n .a.
1.8
4.3
5.0
1975
1976
1977
1978
1979
1980
1981
INDICATORS OF HOUSEHOLD FINANCIAL CONDITION
(Seasonally adjusted)
Debt Repayments as Percent
of Disposable Income
1
Consumer plus
Period 1
Consumer 1
Mortgage Debt
1
Debt
1
1 Loan Delinquency Rates 1 Personal Bankruptcies
(annual rates)
(percent)
1
1
1 Consumer' 1 Mortgage2 1 Number of 1 Percentage
Change3
1
Cases
1 (at banks) 1 (at S&Ls) 1
1975
1976
1977
1978
1979
1980
1981
15.8
15.8
17.0
17.4
17.4
16.7
15.8
19.8
20.1
21.5
22.3
22.5
21.8
20.8
2.61
2.40
2.37
2.41
2.43
2.61
2.38
1.45
1.42
1.15
0.96
0.88
1.04
1.28
231,047
193,734
176,567
179,194
210,875
285,997
310,869
19.4
-16.1
-9.0
1.5
17.7
35.6
8.7
1980-Q1
Q2
Q3
Q4
17.2
16.6
16.7
16.3
22.2
21.7
21.7
21.5
2.41
2.64
2.80
2.59
0.91
0.99
1.09
1.15
247,684
280,084
303,116
312,392
92.2
52.3
32.8
12.3
1981-Q1
Q2
Q3
Q4
16.3
16.2
15.5
15.2
21.4
21.2
20.5
20.3
2.49
2.36
2.28
2.39
1.16
1.21
1.28
1.45
318,268
303,696
309,232
312,076
7.6
-18.3
7.2
3.8
10.1
319,968
1.61
2.37
20.4
15.1
1982-Q1
-69.0
319,464
1.71
n.a.
n.a.
15.4
Apr.
-123.7
286,524
1.79
n.a.
n.a.
15.6
May
1. Percent of loans past due 30 days or more American Bankers Association series
2. Percent of loans past due 60 days or more (Federal Home Loan Bank Board series).
3. Annualized rate, not compounded.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-4S SAVINGS AND SMALL TIME DEPOSIT
GROWTH AT THRIFTSid
(Percent, SAAR, month-average data)
By Type of Institution
Total
S&Ls
MSBs
CUs
1980-Q1
Q2
Q3
1981-Q1
Q2
Q3
Q4
1981-Oct.
Nov.
Dec.
-0.2
3.5
9.1
2.8
2.5
1.2
1.5
0.7
4.5
9.2
2.3
1.7
2.4
1.2
-1.8
2.4
7.5
1.8
2.4
0.1
1.0
-3.4
-1.4
12.9
9.3
8.7
-5.8
4.2
4.2
3.7
0.2
3.1
3.1
-2.2
5.0
2.4
4.2
10.6
13.0
8.5
-0.7
-2.5
1982-Jan.
3.5
Feb.
3.3
5.8
Mar.
5.4
Apr.
4.7
4.2
May
11.1
10.2
JuneP
1.9
1.4
Memo: Deposit Leve ls-June
699.1 I 485.3
By Type of Account
Savings
Small Time
-16.5
-22.2
18.9
-25.4
-7.1
-22.9
-11.7
9.3
17.3
4.4
16.4
6.3
11.4
6.6
9.0
4.6
1.3
13.7
15.1
21.2
-1.0
16.0
-2.1
-1.1
2.4
26.3
-1.5
16.2
-0.6
1.0
21.3
9.6
3.3
9.2
-3.2
0.5
1982
Billions of Dollars
147.9
65.8
I
189.9
5.6
7.1
6.6
14.0
3.9
rJ
509.2
p--preliminary.
1. Quarterly data are derived by averaging month-average data
and then computing growth rates.
FLOWS INTO SELECTED SMALL TIME
DEPOSIT ACCOUNTS
(Billions of dollars, month end data, NSA)
S&Ls and MSBs
1980-Q1
Q2
Q3
Q4
1981-Q1
Q2
Q3
Q4
1981-Oct.
Nov.
Dec.
MMCs
SSCs
ASCs
41.3
5.9
-8.8
32.6
15.5
9.8
-0.5
-24.9
9.0
23.2
17.3
11.7
8.6
3.4
18.7
23.0
24.3
-15.0
-6.0
-3.9
10.9
6.4
5.7
19.8
3.3
1.2
6.5
1.1
1982-Jan.
4.2
2.1
Feb.
6.2
-0.8
Mar.
3.7
-1.6
Apr.
2.2
May!
-2.9
1. Flows into the new 1-1/2
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Commercial Banks
IRA/1/
Keogh-
MMCs
SSCs
35.5
13.2
4.2
11.6
8.3
6.0
2.7
2.0
9.3
11.1
18.6
5.4
3.8
1.9
12.8
4.1
1.7
27.6
19.6
14.0
16.1
-11.0
0.3
ASCs
1.1
2.7
1.4
1.2
3.3
0.7
2.6
0.8
4.5
0.9
1.0
3.6
1.1
3.9
1.0
0.7
3.2
0.8
2.9
1.4
2.1
0.4
0.5
0.6
0.4
year or longer deregulated account.
IRA/1/
Keogh-
0.2
1.3
1.1
1.3
2.6
0.8
-50SELECTED ACTIVITIES OF SAVINGS AND LOAN ASSOCIATIONS
(Seasonally adjusted)
1980-Q1
Q2
Q3
Q4
1981-Q1
Q2
Q3
Q4
Net change
Net change in
liNet change
in mortgage mortgage backed
Mortgage commitments
in
Liquidity
holdings 1/
securities 1/
Outstanding
New
borrowings 2/
ratio 3/
Billions of dollars
--Percent-6.5
0.9
24.0
18.0
6.6
8.41
0.2
1.3
20.7
11.9
-4.1
8.98
9.8
2.8
28.0
26.6
1.9
8.94
11.4
27.3
1.9
22.1
4.6
9.41
7.6
1.0
25.5
16.7
4.9
8.81
5.7
1.6
24.5
16.4
8.8
8.54
2.5
1.1
21.8
11.0
10.0
8.23
-1.2
2.2
23.1
12.3
-0.3
8.92
1981-Oct.
