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Prefatory Note The attached document represents the most complete and accurate version available based on original files from the FOMC Secretariat at the Board of Governors of the Federal Reserve System. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. Content last modified 01/29/2016. Class III FOMC - Internal (FR) April 23, 2010 CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System Contents The Domestic Nonfinancial Economy ........................................................ 1 Sales of New and Existing Homes ................................................... 1 Orders and Shipments of Nondefense Capital Goods...................... 1 Exhibits Private Housing Activity.................................................................. 2 Indicators of Single-Family Housing ............................................... 3 Orders and Shipments of Nondefense Capital Goods...................... 4 Consumer Price Measures................................................................ 5 Producer Price Measures.................................................................. 5 The Domestic Financial Economy .............................................................. Exhibits Selected Financial Market Quotations ............................................. 6 Commercial Bank Credit ................................................................. 7 i 1 Supplemental Notes The Domestic Nonfinancial Economy Sales of New and Existing Homes Home sales strengthened noticeably in March. Sales of new single-family homes jumped 27 percent last month, and the stock of unsold new houses edged down to its lowest level since 1971. Consequently, the months’ supply of new homes moved sharply lower, though it remained elevated. Meanwhile, sales of single-family existing homes rose more than 7 percent in March to an annual rate of 4.7 million units. Both of these sales figures were likely boosted, at least in part, by the anticipated expiry of the homebuyer tax credit, which is only available for home-sale agreements signed through April. Orders and Shipments of Nondefense Capital Goods Shipments of nondefense capital goods excluding aircraft rose again in March, posting a 2.2 percent increase on the heels of a 1.5 percent gain in February. New orders jumped 4 percent, following February's rise of 2.1 percent. These gains leave the level of new orders narrowly above that of shipments. Shipments of high-tech equipment posted particularly robust gains, with shipments of computers and communications equipment rising at 3.7 and 6.2 percent, respectively. New orders for computers surged 12.9 percent, although this series has been quite volatile lately. Outside of the high-tech sector, shipments posted a solid increase of 1.7 percent. New orders rose more rapidly and now stand a little above shipments. The three-month moving average of the staff’s constructed series on real adjusted durable goods orders rose 0.7 percent in March. This series—which strips out nondefense aircraft, defense capital goods, and industries for which reported orders actually equal shipments—is one of the staff’s indicators of near-term industrial production. The Domestic Financial Economy (Exhibits attached) -1- -2Private Housing Activity (Millions of units, seasonally adjusted; annual rate except as noted) 2009 2010 Sector 2009 All units Starts Permits Single-family units Starts Permits Adjusted permits1 New homes Sales Months’ supply2 Existing homes Sales Months’ supply2 Multifamily units Starts Built for rent Built for sale Permits Condos and co-ops Existing home sales Q3 Q4 Q1 Jan. Feb. Mar. .55 .57 .59 .57 .56 .60 .62 .65 .61 .62 .62 .64 .63 .69 .45 .44 .44 .50 .46 .48 .48 .47 .49 .53 .52 .53 .51 .50 .52 .54 .51 .52 .53 .54 .56 .38 9.11 .41 7.72 .37 7.65 .36 7.84 .34 8.24 .32 8.63 .41 6.66 4.57 8.34 4.65 8.06 5.23 6.90 4.49 8.27 4.43 8.22 4.36 8.47 4.68 8.11 .11 .09 .02 .14 .09 .08 .01 .11 .08 .06 .02 .12 .09 n.a. n.a. .13 .10 n.a. n.a. .12 .08 n.a. n.a. .12 .10 n.a. n.a. .14 .59 .63 .73 .65 .62 .65 .67 1. Adjusted permits equal permit issuance plus total starts outside of permit-issuing areas. 