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CONFIDENTIAL (FR)
CLASS III - FOMC

August 13,

SUPPLEMENT
CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the

Federal Open Market Committee

By the Staff
Board of Governors
of the Federal Reserve System

1993

TABLE OF CONTENTS

Page
THE DOMESTIC NONFINANCIAL ECONOMY
Consumption. .
.
Inventories . . .
Prices . . . . .
.
Agriculture. .

.
.

.
.
.

.
.

.
...
. .
. .

.
.
.

.
.
.
.

.
.
.

Tables

1
Sales of North American produced autos and light trucks
Retail sales . . . . . . . . . . . . .
S .
.
8
University of Michigan Survey Research Center:
.
.
.
9
9
. .
Survey of consumer attitudes .
Retail inventories . ... . . . . . . .
. . . 11
. . . 11
Retail inventory/sales ratios. .
. . .
. 12
.
Business inventories . . . . . . . . .
Inventory/sales ratios . . . . . . . .
. 12
.
. 14
.
Recent changes in consumer prices .
.
. . . 14
Recent changes in producer prices. . .
. . . 15
U.S. crop production . . . . . . . . .
Corn and soybean production, selected s tates . . . . . 16
. . . 17
Futures prices for farm commodities. .
Charts
.
.
.
.
.

.
.
.
.
.

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

8
10
10
10
13

August Senior Loan Officer Opinion Survey on
. . . . . . . .
Bank Lending Practices. .

. ..

Real PCE goods excluding motor vehicles .
. . . . .
Consumer homebuying attitudes
MBA indexes of mortgage loan applications
Builders' rating of new home sales . . .
. . . .
Ratio of inventories to sales. .

.
.
.
.

THE FINANCIAL ECONOMY

Tables
.
. . . . .
. . . . .
Monetary aggregates
Commercial bank credit and short- and
intermediate-term business credit. .
.
Selected financial market quotations . .

.
.

.. .
.. 25
. . ..
26

SUPPLEMENTAL NOTES

THE DOMESTIC NONFINANCIAL ECONOMY
Consumption
Nominal retail

sales increased 0.1

percent in July.

in the the retail control category, which excludes
dealers

and building material and supply

stores

jumped 2.4

stores rose

automotive

stores, rose 0.4

Sales in July were particularly brisk in the GAF
merchandise

Spending

percent.

category:

posted a 1.4 percent increase, sales

General

at apparel

percent, and spending at furniture and appliance

1.7 percent.

Elsewhere, movements in sales were

The level of spending in the retail

small.

control category for the

second quarter is now estimated to have been higher than reported
earlier:

the May decline of 0.1 percent was

0.2 percent gain,
0.4 percent rise.

revised up to

and June's 0.3 percent increase became a
These upward revisions imply that real PCE for

goods excluding motor vehicles was around $2 billion higher in the
second quarter than had been estimated by the BEA.
Sales of domestic motor vehicles dropped further

in the

first

ten-day selling period of August to 10.4 million units

(annual

rate).

all

Weaker

sales of GM models accounted for almost

of the

declines in both autos and trucks.

SALES OF NORTH AMERICAN PRODUCED AUTOS AND LIGHT TRUCKS
2
(Millions of units at a seasonally adjusted annual rate)

Q2
Total
Autos
Light trucks

12.05
6.94
5.11

1993
July
11.66
6.74
4.92

1-10
11.54
6.61
4.93

1993
July
11-20
21-31
11.89
7.07
4.82

11.50
6.51
4.99

Aug.
1-10
10.39
5.88
4.50

1. Excludes some vehicles produced in Canada and Mexico that are
classified as imports by industry.
Ten-day figures include
estimates for Chrysler, Hyundai, and Suzuki sales.
2. Monthly rates use BEA seasonal factors.
Ten-day rates use FRB
factors prorated to BEA monthly factors.