Nov.
Dec.
-0.3
-0.4
-0.5
0.4
0.8
1.0
21.6
22.1
23.1
3.4
4.1
4.8
-1.9
0.5
1.1
8.53
8.62
8.92
1982-Jan.
0.7
1.9
23.6
4.5
3.2
8,.65
Feb.
0.4
2.2
23.3
5.0
3.1
8.81
/
Mar.
0.1
22.6
2.9
4.8
2.4
8.91
Apr.
-1.3
2.5
22.5
4.6
1.0
9.20
May.
-0.7
1.4
22.5
4.6
2.4
9.26
1. All federally insured S&Ls.
I. Advances from FHLBs and other borrowings, which include RPs, loans from cotilmercial
banks, mortgage-backed bonds, commercial paper, and other miscellaneous borrowings at
all operating S&Ls.
2. Cash and liquid assets as a percentage of the sum of savings capital and borrowings
payable in one year or less for insured S&Ls. These S&Ls hold 98 percent of deposits
at all operating S&Ls. Currently the minimum required ratio is 5 percent.
SELECTED ACTIVITIES OF MUTUAL SAVINGS BANKS
Net change
in mortgage
holdings
Q3
Q4
1981-Q1
Q2
Q3
Q4
360
-18
-195
310
161
-187
-259
-395
Net change in
mortgage backed
securities 1/
Millions of dollars
692
281
852
204
148
-3
0
-120
1981-Oct.
Nov.
Dec.
-159
-138
-98
85
-186
18
1980-Q1
Q2
Net change
in
Liquidity
borrowings 2/
ratio 3/
--Percent-776
6.73
403
7.66
-838
7.93
596
8.76
8.53
179
1,803
9.31
1,847
10.10
36
10.91
-594
-175
805
10.22
10.73
10.91
1982-Jan.
37
-139
-256
11.47
-98
78
82
Feb.
11.40
-189
209
-292
Mar.
11.33
55
Apr.
-160
219
12.17
1. Not seasonally adjusted.
2. Includes loans from banks, advances from FHLBs, repurchase agreements, and
mortgage warehousing.
3. Cash and investments maturing within one year as a percentage of the sum of
regular deposits plus borrowings and mortgage warehousing.
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Federal Reserve Bank of St. Louis
=51-
NUMBER OF ADVERSE ACTIONS ON CORPORATE SECURITIES
1
Downgradings by Moody's
2
Long-term Debt
3
Commercial Paper
Reductions and
Omissions in
Dividend Payments
1973
1974
1975
1976
1977
1978
1979
1980
1981P
32
70
41
35
43
34
47
69
75
53
156
84
34
39
28
48
61
75
150
325
512
231
260
209
185
249
362
1980-Q1
Q2
Q3
Q4
14
20
13
22
16
17
8
20
35
69
80
65
•
,
1981-Q1
Q2
Q3
Q4P
22
18
11
24
14
9
33
19
73
87
84
118
First six months
1981
1982P
40
62
23
25
160
293
p.
I
Preliminary.
Entries based on data provided by Moody's Investors Service.
1. Data indicate the number of changes. Some companies have had more than
one change in a given period.
2. The number of changes on a corporation's highest ranking debt issue.
3. Withdrawals and terminations of ratings are also included.
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Federal Reserve Bank of St. Louis
-52NUMBER OF BUSINESS BANKRUPTCIES AND FAILURES
Bankruptcy
Filingsl
Period
Total
Selected interwar years
n.a.
1920
n.a.
1921
1922
n.a.
n.a.
1923
1924
n.a.
n.a.
1925
n.a.
1926
n.a.
1927
n.a.
1928
n.a.
1929
1930
n.a.
n.a.
1931
1932 (all time
high)
n.ap
n.a.
1933
n.a.
1934
Failures2
Per 10,000
Total
Concerns3
8,881
19,652
23,676
•18,718
20,615
21,214
21,773
23,146
23,842
22,909
26,355
28,285
48
102
120
93
100
100
101
106
109
104
122
133
31,822
19,859
12,091
154
100
61
,
,
.
Selected postwar years
15,241
1961 (postwar
high)
1974
25,049
34,549
1975
33,167
1976
31,784
1977
1978
29,030
30,831
1979
43,482
1980
48,000
1981
1982-Jan.-Apr.2/ 55,100
17,075*
64*
9,915
11,432
9,628
7,919
6,619
7,564
11,742
17,000
21,350
38
43
35
28
24
28
42
n.a.
p. Preliminary. Data for 1981 and 1982 are partially estimated by Federal Reserve,
1982 data are at seasonally adjusted annual rates.
1. The number of nonpersonal filings for protection under the various provisions
of the U.S. Bankruptcy Code, as reported by the Administrative Office of the U.S.
Courts. Joint peons are excluded.
2. Business failure data are collected by Dun & Bradstreet, Inc. field representatives. Failures include: (1) all industrial and commercial enterprises that are
peoned into the Federal Bankruptcy Courts; (2) concerns which are forced out of
business through such actions in the State courts as foreclosure or attachI- nt assets to cover all claims; (3) concerns involved in court actions such
as receivership or reorganization; (4) voluntary discontinuances with known loss to
creditors; and (5) voluntary compromises with creditors out of court, where obtainable. Data exclude railroads, banks, financial companies, holding companies, real
estate and insurance brokers, amusement enterprises, shipping agents, tourist companies, and transportation terminals.
3. The failure rate per 10,000 business listed in the Dun & Bradstreet Reference
Book.