2. At current sales rate; expressed as the ratio of seasonally adjusted inventories to seasonally adjusted sales. Quarterly and annual figures are averages of monthly figures. n.a. Not available. Source: Census Bureau. Private Housing Starts and Permits (Seasonally adjusted annual rate) Millions of units 2.0 2.0 1.8 1.8 Single-family starts 1.6 1.6 1.4 1.4 1.2 1.2 Single-family adjusted permits 1.0 1.0 .8 .8 .6 Mar. .4 .6 .4 .2 .2 Multifamily starts Mar. .0 1999 2000 2001 2002 2003 2004 2005 2006 2007 Note: Adjusted permits equal permit issuance plus total starts outside of permit-issuing areas. Source: Census Bureau. 2008 2009 2010 .0 -3- Content partially redacted. Indicators of Single-Family Housing Inventories of New Homes and Homeowner Vacancy Rate New Single-Family Home Sales Millions of units _ (annual rate) 16 600 550 1.4 Percent Thousands of units Inventories of new homes (left scale) 2.75 2.50 500 1.2 2.25 450 1.0 2.00 400 0.8 350 0.6 1.75 300 0.4 1.50 250 Source: For total, Census Bureau; Note: Homeowner vacancy rate is seasonally adjusted by Board staff. Source: Census Bureau. Existing Single-Family Home Sales Millions of units _ (annual rate) 70 Index, 2001=100 Mortgage Rates Percent 140 130 6.5 7.5 7.0 120 6.0 6.5 110 5.5 100 5.0 Existing home sales (right scale) Mar. 4.5 6.0 90 5.5 80 Apr. 21 4.0 70 5_ 0 3.5 .................................200.....................006.............................................10............. 60 ...... 4 2 ...... 2008 20 ... 2002 Note: 2-week moving average. Source: Federal Home Loan Mortgage Corporation. Source: National Association of Realtors. Prices of Existing Homes House Price Expectations Index, 2000 = 100 LP price index Monthly FHFA purchase-only index 20-city S&P/Case-Shiller monthly price index Diffusion index 240 220 80 60 Apr.(p) 200 40 180 20 .. .·· .· .. - 160 Apr.(P) 140 -20 120 ~2~0.._0.._2...................2~00....................2~00 6...............2~00 8............~20 10............... 100 ... 4 ...... ...... ...... Note: LP and S&P/Case-Shiller are seasonally adjusted by Board staff. FHFA is re-indexed to 2000. Source: For FHFA, Federal Housing Finance Agency; for S&P/Case-Shiller, Standard & Poor's; for LP, LoanPerformance, a division of First American CoreLogic. 0 2007 2008 2009 2010 Note: Diffusion index is constructed by subtracting expectations of decrease from expectations of increase. p Preliminary. Source: Thomson Reuters/University of Michigan Surveys of Consumers. -40 -4Orders and Shipments of Nondefense Capital Goods (Percent change; seasonally adjusted current dollars) 2009 Category 2010 Q4 Q1 Jan. Annual rate Feb. Mar. Monthly rate Shipments Excluding aircraft Computers and peripherals Communications equipment All other categories1 9.0 8.7 22.0 -5.0 8.8 -.7 7.4 18.6 -.5 7.1 -4.4 -1.9 4.0 1.4 -2.8 .8 1.5 -4.6 -1.1 2.4 2.4 2.2 3.7 6.2 1.7 Orders Excluding aircraft Computers and peripherals Communications equipment All other categories1 1.6 13.5 26.4 -10.4 14.9 25.6 5.1 -5.0 -29.3 10.3 3.9 -4.4 -10.6 -3.9 -3.7 6.1 2.1 4.6 -13.0 3.3 -7.5 4.0 12.9 3.8 3.1 Memo: Shipments of complete aircraft2 39.8 n.a. 31.7 31.5 n.a. 1. Excludes most terrestrial transportation equipment. 2. From Census Bureau, Current Industrial Reports; billions of dollars, annual rate. n.a. Not available. Source: Census Bureau. Communications Equipment 20 17 14 Non-High-Tech, Nontransportation Equipment Billions of chained (2005) dollars, ratio scale Shipments Orders 20 17 14 11 11 8 59 Billions of chained (2005) dollars, ratio scale 54 59 54 Orders 8 Mar. 5 48 42 48 42 Shipments 5 Mar. 36 2 2000 2002 2004 2006 2008 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Note: Shipments and orders are deflated by a price index that is derived from the quality-adjusted price indexes of the Bureau of Economic Analysis and uses the producer price index for communications equipment for monthly interpolation. Source: Census Bureau. 