-2-

The University of Michigan's composite index of consumer
attitudes posted another small decline in the first part of August.
Respondents' views of expected conditions held steady in August
after falling sharply in the first half of 1993, but assessments of
current conditions worsened.
Among the questions not included in the composite index,
consumers' appraisal of car and home buying conditions slipped in
August.

Respondents'

expectations about the change in unemployment

deteriorated further, falling to the most unfavorable reading since
early 1992.

Average expected inflation over the next twelve months

rose by almost a percentage point, to 5.3 percent, while average
expected inflation over the next five years declined slightly, to
4.8 percent.
Inventories
Retail inventories rose in June at an annual rate of
$13.2 billion in current-cost terms.

Excluding auto dealers, retail

stocks increased $11.1 billion, similar to buildups in April and
May.

Revisions to earlier months were small.

With a 0.2 percent

rise in sales, the retailers' inventory-sales ratio edged up to 1.58
months in June;

excluding auto dealers, the ratio was unchanged at

1.49 months.
Inventory changes in June generally were small for most types
of nonauto retail establishments.

However, for stores in the GAF

grouping, inventories posted another sizable increase, and the
inventory-sales ratio for these stores edged up further to
2.39 months in June, near the high end of the range of recent years.
However, sales at GAF stores rose 1.7 percent in July, according to
advance data released yesterday, and their inventory situation may
have eased considerably since mid-year.

-3For all manufacturing and trade, inventories rose at an annual
rate of $16.9 billion in June and $26 billion for the second quarter
as a whole.

With these data now in hand, the second-quarter

accumulation of manufacturing and trade stocks still appears to be
close to BEA's assumption in preparing the advance GDP estimate.
Prices
Consumer prices edged up just 0.1 percent in July after
remaining unchanged in June.

For items other than food and energy,

the CPI also was up 0.1 percent in July, pushing the twelve-month
change in this measure down to 3.2 percent.
Consumer food prices were flat in July; declines in the prices
of vegetables, beef, and poultry were offset by increases elsewhere.
The floods in the Midwest and drought in the Southeast have not yet
had a perceptible effect on consumer food prices.

Energy prices

also were unchanged in July, with lower prices for gasoline and
heating oil offset by higher prices for electricity and natural gas.
Over-the twelve months ending in July, energy prices were down
1/4 percent, with refined-petroleum products more than accounting
for the decline.
Prices of consumer goods other than food and energy were
unchanged in July after edging down in June.

Tobacco prices

retreated a bit further as the price cuts announced last April
continued to be put in place.

Prices of apparel and house

furnishings also dropped back last month.

Elsewhere, new car prices

rose 0.3 percent, keeping the twelve-month change below
2-1/2 percent.

However, used car prices posted another sizable

increase to a level 9.1 percent above the year-earlier level.
Prices of non-energy services increased 0.2 percent in July.
Owners' equivalent rent was flat after jumping 0.4 percent in June;

1. This was the lowest reading since the early 1970s, when wageprice controls were in place.

-4for the twelve months ending in July, this measure rose 3.1 percent,
at the low end of its range over the past year.

In addition, the

price of medical care services posted another modest increase last
month, and auto finance charges fell further.

In contrast to this

favorable news, airfares jumped 2.8 percent after early summer
discounts were removed.
Producer prices for finished goods declined in July for a
second consecutive month.

Excluding food and energy, prices of

finished goods edged up 0.1 percent last month, and were up just
1-3/4 percent over the twelve months ending in July.

Tobacco prices

fell another 0.5 percent in July, as cigarette makers finished
implementing the price cuts announced last April.

But prices of

passenger cars rose 0.8 percent on a seasonally adjusted basis,
because incentives were not sweetened as much as is usual at this
time of the year.
Finished energy prices dropped 1 percent further in July, with
substantially lower prices for gasoline and fuel oil partially
offset by higher prices for electricity and natural gas.

During the

past year, producer prices of refined petroleum products have
declined more than 10 percent, while electricity and natural gas
prices have risen.
The index for finished food edged down 0.1 percent in July,
pulled down by lower prices for meats and poultry.