4. Annual data are not yet available. The latest data are for July 1981 and indicate a failure rate of 66 for that month and 56 for the period January through June.
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Federal Reserve Bank of St. Louis
z
-53-
SELECTED FINANCIAL MARKET QUOTATIONS
1982
Feb.
Highs
May
Lows
June
Highs
July 19
Short-term rates
Federal funds
16.36
13.27
14.98
12.10p1
1-month Commercial paper
3-month Treasury bills
3-month CDs
15.73
14.57
16.14
13.10
11.50
13.25
14.89
13.19
15.58
12.34
11.06
13.28
Bank Prime Rate
17.00
16.50
16.50
16.50
15.16
14.95
14.80
13.60
13.46
13.08
14.98
14.76
14.26
13.73p
13.69p
13.34p
Corporate Aaa utility
(recently offered)
16.34
15.17
16.19
15.87p2
Municipal Bond Buyer
(general obligation)
13.13
11.82
12.63
12.363
Primary Conventional Mortgages
17.66
16.63
16.87
16.882
852.55
68.17
819.54
64.54
816.88
68.28
Intermediate- and long-term rates
U.S. Treasury (constant maturity)
3-year
10-year
30-year
Stock Prices
Dow Jones Industrial
NYSE Composite
826.10
63.54
1. Average for first 5 days of statement week ending July 21 is 12.62.
2. Rate for preceding Friday.
3. Rate for preceding Thursday.
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Federal Reserve Bank of St. Louis
•••••
Table 1
Selected Interest Rates
Percent
Period
federal
funds
1
Short-Term
Treasury bills
COs
secondary
secondary
auction
market
market
3-month
3-month 1-year
6-month
2
3
4
5
Jul
19, 1982
Long Term
money
market
mutual
fund
U.S. government constant
maturity yie ds
6
7
8
9
10
11
corporate
Aaa utility
recently
offered
12
comm.
paper
1-month
bank
prime
loan
3-year
10-year
30-year
mumcipal
Bond
Buyer
13
home mortages
secondary market
primary
FNMA
GNMA
cori
auction
security
14
15
16
1981--High
Low
20.06
12.04
16.72
10.20
15.05
10.64
15.85
10.70
18.70
11.51
18.33
11.39
17.32
11.84
20.64
15.75
16.54
12.55
15.65
12.27
15.03
11.81
17.72
13.98
13.30
9.49
18.63
14.80
19.23
14.84
17.46
13.18
1982-High
Low
15.61
12.42
14.41
11.46
.13.51
11.66
14.36
11.59
15.84
12.94
15.56
12.40
13.89
11.77
16.86
15.75
15.01
13.70
14.81
13.51
14.63
1 1.13
16.34
15.11
13.44
11.82
17.66
16.63
18.04
16.27
16.56
15.17
1981--June
19.10
14.73
13.22
13.95
16.90
17.34
16.92
20.03
14.29
13.47
12.96
14.81
10.67
16.70
16.17
15.02
July
Aug.
Sept.
19.04
17..82
15.87
14.95
15.51
14.70
13.91
14.70
14.53
14.40
15.55
15.06
17.76
17.96
16.84
17.70
17.58
15.95
17.04
17.17
16.55
20.39
20.50
20.08
15.15
16.00
16.22
14.28
14.94
15.32
13.59
14.17
14.67
15.73
16.82
17.33
11.14
12.26
12.92
16.83
17.29
18.16
16.65
17.63
18.99
15.76
16.67
17.06
Oct.
Dec.
15.08
13.31
12.37
13.54
10.86
10.85
13.62
11.20
11.57
14.01
11.53
11.47
15.39
12.48
12.49
14.80
12.35
12.16
15.32
14.33
12.09
18.45
16.84
15.75
1 5.50
13.11
13.66
15.15
13.39
13.72
14.68
13.35
13.45
17.24
15.49
15.18
12.83
11.89
12.90
18.45
17.83
16.92
18.13
16.64
16.92
16.61
15.10
15.51
1982--Jan.
Feb.
Mar.
13.22
14.78
14.68
12.28
13.48
12.68
12.77
13.11
12.47
12.93
13.71
12.62
13.51
15.00
14.21
12.90
14.62
13.99
12.01
13.11
13.49
15.75
16.56
16.50
14.64
14.73
14.13
14.59
14.43
13.86
14.22
14.22
13.53
15.88
15.97
15.19
13.28
12.97
12.82
17.40
17.60
17.16
17.80
18.00
17.29
16.19
16.21
15.54
Apr.
May
June
14.94
14.45
14.15
12.70
12.09
12.47
12.50
11.98
12.57
12.86
12.22
12.31
14.44
13.80
14.46
14.38
13.79
13.95
13.74
13.49
n.a.
16.50
16.50
16.50
14.18
13.77
14.48
13.87
13.62
14.30
13.37
13.24
13.92
15.44
15.24
15.82
12.59
11.95
12.45
16.89
16.68
16.70
16.27
17.22
15.40
15.30
15.84
5
12
19
26
15.53
14.97
14.67
13.70
12.57
12.32
12.27
11.53
12.39
12.05
12.07
11.66
12.78
12.24
12.19
11.68
14.31
13.82
13.92
13.49
14.25
14.01
14.00
13.29
13.59
13.75
13.65
13.29
16.50
16.50
16.50
16.50
14.06
13.70
13.78
13.66
13.87
13.51
13.58
13.59
13.39
13.13
13.25
13.20
15.29
15.31
15.17
15.20
12.04
11.82
11.96
11.99
16.78
16.63
16.67
16.63
2
9
16
23
30
13.43
13.60
14.24
14.17
14.61
11.79
12.13
12.20
12.70
13.01
11.86
12.17
12.39
12.94
12.98
11.59
12.12
12.50
13.03
13.42
13.52
13.81
14.10
15.00
15.25
13.25
13.42
13.75
14.29
14.61
12.94
13.02
13.05
13.01
13.17
16.50
16.50
16.50
16.50
16.50
13.86
14.03
14.29
14.89
14.91
13.81
13.96
14.13
14.63
14.65
13.50
13.70
13.80
14.18
14.13
15.39
15.59
16.11
16.19
16.03
12.13
12.40
12.63
12.62
12.58
16.65
16.70
16.71
16.73
16.87
7
14
21
28
14.47
13.18
12.59
11.88
12.78
12.20
12.98
11.97
15.13
14.13
14.57
13.54
13.14
13.28
16.50
16.50
14.74
14.17
14.47
14.04
13.96
13.60
15.80
12.47
16.93
15.95
15.87p
12.36
/G.S‘g
15.51
9
15
16
13.05
13.07
12.4
19
i2,/0 p
14.03
13.96
13.7c
13.57
13.57
13.35'
1982-May
June
July
Daily-July
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Federal Reserve Bank of St. Louis
11.77
11.64
11.21
H.
