View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Prefatory Note

The attached document represents the most complete and accurate version
available based on original copies culled from the files of the FOMC Secretariat at the
Board of Governors of the Federal Reserve System. This electronic document was
created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions
text-searchable. 2 Though a stringent quality assurance process was employed, some
imperfections may remain.
Please note that this document may contain occasional gaps in the text. These
gaps are the result of a redaction process that removed information obtained on a
confidential basis. All redacted passages are exempt from disclosure under applicable
provisions of the Freedom of Information Act.

1

In some cases, original copies needed to be photocopied before being scanned into electronic format. All
scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly
cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial
printing).
2
A two-step process was used. An advanced optimal character recognition computer program (OCR) first
created electronic text from the document image. Where the OCR results were inconclusive, staff checked
and corrected the text as necessary. Please note that the numbers and text in charts and tables were not
reliably recognized by the OCR process and were not checked or corrected by staff.

CONFIDENTIAL (FR)
CLASS II - FOMC

August 10,

SUPPLEMENT
CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the
Federal Open Market Committee

By the Staff
Board of Governors
of the Federal Reserve System

1979

TABLE OF CONTENTS
Page
THE DOMESTIC NONFINANCIAL ECONOMY
Producer prices ..
. . . . . .
. . . . . .
0
. .
Book value of wholesale trade inventories . . . . .

.. .
. . .

TABLES:
Recent Changes in Producer Prices . .
Wholesale Trade Inventories . . . . . * .

. . . . ..
. .
.
* .

THE DOMESTIC FINANCIAL ECONOMY
Revision of business loan figures, Table II-6
Commercial paper outstanding
Commercial paper rates ..

. . . ...
.
. . ..
.. . .

TABLES:
Change in Commercial Paper Outstanding

. ...

Change in Business Credit at Finance Companies
. . . .
Selected Financial Market Quotations
*
. . . . *
Monetary Aggregates . . . . .
INTERNATIONAL DEVELOPMENTS

ERRATA (Table: U.S. International Transactions)

*

.

6

*

0

*

SUPPLEMENTAL NOTES
Producer prices increased sharply in July at all stages of
production.

Prices of finished goods rose at a 1.1 percent, more than

twice the rates in May and June.

Prices of consumer foods were unchanged

after three months of decline, while prices of consumer finished goods
excluding foods rose 1.9 percent.
goods the increase was 0.8 percent.

Excluding energy items from these
Capital equipment prices rose 0.8

percent rate, up from the increases in the two preceding months but
about the same as the average monthly increase over the first half of
the year.

Prices of materials, both intermediate and crude, rose sharply

again in July, particularly prices of foodstuffs.
Sales of single-family homes fell sharply in June and prices
continued to rise rapidly.

Existing home sales--by far the largest

part of the market--fell almost 8 percent in June to the lowest level in
two years.

At the same time, merchant-builder sales of new homes were

down 5 percent with declines experienced in all regions of the country.
Conversely, the average prices of both new and existing units sold rose
sharply in June.

The average price for a new home sold in June was

$74,200, 17 percent above a year earlier; the average price for an existing
home sold, $66,100, was 20 percent higher than in June 1978.
The stock of unsold new homes continued at relatively high levels
in June.

The number of units on the market at the end of the month was

down slightly from a month earlier, but it was within the range experienced
during the past year.

However, lower sales pushed the stock of units

for sale to 7.5 months' supply--a figure well above recent levels.

The book value of wholesale trade inventories rose at an $8.1
billion annual rate in June, well above the downward revised May increase
of $3.4 billion but substantially below the average during the first four
months of the year.

For the second quarter as a whole, stocks rose at a

$7.4 billion rate, about half the first quarter pace.

In June the moderate

rise in stocks was accompanied by only a modest gain in sales (0.5 percent).
As a result, the inventory to sale ratio for all wholesale trade remained
at the May level of 1.17, somewhat below average in the basis of recent
historical experience.
Inventories held by wholesalers of durable products increased
at a $4.4 billion rate in June, following the $5.7 billion pace in the
previous month.

The increase for the second quarter was just below that

during the first three months of the year.

In June, the largest increase

was at wholesalers of hardware, plumbing, and heating equipment.

Stocks

rose at motor vehicle suppliers, mostly importers of foreign cars and
also some truck distributors; these stocks had fallen for the three consecutive months preceding June.

