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CONFIDENTIAL (FR) August 8, CLASS II - FOMC SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System 1980 TABLE OF CONTENTS Page THE DOMESTIC NONFINANCIAL ECONOMY Home sales . . . . . . . . . . . . . . . . .. . . .. . . 1 Consumer installment credit . . . . . . . . . . . . ... Commercial paper . . . . . . . . . . . . . . . . . .. . Deposit flows at nonbank thrift institutions . . . . . . . 1 1 2 THE DOMESTIC FINANCIAL ECONOMY TABLES: Consumer installment credit . . . . . . . . . . . . Commercial paper outstanding . . . . . . . . . . . . Commercial bank credit and short- and intermediateterm business credit . . . . . . . . . . . . . . . Monetary aggregates . . . . . . . . . . . . . . . . Selected financial market quotations . . . . . . . . . . . . 3 4 . . . . . . 5 6 7 SUPPLEMENTAL NOTES Home sales Housing demand increased sharply in June according to new data. Sales of new houses in June rose over 15 percent from May and were more than 50 percent above April's depressed rate. At this improved sales pace, builders had inventories of 7.8 months' supply--down from the record levels seen this spring. In addition, sales of existing houses rose 7 percent in June, the first increase after 8 months of decline. House prices also showed some upward movement. The average selling price of a new house in June was $77,900, 5 percent above a year earlier. The average selling price of existing houses, at $74,100, in June was 12 percent above June, 1979. Consumer installment credit Consumer installment credit outstanding contracted at a record annual rate of 13-1/2 percent in June, slightly exceeding the 13-1/4 percent decline in May. than credit liquidations. New credit extensions again dropped by more The declines in credit outstanding were mainly at commercial banks and credit unions, and were centered in auto credit and revolving credit. Commercial paper Commercial paper outstanding fell $800 million seasonally adjusted in July, the first decrease since October 1976. All of the nonbank- related components of the series declined in June. Nonfinancial paper increased only $600 million in July, well below the average monthly increases of $2.5 billion in the second quarter and the $1.9 billion average rise in the first quarter. Dealers reported that the large number of long-term financings by businesses in June and July contributed to this weakness. Over the two months, nonfinancial commercial paper issuers sold almost $6-1/2 billion of long-term debt, a portion of which apparently was used to pay down outstanding commercial paper. Deposit flows at nonbank thrift institutions Data on deposit flows at savings and loan associations in the last 10 days of July, received too late to be incorporated into the monetary aggregates table included in this Supplement, indicate somewhat slower growth than had been estimated. The rate of expansion of total small time and savings deposits at all thrifts is now estimated to have been at about a 6-3/4 percent annual rate in July, 1 percentage point below the July figure in the table. Savings deposit growth remained quite strong, while small time deposits now appear to have declined slightly. CONSUMER INSTALLMENT CREDIT 1 1980 1978 1979 Q2 Apr. May June 44.8 19.4 53.1 35.5 12.9 37.8 -35.5 -11.4 83.2 -23.8 -7.6 112.7 -41.2 Percent Bank share (percent) 72.7 -41.6 -13.6 76.8 Extensions Billions of dollars Bank share (percent) 298.4 47.8 322.6 46.4 257.9 41.4 270.6 41.4 254.9 41.5 248.4 41.4 253.5 287.1 293.5 294.4 296.1 289.9 17.4 17.7 16.7 16.8 16.9 16.5 19.6 23.6 12.6 12.3 -14.9 -12.7 -7.7 -6.6 -16.1 -13.8 -20.9 -18.1 89.0 91.9 62.8 68.7 62.3 57.2 Change in outstandings Billions of dollars Percent 7.8 20.7 8.1 17.9 -6.5 -12.1 -4.7 -8.7 -5.8 -11.0 -9.0 -17.0 Extensions Billions of dollars 104.6 