12.12
12.09
11.64
14.06
14.17
13.97
13.59
13.33
13.16
16.50
16.50
16.50
1(c.'1-0
NOTE: Weekly data for columns 1.2, 3, and 5 through 11 are statement week averages. Weekly
data in column 4 are avtvage rates set In the auction of 6-month bills that will be ;ssued on the Thursday
following the
end of the statement week. Data In column 7 are taken from Donoghues Money
Fund Report. Columns 12
and 13 are 1-day Quotes for Friday and Thursday, respectively, following the end
of the statement week.
Column 14 Is an average of contract Interest rates on commitments for conventio
nal first mortgages with
80 percent foe:HO-mos ratios made by a sample of insured savings and loan
associations on the Friday
14.12
14.14
13.4b
13.13
r i3.61
p
a•
16.27
17.22
15.59
15.17
15.26
15.18
15.57
15.58
15.85
16.14
16.05
•
• fn.
following the end of the statement week. The FNMA auction yield Is the average
yield in a bi-weekly auction for snort-term forward commitments for government underwritten mortgages;
figures exclude
graduated payment mortgages. GNMA yields are average net yields
to investors on mortgage-backed
securities for immediate delivery, assuming prepayment in 12 years on pools
of 30-year FHA/VA mortgages carrying the coupon rate 50 basis points below the current FHAIVA ceiling.
FR 1367 (1/82)
NNW
-55-
THE RECENT FAILURES OF TWO GOVERNMENT SECURITIES DEALERS AND A COMMERCIAL
BANK HAVE HAD LIMITED IMPACTS ON THE MONEY MARKET
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Federal Reserve Bank of St. Louis
1. Following the Drysdale Government Securities and Comark episodes,
market participants reported a noticeable contraction in the available supply of RP funds.
This contraction is said to have affected
primarily small dealers, who have had to pay substantially more for
financing than large dealers.
2. In spite of the developments in the RP market, the cash market for
government securities--especially that maintained by the prima,rry
dealers--has continued to function essentially normally in recent
weeks.
Bid-ask spreads have not widened, trading volume has ben
well maintained, Treasury auctions have been conducted routinely,
and open market operations have been carried out without hindrance.
3. Following the announcements by certain large commercial banks that
they would suffer substantial losses on loans purchased from Penn
Square Bank, several money market funds and other investors decided
to stop purchasing CDs of these banks.
In response, these banks
stopped issuing CDs, but the largest banks reentered the market
quite quickly.
However, it appears that there is still reluctance
on the part of some investors to purchase these instruments.
are conflicting reports regarding tiering in the CD market.
There
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Federal Reserve Bank of St. Louis
BUDGETARY DEVELOPMENTS
I
-56--
FEDERAL BUDGET "BASELINE- AND ALTERNATIVE INITIATIVES
(Billions of dollars, fiscal years)
1981a
1982
1983
1984
1985
Receipts
599.3
623.0
645.0
702.0
780.0
Outlays
657.2
742.3
825.7
916.6
1,011.0
Deficit
-57.9
-119.32
-180.7
-214.6
-231.0
+2.7
+54.0
+81.9
+96.1
+76.8
4130.7
+171.0
Baseline'
Net effect of initiatives
recommended in February
by the Administration3
Net effect of Congressional Budget Resolution3
Deficits adjusted for
Administration's
February iniatives
-57.9
-116.6
-126.7
-132.7
-134.9
Deficits in the Congressional Resolution
-57.9
-105.72
-103.9
-83.9
-60.0
a--actual.
1. Current services for all programs except defense; includes the Administration's
defense proposals; evaluated at the Congressional revised baseline economic assumptions. This budget baseline is the one underlying the budget resolution.
2. Has not been adjusted for all the incoming data on actual receipts and outlays;
these data would reduce the CBO's estimated deficit to about $110 billion to $115
billion. The Congressional Resolution contains revised estimates for receipts of
S628.4 and outlays of $734.1 billion.
3. Components are shown on next page; plus sign reduces the deficit.
4. Components are shown on page after next.
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Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-57ADMINISTRATION BUDGET INITIATIVES -- FEBRUARY BUDGET
Effects on unified budget surplus'
(Fiscal years, billions of dollars)
I.
II.
1982
1983
1984
1985
0
7.2
13.5
13.5
REVENUE RAISING PROPOSALS
IN 1983 BUDGET
A.
Tax Revisions2
B.
Improved collection and
Enforcement
.2
5.5
5.5
4.7
C.
Other Initiatives (net)
.1
.2
.4
.1
D.
Total of Receipts proposals
.3
12.8
19.3
, 18.3
E.
Memo: Effect of 1981 Tax Act
-38.3
-91.6
-1391.0
-176.7
NONDEFENSE SPENDING INITIATIVES
IN 1983 BUDGET
.
4
A.
Entitlement reforms3
B.
User fees (negative outlays)
C.