The book value of nondurable inventories

rose at a $3.7 billion rate in June, following a decline now shown for
May.

In the second quarter as a whole, these stocks rose less than 1/3

as much as in the first quarter.

All of the June increase in nondurable

inventories was in raw farm products and "other" wholesale goods, all
other published categories reported declines, with the largest decline
at wholesalers of petroleum and petroleum products.

RECENT CHANGES IN PRODUCER PRICES
(Percent change at compound annual rates; based
on seasonally adjusted data)1/
Relative

importance

1979

Dec. 1978

1978

QI

QII

June

July

Finished goods
Consumer foods
Consumer nonfoods
Capital equipment

41.0
10.4
18.6
12.1

9.2
11.9
8.4
8.0

14.3
21.0
13.4
10.3

6.8
-11.1
16.8
9.2

6.2
-14.5
16.6
6.1

13.0
.0
22.3
9.4

Materials:
Intermediate 2/
Construction
Crude nonfood
Crude food

44.8
8.3
4.8
6.8

8.3
11.0
15.6
18.3

14.0
11.5
29.2
31.0

14.3
8.3
22.0
-7.1

11.6
6.4
39.1
-14.2

19.5
8.3
17.4
24.8

7.1

21.4

57.7

50.6

56.5

Memorandum:
Energy commodities 3/ 11.0

1/ Changes are from final month of preceding period to final month of period
indicated. Monthly changes are not compounded.
2/ Excludes intermediate materials for food manufacturing and manufactured
animal feeds.
3/ Fuels and related products and power. This series is on a commodity basis,
while the other data in this table are on a stage of processing basis.

WHOLESALE TRADE INVENTORIES: CHANGE IN BOOK VALUE
(Billions of dollars; seasonally adjusted, annual rate)

1978

1979
May(r)
QII(p)

QI

June(p)

QIII

QIV

10.2

7.7

14.6

13.2

7.4

3.4

8.1

10.0

7.5

5.6

9.2

5.9

5.3

5.7

4.4

8.5

2.7

2.1

5.4

7.3

2.2

-2.3

3.7

Excluding farm

4.4

3.3

2.7

4.5

6.4

1.3

-. 6

1.9

Farm

4.1

-. 6

-. 7

.9

.9

.9

-1.8

1.8

QI
Total
Durable
Nondurable

QII

18.5

r = revised
p = preliminary
Totals may not add due to rounding.

WHOLESALE TRADE INVENTORY/SALES RATIO

QI
Total
Durable
Nondurable
r = revised
p = preliminary

QII

1978
QIII

QIV

QI

1979
May(r)
QII(p)

June(p)

1.26

1.20

1.20

1.20

1.23

1.19

1.17

1.17

1.76

1.70

1.68

1.67

1.68

1.66

1.65

1.65

.83

.78

.78

.78

.83

.79

.77

.77

The Domestic Financial _Economy

Revision of business loan figures, Table III-6.
Due to revisions of business loan estimates in one district,
some of the seasonally adjusted annual rates of change for 1979 reported
in the Greenbook have been revised.

Where numbers have been changed,

previous figures are shown in parentheses.

12
months
ending

1979
Q2

6.

Business loans

22.6

19.4

16.9

(21.8)

(19.5)

22;8
(22.0)

22.1

21;1

21.5

July e

June

Q1

July e

17.0
(16.7)

Memoranda:
11.

12.

Sum of items 6 รท 10
(Business loans plus
commercial paper)
Memo item 11 plus
business loans from

finance companies

(20.5)

19.8
(20.3)

18.3
(20.0)

18.8

20;1

n.a.

n.a.

(20.2)

Commercial paper outstanding increased $900 million in July,
sharply below the record $5.4 billion gain in June and the smallest monthly
advance since October 1978 (see table).

Bank-related issuers allowed a

$300 million run-off in July after increasing their commercial paper
outstandings in each of the four previous months.

Nonbank-related finan-

cial issuers, as a group, increased their outstandings by only $100 million,
partly because Chrysler Financial Corporation tapped its bank credit lines

to redeem maturing paper.

In the nonfinancial sector, public utilities

and several foreign corporations were active issuers in July as outstandings
climbed $1.2 billion, well-above the monthly average in the first half
of this year.
Commercial paper rates have increased somewhat further in recent
days.

Dealers report that this upward movement mostly reflected delayed

reaction to recent increases in other money market interest rates as well
as large sales by several major issuers.