In contrast,

prices of fresh and dry vegetables jumped last month, partially
offsetting the huge decline in June that pulled these prices down to
an unusually low level.

The floods in the Midwest and drought in

the Southeast did not have a significant effect on finished food
prices in July.

However, at the crude food level, the prices of

corn, soybeans, and wheat rose at double-digit rates in July.

-5Prices of intermediate materials other than food and energy
edged up 0.1 percent in July;

over the past twelve months, prices of

these materials have risen 1-1/4 percent, compared with 3/4 percent
over in the year-earlier period.

At the crude level, prices for

items other than food and energy rose 0.6 percent in June; decreases
for logs and timber were more than offset by increases for most
other items.
Agriculture
In its August crop report, the Department of Agriculture
reduced further its projections for 1993 U.S. corn and soybean
production.

The agency is now forecasting a corn harvest of

7.423 billion bushels, down about 5 percent from its mid-July
projection, and a soybean harvest of 1.902 billion bushels, down
about 4 percent.
As expected, data by state showed large declines in production
of both crops in several states along the Mississippi and Missouri
Rivers.

Many other states also are reporting lower corn production

than in 1992, but soybean production is expected to rise in some key
states, notably Ohio and Indiana.

If the current estimates hold up

through coming months, national production of the two crops will
come in well below 1992's bumper harvest, though far above the
disastrously low levels of 1983 and 1988, especially for corn.
The USDA report also contained production estimates for a broad
range of other crops.

Among the grains, production forecasts were

lowered for wheat, oats, and sorghum

(an important feed grain in the

central and southern Plains) and raised slightly for barley.

The

forecast for cotton production was raised substantially, to a level
14 percent above production in 1992.

By contrast, initial estimates

of 1993 production of peanuts and tobacco show the output of those

-6crops falling about 10 percent from the levels of 1992, a reflection
of drought damage in the southeast and in the mid-Atlantic states.
To help gauge the effect of agricultural crop losses on the
economy, the staff priced out the USDA's production estimates, using
average farm prices for 1987.

These calculations indicate that the

constant-dollar value of twelve major field crops will decline about
$5 billion from 1992 to 1993.
to drought and flood, however.

Not all the decline can be attributed
USDA's farm programs encouraged

farmers to withhold more acres from production this year than in
1992.

More important, the likelihood of matching last year's

exceptionally high yields seemed remote from the beginning.

recognition of those factors, the USDA was in May already predicting
significant production declines, before any crop losses could be
identified.

By our tally, the USDA's May figures were indicating a

drop in constant-dollar output of the field crops of about
$2-3/4 billion.

The reduction since May--$2-1/4 billion--represents

the aggregate change in crop prospects since the flooding
started.2
In the futures markets, prices of farm crops fell sharply on
August 12, the first day of trading after the USDA crop forecast was
released.

The agency's soybean estimate was slightly above the

range of estimates that had been anticipated in the market, and it

2. In contrast, the national press this week has been reporting
much larger estimates of crop damage. Because the estimates have
been presented, in most cases, without further explanation, we can
only guess at the reasons why they are higher than the numbers we
have derived.
In contrast to our method of excluding the
anticipated production decline from our estimate of crop losses,
some observers may be counting all the year-to-year change in
production as losses due to drought or flood. Also, some analysts
probably are pricing the losses in current dollars rather than
constant 1987 dollars; this practice would raise the estimate of
losses, as the prices of most farm crops currently are above their
1987 levels.
Finally, our estimates are derived from national
totals and therefore do not factor out regional offsets to the
losses that have occurred in the areas affected by flood and
drought.

-7-

triggered heavy selling.

Corn and wheat prices moved lower as well,

even though the USDA figures for those crops were not out of line
with forecasts that were being made before the USDA report was
released.

Livestock prices were mixed in yesterday's trading.