120.8 120.1 123.5 121.1 115.6 Total Change in outstandings Billions of dollars Liquidations Billions of dollars Ratio to disposable income (percent) -13.3 Automobile credit Change in outstandings Billions of dollars Percent Extensions Billions of dollars Revolving credit 1. Quarterly and monthly dollar figures and related percent changes are at seasonally adjusted annual rates. COMMERCIAL PAPER OUTSTANDING (Monthly totals or monthly averages, seasonally adjusted; billions of dollars) Net changes in outstandings 12 months 1980 1979 Outstanding Q3 Q4 Ql Q2 June Julyp ending JulyP 2.3 1.5 2.5 2.6 1.1 -.8 1.9 125.7 .5 1.8 .5 .5 -.1 1.3 .3 1.2 .8 .4 .4 .4 .6 1.8 -.1 .1 -.1 1.9 -.3 2.9 .4 .3 * 2.5 -1.3 2.4 -.5 .8 -1.3 2.9 .1 -.8 -1.4 -.1 -1.4 .6 .3 1.6 .2 .2 * 1.5 21.8 103.9 60.6 15.6 45.0 43.2 July 1980P Total commercial paper outstanding Bank-related Nonbank-related Financial Dealer Direct Nonfinancial p--preliminary. *--less than + 0.05 billion. 1. Monthly totals are averages of weekly data. Note: Components may not add to total due to rounding. COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data) 1 1979 Q4 1980 Q1 ---------1. 2. Total loans and investments at banks2 Investments Q2e May Junee Julye July '79 to July '80e Commercial Bank Credit ------- 3.4 11.5 -4.4 -6.1 -2.8 6.4 3.5 7.3 10.6 20.3 15.9 24.5 9.3 6.0 3. Treasury securities 5.9 3.0 10.6 18.0 30.4 44.5 5.6 4. Other securities 8.3 9.4 11.2 21.4 10.8 14.9 11.2 3.4 12.8 -9.5 -15.0 -9.5 0.0 4.9 1.6 7.6 5. Total loans 2 6. Business loans 6.0 16.4 -7.9 -13.9 -4.8 7. Security loans -8 8.5 -32.8 -26.2 -50.9 -7.6 8. Real estate loans 114.2 11.9 9. Consumer loans 5.5 3.7 10. 11. 12. Total short- and intermediateterm business credit (sum of lines 13,14 and 15) Business loans net of bankers acceptances1 Commercial paper issued by nonfinancial firms3 1.0 2.4 -21.5r -25.7 -1.9 -25.6r -84.1 -38.1 5.3 n.a. 9.9 n.a. Short- and Intermediate-Term Business Credit - 6.4 22.0 4.1 3.7 6.3 17.6 -8.8 -16.3 -5.4 15.5 76.2 86.9 119.7 87.7 8.2 n.a. n.a. 1.2 7.6 16.9 67.4 5.8 3.2 12.9 13. Sum of lines 11 & 12 7.0 23.1 1.3 14. Finance company loans to business 4 4.0 -2.8 -4.0 -5.1 -6.9 n.a. n.a. Total bankers acceptances outstanding4 4.6 54.1 33.9 50.7 44.0 n.a. n.a. 15. -1.4 1. Average of Wednesdays for domestic chartered banks and average of current and preceding ends of months for foreign-related institutions. 2. Loans include outstanding amounts of loans reported as sold outright to a bank's own foreign branches, unconsolidated nonbank affiliates of the bank, the bank's holding company (if not a bank), and unconsolidated nonbank subsidiaries of the holding company. 3. Average of Wednesdays. 4. Based on average of current and preceding ends of months. r--revised n.a.--not available. e-estimated. MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted) 1 July '79 1980 1979 to Q1 Q4 -Money stock measures 1. M-1A 2. M-1B 3. M-2 4. M-3 -3.9 3 Overnight RPs and Eurodollars, NSA Money market mutual fund shares, NSA Commercial banks savings deposits small time deposits Thrift institutions savings deposits small time deposits Large time deposits at commercial banks, net 4 at thrift institutions Term RPs, NSA -1.6 7.0 -8.5 31.8 8.1 12.1 -4.6 -37.9 13.5 -33.1 120.0 -7.5 -72.0 151.9 82.7 59.1 127.2 8.6 -16.5 32.1 3.7 -26.0 22.3 28.3 6.9 9.8 -19.3 -22.6 29.1 33.9 3.7 -0.3 -22.5 -27.1 12.0 19.4 17.8 10.6 5.6 -7.5 14.1 6.4 -21.5 19.0 4.1 20.2 90.8 -16.0 9.9 7.4 72.6 28.9 -31.9 -19.4 -1.2 34.4 0.0 8.3 3.4 29.3 7.7 -Average MEMORANDA: 21. Managed liabilities at commercial banks (22+23) Large time deposits, gross 22. Nondeposit funds 23. Net due to related foreign 24. institutions, NSA Other 5 25. 26. U.S. government deposits at commercial banks6 0.7 -2.4 5.5 5.8 8.5 2.9 12.6 7.8 8. M-2 minus M-1B (9+10+11+14) May June Julye e July '80 Percentage change at annual rates - 4.5 5.0 7.1 9.1 Selected components 5. Currency 6. Demand deposits 7. Other checkable deposits, NSA 2 9. 