These individuals indicate also

that the current problems of Chrysler Corporation have had very little
impact on the market and that spreads between high- and lower-rated
commercial paper have not widened.
Business credit at finance companies climbed by $1.0 billion
during June (latest available data).

Retail automotive loans on commercial

vehicles decreased slightly reflecting in part the reduced pace of truck
sales in June, but wholesale automotive credit expanded by $600 million
as dealer inventories of cars and trucks continued to increase (see
table).

The equipment and all other loan category expanded by $800

million in June.

Industry representatives reported strong sales of

agricultural equipment accounted for a major portion of this increase.
Weaker than anticipated deposit flows at sampled savings and
loan associations in the last 10 days of July have led to a downward
revision in the estimated combined growth rate for S&Ls and MSBs to
about 5-1/4 percent from the 6-3/4 percent reported in the Greenbook
(end-of-month basis).

CHANGE IN COMMERCIAL PAPER OUTSTANDING
(monthly totals or monthly averages, sea. adj., billions of dollars)

QI

QII

1979
May

Total commercial paper

2.4

3.6

Bank-related
1/
Nonbank-related
Financial
Dealer-placed
Directly placed
Nonfinancial

0.2
2.2
1.8
0.6
1.2
0.4

0.8
2.7
1.8
0.8
1.0
0.9

June

July

Outstanding
7/31/79

3.4

5.4

0.9

102.5

0.9
2.5
2.2
0.7
1.5
0.2

1.0
4.4
3.4
1.3
2.1
1.1

-0.3
1.2
0.1
0.4
-0.3
1.2

18.7
83.8
58.9
13.1
45.8
24.8

1/ Not seasonally adjusted.
NOTE:

Components may not add to total due to rounding.

CHANGE IN BUSINESS CREDIT AT FINANCE COMPANIES
(monthly totals or monthly averages, sea. adj., billions of dollars)

QI

QII

1979
April

May

June

0.8

1.0

0.9

1.0

1.0

68.8

Retail automotive (com'l.)
0.2
0.5
Wholesale automotive
-0.1
Accounts receivable 1/
Equipment loans & all other 0.2

-0.6
-0.4

-0.5
0.1
0.2

0.1
0.6
0.1
0.2

-0.1
0.6
-0.2
0.8

15.2
16.1
6.7
31.0

Total business credit

1/ Includes factored accounts receivable.

Outstanding
6/30/79

SELECTED FINANCIAL MARKET QUOTATIONS
(percent)

1978 1/

1979 1/

,

FOMC
July 11

1979 2/
July
31

August
9

Change from:
July
FOMC

High*

High

Low**

10.25

6.58

10.75

9.93

10.28

10.75

10.67

+.39

9.25
9.30
9.51
9.62

5.82
6.16
6.45
6.55

9.99
9.69
9.63
9.68

8.76
8.85
8.91
8.64

9.35
9.27
9.18
8.76

9.07
9.18
9.28
8.95

9.36
9.40
9.41
8.96

+.01
+.13
+.23
+.20

10.29
10.52
10.56

6.48
6.68
6.70

10.36
10.57
10.62

9.49
9.66
9.60

9.91
9.86
9.78

9.95
9.99
9.96

10.33
10.14
10.06

+.42
+.28
+.28

10.36
10.96
11.52

6.61
6.76
7.01

10.36
10.92
11.51

9.82
9.84
9.86

10.04
10.05
10.10

10.12
10.27
10.46

10.35
10.39
10.49

+.31
+.34
+.39

11.48
11.95
11.57

6.86
7.20
7.75

11.14
11.81
11.75

10.30
10.40
11.50

10.61
10.64
11.50

11.03
11.13
11.75

10.90
11.00
11.75

+.29
+.36
+.25

9.58
9.22
8.99

7.38
7.72
8.00

9.61
9.35
9.31

8.76
8.73
8.80

8.90
8.90
8.90

9.05
9.02
8.98

9.00
8.98
8.94

+.10
+.08
+.04

6.67

5.58

6.58

6.08

6.08

6.19

6.13

+.05

9.30
9.54

8.61
8.48

9.87
9.94

9.39
9.40

9.41

9.59

9.44

10.38

Short-term rates
Federal funds 1/
Treasury bills
1-month
3-month
6-month
1-year
Commercial paper
1-month
3-month
6-month
Large negotiable CDs 3/
1-month
3-month
6-month
Eurodollar deposit 1/
1-month
3-month
Bank prime rate

Low

8.98

11.13

10.38

11.13

11.08

11.08

Intermediate- and longterms rates
U Q. Treasury.