Discretionary Programs
D.
Management Initiatives
E.
Proposed Spending Increases
F.
Total:
G.
Memo:
New Spending Proposals
Effect of 1981 Outlay Cuts
1.4
12.8
18.1
23.0
1.2
2.1
2.2
14.2
26.1
35.3
1.1
14.8
18.5
19.2
-0.2
-1.8
-2.1
-2.7
2.4
41.2
62.6
77.8
27.1
45.0
47.5
48.0
2.7
54.0
81.9
96.1
III. NET EFFECT OF NONDEFENSE INITIATIVES
IN 1983 BUDGET
A.
1983 Budget Proposals (ID + IIF)
B.
1983 Budget Proposals plus
Initiatives Enacted in 1981
-8.5
+7.4
-9.6
-32.6
Memo: Increase in Defense from
Level in Carter Budget
-2.8
-10.6
-14.7
-23.7
C.
1. Minus sign denotes increase in the deficit; direct effects not taking into
account any second round effects on either aggregate demand or supply.
2. Includes complete contract accounting, corporate minimum tax, and modified
coinsurance.
3. Includes medical entitlements, cash welfare and nutrition assistance, and
federal retirement and disability.
Source: Budget of the United States Government, Fiscal Year 1983 (February
1982)
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Federal Reserve Bank of St. Louis
-58-
CONGRESSIONAL DEFICIT-REDUCING INITIATIVES
(fiscal years, in billions of dollars)
1983
1984
1985
20.9
36.0
41.4
6.6
1.2
10.8
1.3
13.4
1.1
5.9
10.1
1.4
18.8
1.7
Deficit-Reducing Measures:
Revenue Increases
Spending Reductions
Entitlement benefits
(including COLA caps
other than Social Security)
Other programs
Discretionary non-defense
programs (appropriations
freeze)
User fees (negative outlays)
Defense (except pay and retirement)
Federal pay limitations
Subtotal: reductions requiring
legislative action
Management initiatives
Lower Interest Cost:
From small deficits
From lower interest rates
Total Deficit Reduction
Memo: Remaining Deficits
Baseline Deficits
1.1
7.8
5.1
8.3
8.9.
10.3
12.1
27.7
40.8
57.4
13.7
17.1
15.8
6.5
8.0
17.7
19.1
28.6
27.8
76.8
130.7
171.0
-103.9
-180.7
-83.9
-214.6
-60.0
-231.0
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Federal Reserve Bank of St. Louis
-59SENATE FINANCE COMMITTEE REVENUE RAISING BILL
(fiscal year 1983 impact in billions of dollars)
Depreciation limitations including reducing
depreciation by 1/2 of investment tax credit
0.4
Limitations on safe harbor leasing
1.4
Reduce value of corporate tax preferences
0.7
Accelerated payments and other corporate
tax provisions
5.0
Withholding of tax on interest and dividends
4.2
Double cigarette tax
1.2
Airport and airway tax increases
1.1
Increase federal unemployment tax
1.4
Other, including federal employee medicare tax,
tightened pension provisions and minimum tax
1.4
Measures to tighten tax compliance
4.3
,
21.1
Total
NOTE: It is expected that this bill would be taken up in the Senate in
July; the Ways and Means Committee has an August 1 deadline for
reporting a revenue raising bill.
SUMMARY OF THE ECONOMIC RECOVERY ACT OF 1981
Reductions in Receiptsl
(Fiscal years, billions of dollars)
1982
1983
1984
1985
1986
Individual income tax
(Marginal rate cuts)
(Indexing)
(Saving incentives)
-113.1
-28.2
-75.4
-137.6
-173.5
(-113.5)
(-96.9)
(-65.4)
(-131.5)
(-25.3)
(-5.3) (-16.2)
(-4.3)
(-4.2)
(-.5) (-2.7)
(-6.5)
Corporate income tax
(Accelerated cost recovery)
-33.1
-48.1
-21.6
-9.3
-13.1
(-37.1)
(-25.8)
(-53.7)
(-10.5) (-16.5)
Excise taxes2
-.9
-1.2
-1.2
-1.9
-2.6
Other
+.2
-1.8
-3.0
-4.1
-5.5
-38.3
-91.6
-139.0
-176.7
-229.7
Total
1. FY1983 Budget Assumptions.
2. Principally Windfall Profit Tax.
NOTE: Details may not sum to exact totals due to rounding.
-
-60-
RECONCILIATION OF THE FIRST BUDGET RESOLUTION AND JUNE/JULY
GREENBOOK FY1983 DEFICIT
(Billions of dollars)
1983
Budget resolution outlays
Smaller budget cuts
Economic assumption effects'
Unemployment
Interest
SubtotaL economic assumption
769.8
18.2
3.4
6.0
9.4
,
Other estimating differences
(includes effects of lower FRB
inflation assumption)
A
-9.1
July Greenbook outlays
788..3
Budget resolution receipts
665.9
Smaller tax increases
Effect of lower nominal income
projections'
July Greenbook receipts
Budget resolution deficit
Policy assumption differences
Economic projection differences
Other estimating differences (net)
July Greenbook deficit
1. See page 27 for a comparison of the economic assumptions.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-5.9
-37.7
622.3
-103.9
-24.1
-47.1
9.1
166.0
-61-
RECONCILIATION OF THE ADMINISTRATION' AND THE JUNE/JULY
GREENBOOK FY1983 DEFICIT
(Billions of dollars)
1983
767.0
Administration outlays
Smaller budget cuts for:
Transfer payments
Grants
Purchases
Other (subsidies, asset sales,
debt collection etc.)