10. 11. 12. 13. 14. 15. 16. 17. 18 19. 20. Q2 9.8 8.9 11.4 14.9 17.8 13.1 7.4 10.7 17.0 11.5 9.8 12.6 78.3 18.8 67.6 132.9 10.9 32.9 -3.1 10.9 23.7 4.9 -22.0 -25.9 0.0 44.3 11.9 5.5 73.5 19.1 245.3 84.1 13.5 38.6 -3.1 7.8 25.6 0.0 -30.2 -36.3 3.3 42.7 9.3 0.8 35.1 10.2 -4.9 183.6 9.5 -9.9 28.3 3.7 -15.9 16.2 13.1 6.7 65.1 -9.1 monthly change in billions of dollars- -1.6 2.0 -3.6 8.0 3.1 4.9 -7.5 0.0 -7.5 -2.4 1.7 -4.1 -14.2 -5.0 -9.2 -3.7 -3.9 0.2 -2.5 -1.1 1.6 3.3 -6.0 -1.5 -3.6 -0.5 -8.2 -1.0 -3.0 3.2 -1.4 0.7 -1.0 -0.2 0.4 0.8 -0.8 2.2 -0.4 1. Quarterly growth rates are computed on a quarterly average basis. 2. Consists of ATS and NOW balances at all institutions, credit union share draft balances, and demand deposits at mutual savings banks. 3. Overnight and continuing contract RPs issued to the nonbank public by commercial banks, net of amounts held by money market mutual funds, plus overnight Eurodollar deposits issued by Caribbean branches of U.S. member banks to U.S. nonbank customers. 4. Net of large denomination time deposits held by money market mutual funds and thrift institutions. 5. Consists of borrowings from other than commercial banks in the form of federal funds purchased, securities sold under agreements to repurchase and other liabilities for borrowed money (including borrowings from the Federal Reserve), loans sold to affiliates, loans RPs, and other minor items. 6. Consists of Treasury demand deposits at commercial banks and Treasury note balances. n.a.-not available. e-estimated. SELECTED FINANCIAL MARKET QUOTATIONS 1 (Percent) 1979 1980 Mar-Apr. Mid-June** FOMC FOMC Oct. 5_ High Low July 9 __ _ Change from: Mar-Apr. Mid-June FOMC July 9 Aug. High Low __Y __Y 7 _I Short-term rates Federal funds 2 11.91 19.39 8.99 9.26 9.60 -9.79 Treasury bills 3-month 6-month 1-year 10.70 10.63 10.28 16.00 15.64 14.58 6.18 6.60 7.00 7.97 7.90 7.78 8.38 8.56 8.55 -7.62 -7.08 -6.03 2.20 1.96 1.55 Commercial paper 1-month 3-month 6-month 11.73 11.86 11.84 18.00 17.69 17.25 7.98 7.78 7.59 8.45 8.32 8.19 8.59 8.76 8.78 -9.41 -8.93 -8.47 .61 .98 1.19 .14 .44 .59 12.09 12.50 12.80 17.87 18.59 18.47 7.96 7.90 7.66 8.59 8.65 8.60 9.01 9.16 9.40 -8.86 -9.43 -9.07 1.05 1.26 1.74 .42 .51 .80 12.45 12.79 19.04 19.60 8.88 8.99 9.06 9.23 9.83 10.09 -9.21 -9.51 .95 1.10 .77 .86 13.50 20.00 12.00 11.50 11.00 -9.00 -1.00 -. 50 10.01 9.60 9.36 14.53 13.65* 12.85* 8.56 9.47 9.49 9.11 10.14 10.14 9.86 10.71 10.68 -4.67 -2.94 -2.17 1.30 1.24 1.19 .75 .57 .54 6.64 9.44 7.44 7.88 8.59 - .85 1.15 Corporate Aaa New issue 5 Recently offered 10.22 10.25 14.22 14.12 10.53 10.79 11.50 11.18 11.93p 11.95p -2.29 -2.17 1.40 1.16 Primary conventional mortgages 11.35 16.35 12.35 12.18 12.25 -4.10 -. 10 3 Large negotiable CDs 1-month 3-month 6-month Eurodollar deposit 1-month 3-month 2 Bank prime rate Intermediate- and longterm rates .S. Treasury (constant maturity) 3-year 10-year 30-year Municipal 4 (Bond Buyer) Mar-Apr. Mid-June FOMC High Low Oct. 5 Stock Prices 897.61 759.13 Dow-Jones Industrial 55.30 63.39 NYSE Composite 235.15 215.69 AMEX Composite 152.29 124.09 NASDAQ (OTC) 1. One-day quotes except as noted. 2. Averages for statement week closest to 3. Secondary market. 4. One-day quotes for preceding Thursday. 5 881.91 66.36 297.60 159.18 Aug. 7 Mar-Apr. High 897.27 67.46 307.27 164.09 950.94 70.60 317.13 175.24 191.81 15.30 101.44 51.15 date shown. Averages for preceding week. 6. One-day quotes for preceding Friday. *--Highs reached on February 26. **--Most lows occurred on or around June 13. p-- preliminary. FOMC July 9 .43 .77 Mid-June FOMC July 9 Low 69.03 4.24 19.53 16.06 53.67 3.14 9.86 11.15
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