3tant maturity)
year
7-year
20-year
Municipal
(Bond Buyer) 4/
Corporate Aaa
New issue 5/
Recently offered 6/
Primary conventional
mortgages 6/

-9.63

9.39

+.03
-.05

Low
Stock prices
Dow-Jones Industrial
NYSE Composite
AMEX Composite
NASDAQ (OTC)
1/
2/
3/
4/
5/
6/
7/
**

High

Low

High

FOMC

July

August

July

7/

7/

7/

7/

July 11

31

9

FOMC

742.12
48.43
119.73
102.66

907.74
60.38
176.87
149.53

813.71
54.25
154.98
119.92

873.66
60.36
200.54
144.27

843.86
58.86
197.83
138.85

846.42
59.14
198.69
141.33

858.28
60.14
200.54
144.27

+14.42
+1.28
+2.71
+5.42

Daily averages for statement week except where noted.
One-day quotes except as noted.
Secondary market.
One-day quotes for preceding Thursday.
Averages for preceding week.
One-day quotes for preceding Friday.
"lendar week averages.
highs were reached at or close to the end of 1978.
as were generally reached at end of June or early July.

Updated

MONETARY AGGREGATES
(Seasonally adjusted annual rates of growth) 1/

to

H1
Major monetary aggregates
1. M-l (currency plus demand
deposits)
2. M-2 (M-1 plus time & savings
deposits at CBs, other
than large CDs)
3. M-3 (M-2 plus all deposits
at thrift institutions)
Bank time and savings deposits
4. Total
5. Other than large negotiable
CDs at weekly reporting banks
Savings deposits
6.
7.
Individuals 2/
Other 3/
8.
Time deposits
9.
Small time 4/
Large time 4/
Time and savings deposits sub12.
ject to rate ceilings (6+10)
Deposits at nonbank thrift institutions
13. Total
14. Savings and loan associations
15. Mutual savings banks
16. Credit unions
MEMORANDA:
17. Total U.S. Govt. deposits 6/
18. Total large time deposits 7/
19. Nondeposit sources of funds 8/

July '78

1979

1978
QIII

8.0

7.9

4.1

-2.1

7.7

9.8

7.6

8.3

10.3

12.2

JulyP

7.6

14.8

10.1

5.0

1.8

8.6

14.2

12.7

7.7

9.3

4.7

7.9

11.9

10.6

8.4

11.3

12.3

8.4

1.2

0.8

12.2

7.6

7.6
2.9
2.7
5.2
11.7
6.8
21.5

11.0
2.9
4.1
-10.1
17.9
12.7
26.9

10.2
0.2
0.0
0.0
18.2
15.8
22.4

4.5
9.3 13.6
7.8
-9.6 -3.1
-9.4 -2.9
6.5
-13.0 -8,1 24.7
15.6 18.5 17.6
16.5 36.3 36.0
13.6 -12.1 -16.9

14.6
9.4
11.2
-8.1
18.1
21.4
10.3

9.7
-1.5
-1.3
-3.3
18.9
24.9
8.0

4.7

6.9

7.0

15,3

10,0

QI

2.2

QII

July '79P

June

QIV

15.1

21.6

9.2
11.1 11.6
8.8
6.8
8.8
7,6
9.5
12.3 13.1
11.3
7.8
9.9
9,6
5.6
6.8
7.8
4.6
3.1
1.7
1.7
17.0
13.7 10.1
0.8
8.3 17.8
6.6
Average monthly changes, billions of dollars
1.1 -0.4
-2.0
1.5
4.5
2.2
0.3
3.6
2.9
4.7
1.3 -6.3 -7.2
0,7
0.8
1.4
3.0
2,4
2,3
3,9
1.91'

9.4
11.1
5.0
7.9
0.1
0.4
2.4- /

p-preliminary
1/ Quarterly growth rates are computed on a quarterly average basis.
2/ Savings deposits held by individuals and nonprofit organizations.
3/ Savings deposits of business, government, and others, not seasonally adjusted.
4/ Small time deposits are time deposits in denominations less than $100,000. Large time
deposits are time deposits in denominations of $100,000 and above excluding negotiable

5/
6/
7/
8/

9/

CDs at weekly reporting banks.
Growth rates computed from monthly levels are based on average of current and preceding
end-of-month data.
Includes Treasury demand deposits at commercial banks and Federal Reserve Banks and
Treasury note balances.
All large time certificates, negotiable and nonnegotiable, at all CBs.
Nondeposit borrowings of commercial banks from nonbank sources include Federal funds
purchased and security RPs plus other liabilities for borrowed money (including borrowings from the Federal Reserve), gross Eurodollar borrowings, and loans sold, less
interbank borrowings.
Based on data through'July 25, 1979.