Defense cuts
Subtotal: budget cuts
6.6
7.7
.6
5.4
-6.0
14.3
Economic assumption effects2
Unemployment
Interest
Lower inflation assumption
Subtotal: economic assumption
Other estimating differences
July Greenbook outlays
Administration receipts
Larger tax increases
Effect of lower nominal income
projection2
July Greenbook receipts
Administration deficit
Policy assumption differences
Economic projection differences
Other estimating differences (net)
July Greenbook deficit
8.0
6.4
-3.0
11.4/
•
788.3
665.1
1.0
-43.8
622.3
-101.9
-13.3
-55.2
+4.4
-166.0
1. The Administration's April budget revisions reflect only minor policy
changes and some technical reestimates based primarily on the receipts
and outlay experience up to the time of the revision. The underlying
economic assumptions were not changed.
2. See page 27 for a comparison of the economic assumptions.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-62-
FEDERAL UNIFIED BUDGET AND GROSS NATIONAL PRODUCT
(Percent)
High Employment Deficit
as percent
of Potential
GNP'
Deficit
as Percent
of GNP
Budget Outlays
as Percent
of GNP
Fiscal
Year
Budget Receipts
as Percent
of GNP
1969
20.5
20.2
-0.4
1.3
1970
19.9
20.2
0.3
1.0
1975
18.9
21.9
3.1
. 1.9
1976
18.2
22.2
4.0
1977
19.1
21.5
2.4
1978
19.2
21.5
s2.3
2.4
1479
19.7
20.9
1.2
1.6
1980
20.1
22.5
2.3
1.9
1981
21.0
23.0
2.0
1.0
1982e
20.3
24.2
3.4
1.6
1983e
18.9 (19.6)
24.3 (22.6)
5.3 (3.1)
3.1 (1.0)
1984e
18.5 (19.5)
24.3 (21.8)
5.7 (2.2)
4.1 (0.8)
1985e
18.9 (19.9)
24.5 (21.4)
5.6 (1.5)
4.4 (0.5)
,
2.6
"
1.8
•
_
e--Estimate from Congressional baseline budget and Congressional economic assumptions. The numbers in parentheses apply to the Congressional Budget Resolution.
1. High employment defined as 1 percentage point above the official CEA series
--i.e. 5.6 percent in 1969, and approximately 6.1 percent from 1975 on.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
BUDGET RESOLUTION DEFICITS AT 6.1% UNEMPLOYMENT
(fiscal years, billions of dollars)
1983
$36-1/2
1984
$33
1985
$22
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-S3-
FEDERAL BORROWING AND CREDIT MARKETS
Fiscal
Years
Total funds
raised by
nonfinancial
sectors'
Federal
borrowing
from the
public
($ bil)
($ bil)
Federal
borrowing
as a percent
of funds raised
(%)
1972
152
19
12.8
1973
S.
19
9.8
1974
187
3
1.6
1975
174
51
29.2 -
1976
242
83
34.3
1977
310
54
17:2
1978
379
59
15.6
1979
413
34
8.1
1980
342
70
20.6
1981
405
79
19.6
1982P
389
132
34.0
1. Nonfinancial sectors, excluding equities.
p--FR staff projection; for the last half of calendar 1982 federal borrowing
is projected to rise to about 50 percent of net funds raised by nonfinancial
sectors.
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Federal Reserve Bank of St. Louis
-64-
ADMINISTRATION1 AND CONGRESSIONAL2 LONG-RUN ECONOMIC ASSUMPTIONS
(Calendar years)
1982
1983
1984
1985
8.1
6.4
11.5
11.9
10.2
10.4
9.7
9.7
0.2
5.2
5.0
4.1
4.7
3.7
8.9
9.1
8.4
7.6
7.2
7.9
7.4
6.0
7.3
5.0
6.6
4.7
6.0
11.7
12.0
10.5
10.7
9.5
8.8
8.5
6.9
Nominal GNP growth
(% change, year
over year
Administration
Congressinal
o
Real GNP growth
(% change, year
over year)
Administration
Congressional
Unemployment rate
(annual average, %)
Administration
Congressional
Inflation rate (%
change, year over
year, GNP deflator)
Administration
Congressional
Interest rates
(annual averages, %,
91-day bills)
Administration
Congressional
1. Administration's February Budgt.
e
2. First Concurrent Resolution on the Budget.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-65-
MILITARY SPENDING IN THE REAGAN BUDGET'
(Billions of dollars)
Fiscal
Years
Budget
Authority
1977
108.4
1978
115.3
6.4
1979
125.0
1980
Percent
Change
Nominal
Outlays
Percent
Change
Real2
Outlays
103.0
7.7
n.a.
n.a.
8.4
115.0
11.7
n.a.
n.a.
142.6
14.1
132.8
15.5
174.3
n.a.
1981
178.4
25.1
156.1
17.5
181.4
1982e
214.1
20.0
182.8
17.1
195.4 ,
4.1
,
7.7
1983e
257.5
20.3
215.9
18.1
215.9
1984e
284.7
10.6
247.0
14.4
233.2 .