RETAIL SALES
(Percent change: seasonally adjusted)
1992
Q4

1993

1993
June

May

2.9

1.7
1.6

.7
.4

.2
.4

Retail control
Previous estimate

2.2

1.0
.7

.2
.1

.4
.3

GAF

2.7

1.5

1.7

Durable goods stores

4.3

3.6

1.5

-.0

3.9
5.5
4.4
-. 1

1.1
.2
.8
-1.3

3.0
3.9
2.2
4.7

3.4
1.7
.4
.1

-1.5
-. 2
.3
5.6

.6
-,7
1.7
.3

Nondurable goods stores

2.1

Apparel
Food
General merchandise

2.8
1.3
1.9

-2.5
.5
2.0

.4
-.4
1.7

1.2
-. 4
.9

.4
.2
.9

2.4
-.1
1.4

stations

-. 4

2.7

Other nondurables

3.9

-.7

1.1

Total sales
Previous estimate

Bldg. material and supply
Automotive dealers
Furniture and appliances
Other durable goods

Gasoline

-1.2

July

-. 7

-. 5

-. 6

-. 5

1. Total retail sales less building material and supply stores and automotive
dealers, except auto and home supply stores.
2. General merchandise, apparel, furniture, and appliance stores.
3. Excludes mail order nonstores; mail order sales are also excluded from the
GAF grouping.
4. Includes sales at eating and drinking places, drug stores and proprietary
stores.

Real PCE Goods excluding Motor Vehicles*
Billions of 87$
1440

1400

July

1360

1320

1280

I
1990

1
I

-L
.
199

* Values for May, June, and July are staff forecasts.

1I 1I 1 1
1992

I1 I
I 1I

I l 11 1
1993

1240

August 13, 1993
UNIVERSITY OF MICHIGAN SURVEY RESEARCH CENTER:

SURVEY OF CONSUMER ATTITUDES

(Not seasonally adjusted)
1992
Dec

1993
Jan

1993
Feb

1993
Mar

1993
Apr

1993
May

1993
Jun

1993
Jul

1993
Aug
(p)

Indexes of consumer sentiment (Feb. 1966=100)
Composite of current and expected conditions

91.0

89.3

86.6

85.9

85.6

80.3

81.5

77.0

75.4

Current conditions
Expected conditions

93.4
89.5

98.6
83.4

96.0
80.6

101.6
75.8

99.9
76.4

98.7
68.5

98.7
70.4

96.2
64.7

92.5
64.5

99
131

110
127

100
125

111
119

104
120

103
115

108
117

102
112

90
116

126
103

111
97

103
95

145
142
162

134
145
166

132
148
158

136
152
173

137
155
167

140
152
163

140
147
166

141
147
171

134
149
165

110

117

115

125

127

130

133

3.3
5.2

3.5
4.8

4.6
5.9

4.9
4.9

4.1
4.8

4.4
5.7

4.8
5.2

4.4
5.0

5.3
4.8

Personal financial situation
Now compared with 12 months ago*
Expected in 12 months*
Expected business conditions
Next 12 months*
Next 5 years*
Appraisal of buying conditions
Cars

Large household appliances*
Houses

Willingness to use credit
Willingness to use savings
Expected unemployment change - next 12 months
Expected inflation - next 12 months
Expected inflation - next 5 to 10 years
* --

Indicates the question is one of the five equally-weighted components of the index of sentiment.

(p) -- Preliminary
(f) -- Final

Note: Figures on financial, business, and buying conditions are the percent reporting 'good times' (or
'better') minus the percent reporting 'bad times' (or 'worse'), plus 100. Asterisk (*) indicates
the question is one of the five equally-weighted components of the index of sentiment. Expected
change in unemployment is the fraction expecting unemployment to rise minus the fraction expecting
unemployment to fall.

-10-

Millions of units
(annual rate)

CONSUMER HOMEBUYING ATTITUDES
(Seasonally adjusted)

Diffusion index

Consumer homebuying attitudes (right scale)

1987
1988
1989
1990
1991
1992
1993
1 The homebuying attitudes index is calculated by the Survey Research Center (University of Michigan) as the proportion of respondents
rating current conditions as good minus the proportion rating such conditions as bad.