-10-

International Developments
ERRATA:
Replace the corrected table on the following page for
page IV-8.

Transactions
U.S. International RESTRICTED
(in millions of dollars; receipts, or increase in liabilities,

RESTRICTL

l

U

S

sactions

Internatiop

1977

1978

Year

Year

-. ,325
14,371
-16,696

-2.685
14,843
-17,528

3.562

-13.568

13.753

5.463

2.004

5.850

-2.391

5,616
-11,400

7,173
-1,425

-2,880
-6,628

14,452
742

7,599
-1,165

-2,271
4,122

5,464
454

4,406
-5,741

-424
1,436

-9,435
1,501

-2,642
456

-4,836
776

-984
-458

-1,750
778

-135
287

-727
659

-3.068
1,112
1,326
-5,506

-783
1,583
1,124
-3,490

-114
378
-17
-475

-108
513
297
-918

-564
-11
423
-976

-94
258
274
-626

217
177
48
-8

242
*
171
71

534

2.264

-1.069

1,551

2,583

-239

1.245

-1.194

-290

35.448

31.243

4.700

16.728

-8.696

-10.342

-6.156

-6.921

2.736

-13.719

Through interbank transactions with
a) Own offices in foreign countries
b) Unaffiliated banking offices in foreign countries

-2,718
-2,204

Foreign net purchases of U.S.

Treasury obligations 2/

14. Change in foreign official reserve assets in U.S.

(increase +)

June

Apr.
-2.629
13,546
-16,175

-3.909

13.

1979

I

Q2
-7.639
42,760
-50,399

Change in net foreign positions of banking
offices in U.S. (excl. liab. to foreign official inst.)

9. Private securities transactions, net (excl. U.S. Treas. Oblig.)
10.
Foreign net purchases of U.S. corp. bonds
11.
Foreign net purchases of U.S. corp. stocks
12.
U.S. net purchases (-) of foreign securities

1979

Q1
-6.098
41,350
-47,448

4.

Through nonbank transactions
a) Claims on nonbanks in foreign countries (increase, -)
b) Liabilities to private nonbanks in foreign
countries (inc. custody liab.)

I

Q4
-6.369
39,315
-45,684

Trade balance 1/
Merchandise exports
Merchandise imports

7.
8.

1978

Q3

.34 R17 -8.012
36,491
141,884
-44,503
-176,071

-30 873
120,816
.151,689

1.
2.
3.

5.
6.

+)

-888
-168
-553
82
55
-690

15.
16.
17.

By Area
G-10 countries and Switzerland
OPEC
All other countries

29,414
5,743
291

30,200
-1,290
2,333

5,151
-1,475
1,024

15,570
956
202

-7,191
-1,972
467

-11,496
134
1,020

-7,861
1,159
546

-6,922
71
-70

3,287
-1,095
544

18.
19.

By Type
U.S. Treasury securities
Other 3/

30,266
5,182

23,836
7,407

3,167
1,533

13,348
3,380

-8,085
-611

-12,846
2,504

-7,990
1,834

-7,913
992

3,057
-321

-237

662

14

200

-3.008

446

255

-827

1.018

2.105

14.520

919

L 566

2.030

12,405

5.064

5.175

2.165

14.1

-13.9

-12.9

-1.3

.6

n.

-14,1

-13.9

-12.9

-1.3

.6

n.a,

20. Change in U.S. reserve assets (increase -)
21. All other transactions and statistical discrepancy

MEMO:Current Account (i.
Current Account (bil. $, seasonally adj., annual rates)
I/
/
3/
4/
*/

n.a

n..

n.a. na.

International accounts basis, seasonally adjusted.
Includes U.S. Treasury notes publicly issued to private foreign residents.
Includes deposits in banks, commercial paper, bankers' acceptances, and borrowing under repurchase agreements.
Includes $1,103 million of newly allocated SDR's.
Less than $500,000.
NOTE:

Details may not add to total because
of rounding.