8.0
1985e
330.9
16.3
285.5
15.6
255.6
9.6
Percent
Change
95.6
10.5
1. Department of Defense - Military Spending.
2. In FY1983 dollars.
e--Estimated by OMB in Current Budget Estimates, April 1982, which were
unchanged from February budget estimates
July 7, 1982
-66-
DEFENSE SPENDING INDICATORS
Fiscal Years
1981
1980
1979
81:Q1
Calendar Quarters
81:02 81:Q3 81:Q4 81:Q1
Unified Budget
($ billions)
Defense Outlays
Procurement
% Change from year earlier
115.0
25.4
27.0
132.8
29.0
14.2
156.1
35.2
21.3
Calendar Years
1981
1980
1979
38.2
8.0
10.2
81:11
40.0
9.2
21.1
41.3
9.7
37.9
44.1
10.2
23.3
44.1
10.1
26.3
Cif
alendar Quarters
81:Q2 81:Q3 81:Q4 81:Q1
NIPA Accounts
($ billions, annual rate)
Federal Purchases for National
Defense
Personal Compensation
Other Purchases
Durables
% Change from year earlier
Purchases as a Percent of GNP
145.2 148.2
57.4 ' 57.8
87.8
90.4
37.2
36.3
15.2
15.2
154.1
58.4
95.7
40.7
23.7
169.7
64.0
105.7
42.9
22.9
169.7
64.7
105.0
43.9
20.9
5.1
5.1
5.2
5.7
5.7
62.5
13.6
80.9
18.3
49.9
21.4
62.5
12.0
72.4
26.7
46.3
21.6
57.3
12.7
74.7
24.1
48.1
20.1
71.2
13.0
79.6
18.9
51.4
22.6
58.9
13.6
80.9
18.3
53.9
21.4
93.2
14.4
90.5
25.0
54.7
18.0
16.1
16.9
16.6
17.0
16.1
16.9
16.0
133.7
64.2
3.7
160.7
81.1
26.3
191.3
96.8
19.4
184.4
89.0
22.2
184.3
94.1
15.9
203.2
110.7
36.4
193.5
93.3
4.9
235.4
133.5
50.0
93.5
98.3
102.7
100.7
101.7
102.8
105.6
106.3
111.2
48.8
62.4
26.8
19.2
131.7
52.8
78.9
32.9
22.8
154.3
59.4
94.9
39.3
19.5
4.6
5.0
5.3
40.5
8.6
53.5
12.9
34.4
11.2
55.9
11.0
68.4
27.7
41.1
19.6
16.1
Reports by Manufacturers'
Defense Industries
($ billions)
New Orders (annual rate)
Inventories'
Unfilled Ordersl
% Change from year earlier
Shipments (annual rate)
% Change from year earlier
Inventories as Percent of
Unfilled Orders
Defense Department
($ billions, annual rate)
Gross Obligations Incurred
Military Prime Contract Awards
% Change from year earlier
Industrial Production (1967-100)
Defense and Space Equipment
1. inventories and unfilled numbers are end-of-quarter/year levels, not averages or changes.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
JUNE GREENBOOK
June 23, 1982
FEDERAL SECTOR ACCOUNTS
Fiscal
Year
1981*
Unified budget receipts
Unified budget outlays
Surplus/deficit(-), unified budget
Surplus/deficit(-), off-budget
agencies3
Combined deficit to be financed
FY1982e/
Admin.
P.R.
Board
1/
FY1983e/2/
Admin.
F.R.
Board
1/
CY
1981*
CY1982e/
F.R.
Board
Calendar
1981
IV*
1982
I*
II
III
IV
FRB Staff Estimates
uarters; unadjusted data
1983
I
III
II
599.3
657.2
-57.9
628.4
728.9
-100.5
622.2
734.9
-112.7
665.1
767.0
-101.9
622.3
788.3
-166.1
619.1
691.6
-72.5
617.7
734.4
-116.7
146.0
194.2
-48.2
143.6
167.3
-23.7
183.7
185.2
-1.5
148.9
188.2
-39.3
141.5
193.7
-52.2
140.9
196.0
-55.1
186.8
196.4
-9.7
153.1
202.2
-49.1
-21.0
-78.9
-20.9
-121.4
-18.7
-131.4
-15.8
-117.7
-18.2
-184.3
-22.4
-94.9
-19.3
-135.9
-3.6
-51.8
-2.0
-25.7
-5.5
-7.0
-7.6
-46.9
-4.1
-56.3
-5.5
-60.6
-4.3
-14.0
-4.3
-53.4
Means of financing combined deficit:
Net borrowing form public
Decrease in cash operating balance
Other4
79.4
2.3
-2.8
118.5
118.5
(2.9
127.4
0.5
3.5
("0.8
188.4
-2.0
-2.1
87.3
0.3
7.3
144.0
0.0
-8.1
35.6
6.7
9.5
32.8
-1.0
-6.1
8.5
-0.5
-1.0
50.5
-4.7
1.1
52.2
6.2
-2.1
59.4
0.4
0.8
21.1
-4.0
-3.1
55.7
-4.6
2.3
Cash operating balance, end of period
18.7
n.a.
18.2
n.a.
20.2
12.0
12.0
12.0
13.0
13.5-
18.2 •
12.0
11.6
15.6
20.2
Memo:
35.7
46.6
21.6
50.1
28.5
30.0
25.1
4.0
1.6
8.7
7.3
7.5
7.0
7.0
7.0
612.5
667.4
217.8
147.1
70.7
449.6
-54.9
637.1
744.0
252.4
174.2
78.2
491.6
-106.9
614.0
685.3
744.3
794.1
278.4
252.3
173.7
203.5
78.5
74.9
492.0
515.7
-130.3 -108.8
630.7
810.6
267.5
195.8
71.7
543.1
-179.9
626.0
688.4
230.2
154.3
75.9
458.2
-62.4
610.2
760.0
256.4
179.3
77.1
503.6
-147.9
High Employment (H.E.) surplus/deficit(-)
evaluated at H.E. unemployment rate of:
5.1 percent
-0.8
6.1 percent
-22.4
n.a.
n.a.
-60.5
-84.0
-2.8
-25.0
-45.1
-67.4
Sponsored agency borrowing5
NIA Budget
Receipts
Expenditures
Purchases
Defense
Nondefense
All other expenditures
Surplus/deficit(-)
-36.6
-58.8
n•a •
11 •a•
*__a ctual
e--estimated
I. OMB Ourrent Budget Estimates, April 1982 and BEA NIA translations, April 1982.
2. In the First Concurrent Resolution on the Budget -- Fiscal Year 1983, the
Congress recommended revenues of $665.9 billion and outlays of $769.8 billion.
3. Includes Federal Financing Bank, Postal Service Fund, Rural Electrification
and Telephone Revolving Fund, Rural Telephone Bank and (beginning in FYI982) the
Strategic Petroleum Reserve.