MBA INDEXES OF MORTGAGE LOAN APPLICATIONS
Purchase Index

210 -

March 16, 1990 = 100

Weekly
180 -

Seasonally adjusted 1
150

-Augus
6

August

120

VCi

'r
-

/
'I

I
^

Not seasonally adjusted

60 -

1990
1991
1. Seasonally adjusted by Federal Reserve Board Staff

Millions of units
(annual rate)

1992

BUILDERS' RATING OF NEW HOME SALES 1
(Seasonally adjusted)

1993

Diffusion index

Builders' rating of new home sales (right scale)
Aug (p)

June

Single-family starts (left scale)

1993 .
1992
1991
1990
1989
1988
1987
data as the proportion of respondents rating current sates as good
IThe index is calculated from National Association of Homebuilders
to excellent minus the proportion rating them as poor.

-11RETAIL INVENTORIES

(Change in current cost at seasonally
adjusted annual rate; billions of dollars)
1992
Q3

Total retail
(previous)
Excluding auto dealers
(previous)
Durable goods
Lumber, bldg. mat.
Auto dealers
Furniture
Other durable goods 1
Nondurable goods
General merchandise

8.9

23.1

33.6

11.7

14.4

4.0
2.0
-2.8
1.8
3.1

Apr.

May

June

9.9

40.0

15.1

13.2

14.3

9.9

20.6

11.7

1.3
.1
7.0
10.6

18.6
.5
8.7
6.4
3.0

25.0
4.4
19.3
-1.3
2.6

3.9
-.2
-. 1
4.2
-. 1

26.4
2.4
19.5
2.3
2.2

11.8
.4
3.4
5.3
2.6

-8.2
-. 6
-5.7
-.2
-1.7

8.1
-.3
2.2
7.5
-1.2

4.9
4.3

4.5
3.2

8.6
7.5

6.0
4.0

13.6
10.9

3.3
3.0

9.5
9.0

5.1
-.0

-1.2

11.1

1.2

1.4

-. 3

-3.4

2.3
-2.1

4.1
-4.0

.6
-.4

2.4
.8

2.2
-. 8

2.1
-1.5

2.5
1.4

2.7
2.5

8.3

13.6

6.7

10.6

15.4

10.4

11.4

10.1

G. A. F. 2
1.
2.

1993
Mar.

Food

Apparel
Other nondurable goods1

1993

FRB calculated.
Equals: General Merchandise, Apparel, and Furniture & Home Furnishings.

RETAIL INVENTORY/SALES RATIOS 1

1992

1993

1993
Mar.

Apr.

May

June

Total retail
Excluding auto dealers

1.56
1.48

1.55
1.47

1.60
1.49

1.58
1.50

1.61
1.51

1.59
1.49

1.57
1.49

1.58
1.49

Durable goods
Lumber, bldg. mat.
Auto dealers
Furniture
Other durable goods

2.16
2.20
1.89
2.27
3.10

2.15
2.14
1.85
2.35
3.20

2.25
2.23
1.99
2.30
3.32

2.18
2.16
1.91
2.36
3.17

2.27
2.25
2.00
2.32
3.42

2.21
2.21
1.94
2.30
3.26

2.17
2.13
1.89
2.29
3.24

2.17
2.16
1.90
2.35
3.06

Nondurable goods
General merchandise
Food
Apparel
Other nondurable goods

1.22
2.31
.83
2.39
3.59

1.21
2.31
.83
2.44
3.34

1.22
2.35
.83
2.52
3.43

1.23
2.35
.83
2.58
3.47

1.23
2.38
.84
2.63
3.34

1.22
2.34
.83
2.55
3.42

1.23
2.35
.83
2.55
3.41

1.23
2.33
.83
2.56
3.53

G. A. F.

2.32

2.35

2.37

2.40

2.42

2.38

2.39

Months' supply, based on current-cost data.