2 30 210 190 2000 = 100 2000 2002 2004 2006 2008 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Note: Shipments and orders are deflated by the staff price indexes for the individual equipment types included in this category. Indexes are derived from the quality-adjusted price indexes of the Bureau of Economic Analysis. Source: Census Bureau. Billions of chained (2005) dollars, ratio scale 24 100 21 19 80 Industrial production (left scale) 30 Shipments Diffusion Index Computers and Peripherals 240 36 Mar. 170 17 150 15 130 Diffusion index 100 80 13 110 2000 2002 2004 2006 2008 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Note: Shipments are deflated by the staff price index for computers and peripheral equipment, which is derived from the quality-adjusted price indexes of the Bureau of Economic Analysis. Source: Census Bureau; FRB Industrial Production. 60 60 40 40 9 Real M3 shipments (right scale) 90 70 Mar. 20 20 7 0 11 2000 2002 2004 2006 2008 2010 Note: 3-month moving average. The diffusion index equals the percentage of 26 nontransportation equipment categories that experienced an increase in shipments relative to 3 months prior. Source: Census Bureau. 0 -5- Price Measures (Percent change) 12-month change Mar. 2009 1-month change Annual rate Measures 3-month change Monthly rate Mar. 2010 Dec. 2009 Mar. 2010 Feb. 2010 Mar. 2010 CPI Total Food Energy Ex. food and energy Core goods Core services Shelter Other services Memo: Trimmed mean Chained CPI (n.s.a.) 1 Ex. food and energy 1 -.4 4.4 -23.0 1.8 .4 2.3 1.5 3.5 2.3 -.1 1.7 2.3 .2 18.3 1.1 1.9 .8 -.7 2.8 1.0 2.5 .8 2.5 1.0 15.3 1.3 2.9 .7 -.6 2.6 1.2 ... ... .9 2.3 9.2 -.2 -.1 -.2 -2.3 2.5 .6 ... ... .0 .1 -.5 .1 -.1 .1 .0 .3 .0 ... ... .1 .2 .0 .0 -.1 .1 -.1 .3 .0 ... ... PCE prices 2 Total Food and bev. at home Energy Ex. food and energy Core goods Core services Housing services Other services Memo: Trimmed mean Core market-based Core non-market-based .2 4.6 -24.8 1.7 .7 2.0 2.4 1.9 2.3 2.1 -.9 2.0 -.5 18.6 1.3 .3 1.7 .0 2.2 ... 1.1 2.5 2.5 1.4 16.1 1.8 -.7 2.6 -.4 3.5 1.4 1.0 6.4 1.1 2.3 9.0 .5 -.9 .9 -.6 1.4 ... .4 .7 .0 .1 -.6 .0 -.1 .1 .0 .1 .0 .1 -.1 .1 .3 .0 .1 .0 .1 -.1 .2 ... .1 .1 PPI Total finished goods Food Energy Ex. food and energy Core consumer goods Capital equipment Intermediate materials Ex. food and energy Crude materials Ex. food and energy -3.4 -1.3 -25.0 3.8 4.2 3.4 -8.9 -1.8 -38.9 -32.9 6.0 6.8 22.9 .9 1.4 .2 7.7 4.0 33.4 44.5 9.6 13.7 37.7 .0 .7 -.8 9.8 3.7 59.4 25.2 6.2 13.3 11.9 1.9 2.9 .8 9.8 8.9 42.0 59.1 -.6 .4 -2.9 .1 .2 -.1 .1 .9 -3.5 -.6 .7 2.4 .7 .1 .1 .0 .6 .7 3.2 6.0 1. Higher-frequency figures are not applicable for data that are not seasonally adjusted (n.s.a.). 2. PCE prices in March 2010 are staff estimates. ... Not applicable. Source: For consumer price index (CPI) and producer price index (PPI), U.S. Dept. of Labor, Bureau of Labor Statistics; for personal consumption expenditures (PCE), U.S. Dept. of Commerce, Bureau of Economic Analysis; for trimmed mean CPI, Federal Reserve Bank of Cleveland; for trimmed mean PCE, Federal Reserve Bank of Dallas. -6Selected Financial Market Quotations (One-day quotes in percent except as noted) 2008 Change to Apr. 22 from selected dates (percentage points) 2010 Instrument Sept. 12 Jan. 26 Mar. 15 Apr. 22 2008 Sept. 12 2010 Jan. 26 2010 Mar. 15 2.00 .13 .13 .13 -1.87 .00 .00 1.46 1.80 .07 .14 .17 .24 .16 .24 -1.30 -1.56 .09 .10 -.01 .00 Commercial paper (A1/P1 rates)2 1-month 3-month 2.39 2.75 .14 .20 .21 .20 .23 .28 -2.16 -2.47 .09 .08 .02 .08 Large negotiable CDs1 3-month 6-month 2.79 3.09 .20 .29 .23 .34 .31 .43 -2.48 -2.66 .11 .14 .08 .09 Eurodollar deposits3 1-month 3-month 2.60 3.00 .28 .40 .28 .40 .30 .40 -2.30 -2.60 .02 .00 .02 .00 Bank prime rate 5.00 3.25 3.25 3.25 -1.75 .00 .00 Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year 2.24 2.97 3.93 .85 2.38 3.80 .95 2.42 3.84 1.04 2.57 3.89 -1.20 -.40 -.04 .19 .19 .09 .09 .15 .05 U.S. Treasury indexed notes5 5-year 10-year 1.33 1.77 .38 1.37 .56 1.56 .65 1.51 -.68 -.26 .27 .14 .09 -.05 Municipal general obligations (Bond Buyer)6 4.54 4.30 4.33 4.37 -.17 .07 .04 4.26 4.36 6.62 7.22 10.66 3.72 4.14 5.04 5.74 8.76 3.77 4.18 5.02 5.72 8.64 3.73 4.26 4.90 5.55 8.30 -.53 -.10 -1.72 -1.67 -2.36 .01 .12 -.14 -.19 -.46 -.04 .08 -.12 -.17 -.34 5.78 5.03 4.98 4.29 4.96 4.12 5.07 4.22 -.71 -.81 .09 -.07 .11 .10 Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month Private instruments 10-year swap 10-year FNMA7 10-year AA8 10-year BBB8 10-year high yield8 Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable Record high Change to Apr. 22 from selected dates (percent) 2010 Stock exchange index Level Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 D.J. Total Stock Index Date Jan. 26 Mar. 15 Apr. 22 Record high 2010 Jan. 26 2010 Mar. 15 14,165 1,565 5,049 856 15,807 10-9-07 10-9-07 3-10-00 7-13-07 10-9-07 10,194 1,092 2,204 612 11,282 10,642 1,151 2,362 674 11,980 11,134 1,209 2,519 734 12,649 -21.39 -22.78 -50.10 -14.19 -19.97 9.22 10.67 14.31 19.95 12.12 4.62 5.06 6.64 8.88 5.59 1. Secondary market. 2. Financial commercial paper. 3. Bid rates for Eurodollar deposits collected around 9:30 a.m. eastern time. 4. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 5. Derived from a smoothed Treasury yield curve estimated using all outstanding securities and adjusted for the carry effect. 6. Most recent Thursday quote. 7. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 8. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: September 12, 2008, is the last business day before Lehman Brothers Holdings filed for bankruptcy. January 26, 2010, is the day before the January 2010 FOMC monetary policy announcement. March 15, 2010, is the day before the most recent FOMC monetary policy announcement. _______________________________________________________________________ -7Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit 2008 2009 4.2 Total Q3 2009 Q4 2009 Q1 2010 Level1 Mar. 2010 H1 2009 Mar. 2010 -7.1 -5.5 -8.7 -9.3 -6.8 -5.3 9,308 Loans2 Total Core To businesses Commercial and industrial Commercial real estate 4.2 4.6 -10.2 -8.3 -7.5 -4.6 -14.4 -12.4 -12.7 -12.5 -10.1 -11.5 -6.3 -9.1 6,983 6,201 14.6 6.4 -18.6 -4.4 -14.7 -1.4 -26.2 -6.1 -23.8 -8.9 -20.6 -9.5 -17.9 -8.0 1,284 1,609 To households Residential real estate Revolving home equity Closed-end mortgages Consumer Memo: Originated3 Other -3.9 12.8 -8.8 7.2 7.1 1.6 -6.2 .5 -8.5 -3.7 -3.9 -23.4 -1.7 6.0 -4.5 -.6 -.9 -28.1 -11.3 -4.9 -13.7 -5.6 -5.7 -30.3 -10.4 -4.8 -12.5 -8.1 -8.1 -14.3 -6.6 -3.3 -7.9 -12.8 -12.5 1.8 -6.1 -2.0 -7.9 -6.1 -6.1 16.6 2,120 605 1,515 1,187 1,212 783 4.1 16.2 -9.5 4.1 9.2 -3.3 1.8 1.9 1.6 10.7 23.9 -8.3 1.9 8.4 -8.1 3.6 8.5 -4.5 -2.4 4.3 -13.6 2,325 1,463 862 Securities Total Treasury and agency Other4 Note: Yearly annual rates are Q4 to Q4; quarterly and monthly annual rates use corresponding average levels. Data have been adjusted to remove the effects of mark-to-market accounting rules (FAS 115) and the initial consolidation of certain variable interest entities (FIN 46) and off-balance-sheet vehicles (FAS 166 and 167). Data also account for the effects of nonbank structure activity of $5 billion or more. 1. Billions of dollars. Pro rata averages of weekly (Wednesday) levels. 2. Excludes interbank loans. 3. Includes an estimate of outstanding loans securitized by commercial banks that retained recourse or servicing rights. 4. Includes private mortgage-backed securities; securities of corporations, state and local governments, and foreign governments; and any trading account securities that are not Treasury or agency securities. Source: Federal Reserve Board. Loans and Leases in Bank Credit Survey Measures of Standards and Demand for Loans Billions of dollars Monthly, SA Net percent 8200 NBER peak Quarterly Standards Demand 8000 100 NBER peak 80 60 40 7800 20 7600 0 Q2 Mar. 31* -20 7400 -40 -60 7200 -80 7000 2007 2008 2009 2010 *Data for March 31, 2010, reflect banks adoptions of FAS166/167. Source: Federal Reserve. -100 1990 1993 1996 1999 2002 2005 2008 Note: The aggregate indexes of changes can be interpreted as the net percentage of core loans on SLOOS respondents’ balance sheets each quarter that were in categories for which banks reported a tightening in standards or strengthening in loan demand. Source: Senior Loan Officer Opinion Survey. Note: Shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research (NBER).
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