NOTE:
Quarterly figures may not add to yearly totals due to rounding.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
627.2
609.9
727.2
733.4
253.3
253.6
169.7
169.7
83.5
83.9
473.9
479.8
-100.0 -123.5
-24.8
-47.2
-33.4
-55.4
Seasonally adjusted annual rates
615.6
601.
612.1
634.1
645.3
631.2
747.7
782.7
768.8
799.8
817.3
842.6
250.0
252.3
259.3
263.7
270.1
276.9
175.5
186.5
180.0
191..5
198.6
206.6
74.5
72.3
72.8
72.2
70.3
71.5
497.7
516.5
523.4
547.2
536.1
565.7
-132.2 -165.4 -170.6 -165.7 -172.0 -211.4
-29.4
-51.6
-58.8
-81.0
-58.9
-81.7
-45.0
-68.6
-46.7
-70.7
-91.4
-115.1
n.a.--not available
4. Checks issued less checks paid, accrued items and other transactions.
5. FRB staff estimates include Federal Home Loan Banks, FHLMC (excluding
participation certificates), FNMA (excluding mortgage backed securities),
Federal Land Banks, Federal Intermediate Credit Banks for Cooperatives, and
Student Loan Markettng Association marketable debt on a payment basis. FRB
and Administration estimates are not stricly comparable.
.
_.
BRIEFING NOTES
Uninsured Deposits
Amount
Number
Number
Number
Number
uninsured
uninsured
of banks
of S&Ls
of credit unions
$251 million
1082
20 (approximately)
28 (approximately)
113 ($93 million)
Discount Window
Receiver's certificates issued
172
Discount window loans
1 ($670,000)
Applications made for
discount window
2
Discount rate
Basic rate
1st 60 days
1% increase
next 90 days
1% increase
after 150 days
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Federal Reserve Bank of St. Louis
TABLE 1
GROWTH OF SELECTED CREDIT AGGREGATES AND GNP, 1970-1983
(Percentage changes on end-of-year basis)
Credit Aggregates
Private
domestic
nonfinancial
Kaufman
1
credit
proxy"
Year
Total:
all sectors
1970
8.0
7.3
7.4
8.3
6.9
8.0
6.7
4.9
1971
10.6
10.4
10.4
11.0
9.6
11.5
10.6
9.6
1972
11.7
10.9
11.0
12.6
12.0
14.8
13.3
11.5
1973
12.8
11.3
11.3
13.5
11.8
13.2
11.8
11.6
1974
10.7
9.8
9.4
10.7
9.0
10.2
9.3
7.1
1975
9.3
9.9
9.7
6.8
10.1
4.3
10.1
10.0
1976
11.3
11.5
11.1
10.0
10.8
7.8
11.2
9.3
1977
13.2
12.6
12.6
13.0
10.3
10.8
12.6
12.2
1978
14.5
13.4
12.8
13.7
11.0
13.5
12.5
14.2
1979
12.8
11.7
11.7
13.1
12.1
12.6
11.1
9.9
1980
10.7
10.3
10.0
9.6
10.2
9.1
10.0
9.4
1981
10.3
9.5
9.4
8.9
11.1
7.9
11.4
9.8
1982P
8.7
8.8
8.9
6.8
10.0
7.9
1983P
8.4
8.7
8.9
5.7
8.3
7.7
Total
nonfinancial
Domestic
nonfinancial
Bank
dredit
Nominal
GNP
5.8
-
7.5
Note: Growth in credit aggregates defined as net changes in credit-market debt plus net new equities
as a percent of credit-market debt outstanding at end of previous year. Credit-market debt outstanding not adjusted for changes in market valuation. Data include unpublished estimates of sellerfinanced mortgages. Source - Flow of Funds and Banking Sections.
p--projected.
1. Total of credit-market instruments,.deposits and currency held by private domestic nonfinancial
sectors.
2. Adjusted for breaks in series.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
411.
0
Table 4a
Credit Flows in Relation to Nominal GNP, 1970 to 1983
(annual average percentages)
Credit Aggregates
Year
2/
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Total
Nonfinancial
Domestic
Nonfinancial
1970
12.1
10.2
9.9
1971
15.7
14.3
1972
17.3
1973
Private
Federal
Domestic
Govt.
Nonfinancial Debt
Kaufman
"Credit
Proxy"!!
Bank
Credit/
"L"
8.7
1.2
6.5
3.3
5.2
13.8
11.5
2.3
8.9
4.7
8.0
14.9
14.5
13.2
1.3
11.1
6.1
10.2
18.7
15.2
14.7
14.1
.6
11.0
6.7
9.1
1974
16.3
13.5
12.5
11.7
.8
8.7
4.6
7.4
1975
14.5
13.9
13.1
7.6
5.5
9.8
2.0
8.2
1976
17.3
15.9
14.8
10.8
4.0
10.4
3.4
9.0
1977
20.1
17.4
16.7
13.7
3.0
9.8
4.5
10.1
1978
22.1
18.5
17.0
14.5
2.5
10.3
5.6
10.0
1979
19.9
16.4
15.5
14.0
1.5
11.2
5.3
8.9
1980
17.4
14.8
13.7
10.7
3.0
9.7
4.0
8.2
1981
16.6
13.5
12.7
9.7
3.0
10.5
3.4
9.2
1982
14.6
13.1
12.5
7.8
4.8
10.0
3.4
n.a.
1983
14.1
13.1
12.7
6.4
6.3
8.5
3.3
Note:
11
1/
Total
All Sectors
Credit aggregates defined to include net changes in credit market debt plus net
new equities. Data include unpublished estimates of credit flows attributable
to seller-financed mortgages. Source - Flow of Funds and Banking Sections
Projected
Total of credit-market instruments, deposits and currency held by private domestic
nonfinancial sectors.
Adjusted for breaks in series.
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9:30 AM, E.D.T.
July 20, 1982
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