-12BUSINESS INVENTORIES
(Change at annual rates in seasonally
adjusted current cost; billions of dollars)

1992

1993

Manufacturing and trade
(previous)
Excluding autos
(previous)
Manufacturing
Trade, total
Wholesale
Retail
Excluding autos
Durable
Auto
Nondurable

Mar.

Apr.

May

June

16.3

20.4

39.9

26.0

52.5

40.6

20.6
21.5

16.9

19.0

11.7

20.6

26.1

33.1

37.2

26.4
32.0

14.7

4.4
11.9
3.0
8.9
11.7
4.0
-2.8
4.9

-19.1
39.5
16.5
23.1
14.4
18.6
8.7
4.5

1.2
38.7
5.1
33.6
14.3
25.0
19.3
8.6

7.3
18.7
8.9
9.9
9.9
3.9
-. 1
6.0

3.7
48.9
8.9
40.0
20.6
26.4
19.5
13.6

9.2
31.4
16.3
15.1
11.7
11.8
3.4
3.3

15.4
5.2
4.0
1.3
7.0
-8.2
-5.7
9.5

-2.7
19.6
6.4
13.2
11.1
8.1
2.2
5.1

May

June

Totals may not add because of rounding.

INVENTORY/SALES RATIOS

1992

1993

Manufacturing and trade
Excluding autos
Manufacturing
Trade, total
Wholesale
Retail
Excluding auto

Mar.

Apr.

1.50
1.48

1.48
1.46

1.47
1.44

1.57
1.45
1.34
1.56
1.48

1.52
1.46
1.35
1.55
1.47

1.48
1.47
1.33
1.60
1.49

1.49
1.46
1.33
1.58
1.50

1.47
1.48
1.34
1.61
1.51

1.49
1.46
1.33
1.59
1.49

1.50
1.45
1.31
1.57
1.49

1.47
1.46
1.33
1.58
1.49

-13-

RATIO OF INVENTORIES TO SALES
(Current-cost data)
Ratio
- 2.05
Manufacturing

?,"

-' 1 85

Excluding aircraft
Lo

e'l., t

\.\ I

June-

1.45

1
1993

1.25

SI
1979

I
1983

1981

. .
1985

I I
1987

I
1989

I
1991

Ratio
1.5
Wholesale

1.4

- 1.3

S1.2

1979

I I II I i
1983
1985

1981

I
1987

I
1989

1.1
1991

Ratio
2.7 Retail

Ratio
1.7
;-.

.,.

2.5 -

2.3

1993

GAF group

h*'

2.1

- 1.6

A,,,

u" "Au

A',g

Total excluding auto

1979

1981

1983

1985

1987

1989

1991

-1.5

1.4

1993

-14RECENT CHANGES IN CONSUMER PRICES
(Percent change; based on seasonally adjusted data)1

Relative
importance,
Dec. 1992

1991

1992

1992
--Q4

1993
Q1

1993
Q2

June

----- Annual rate-----All items 2
Food
Energy
All items less food
and energy
Commodities
Services

July

-Monthly rate-

100.0
15.8
7.3

2.9
1.5
2.0

3.2
1.4
1.9

4.0
2.6
3.1

2.2
1.4
-3.8

.0
-.4
-.2

.1
.0
.0

76.9
24.7
52.2

4.4
4.0
4.6

3.3
2.5
3.7

3.8
1.5
4.7

4.3
4.6
4.4

2.9
.6
4.1

.1
-.1
.2

.1
.0
.2

100.0

Memo:
CPI-W 3

3.1
1.9
-7.4

2.8

2.9

3.2

4.1

2.0

1.
Changes are from final month of preceding period to final month of period indicated.
2. Official index for all urban consumers.
3. Index for urban wage earners and clerical workers.

RECENT CHANGES IN PRODUCER PRICES
1
(Percent change; based on seasonally adjusted data)

Relative
importance,
Dec. 1992

1991

1992

1992
--Q4

1993
Q1

1993
Q2

----- Annual rate------

June

July

-Monthly rate-

100.0
22.4
13.9
63.7
40.6
23.1

-. 1
-1.5
-9.6
3.1
3.4
2.5

1.6
1.6
-.3
2.0
2.1
1.7

-.3
3.3
-10.2
1.2
1.2
.6

4.3
-1.6
16.6
3.6
3.2
4.4

.6
1.3
-3.5
1.2
1.2
1.2

-. 3
-. 9
-.5
-.1
-.3
.2

-.2
-.1
-1.0
.1
.1
.1

Intermediate materials 2
Excluding food and energy

95.4
81.8

-2.7
-.8

1.1
1.2

-2.1
-.3

5.7
4.7

.3
-. 3

.3
.1

-.2
.1

Crude food materials
Crude energy
Other crude materials

41.2
39.5
19.3

-5.8
-16.6
-7.6

3.0
2.3
5.7

5.1
-17.8
1.9

1.9
-10.1
24.3

-1.5
19.3
10.9

-3.1
.2
.2

1.2
-4.9
.6

Finished goods
Consumer foods
Consumer energy
Other finished goods
Consumer goods
Capital equipment

1. Changes are from final month of preceding period to final month of period indicated.
2. Excludes materials for food manufacturing and animal feeds.

-15-

U.S

1991

CROP PRODUCTION 1

USDA Projection for 1993
May 11
July 12
Aug. 11

1992

billions of bushels
Corn
Soybeans
Wheat
Sorghum
Oats
Barley

7 48
1 .99
1 98
59
.24
.46

9.48
2.20
2.46
.88
30
.46

8.50
2.05

2.52
.66
25

7 .85
1 98
2.60
.67
26

7 .42
1 .90
2.55
.64
25
47

billions of hundredweight
7

Rice

billions of pounds
Peanuts
Tobacco

4.93
1.66

4.28
1 72

n.a,
n.a,

n.a.
n.a,

3.91
1.55

millions of bales
10.

Cotton

17 .61

16.22

17 .50

17 .80

18.55

millions of tons
1l
12.

Sugar beets
Sugar cane

28.20
30.25

28.93

30.36

n.a.
n.a.

28.05
30.85

Memo:
billions of 1987 dollars
13

13 Value, crops
12
Value, 12 crops

41 18

47.05

44.31

Data are from the U.S. Department of Agriculture
Calculated by the staff from USDA data.

43.30

42.18

-16CORN AND SOYBEAN PRODUCTION, SELECTED STATES
(Billions of bushels)
USDA
Forecast

1990

1991

1992

For 1993

Iowa
Illinois
Nebraska
Indiana
Minnesota
Ohio
Wisconsin
Michigan
South Dakota
Missouri

1.56
1.32
.93
.70
.76
.42
.35
.24
.23
.21

1.43
1.18
.99
.51
.72
.33
.38
.25
.24
.21

1.90
1.65
1.07
.88
.74
.51
.31
.24
.28
.32

1.25
1.40
.95
.76
.46
.40
.27
.24
.18
.20

Total, 10 states

6.72

6.24

7.90

6.11

Total, U.S.

7.93

7.48

9.48

7.42

Illinois
Iowa
Minnesota
Indiana
Ohio
Missouri
Arkansas
Nebraska
South Dakota
Kansas

.35
.33
.18
.17
.14
.12
.09
.08
.05
.05

.34
.35
.20
.17
.14
.14
.09
.08
.06
.04

.41
.36
.17
.19
.15
.16
.10
.10
.06
.07

.37
.28
.14
.22
.17
.12
.09
.09
.04
.05

Mississippi
Michigan

.04
.04

.05
.05

.06
.05

.05
.05

Total, 12 states

1.64

1.71

1.88

1.67

Total,

1.93

1.99

2.20

1.90

Corn:

Soybeans:

U.S.

-17FUTURES PRICES FOR FARM COMMODITIES 1

Pricing date
Commodity
and contract

May 13

June 30

July 7

July 30

Aug. 11

Aug. 12

2.40
6.01
3.05

2.38
6.59
2.96

2.58
7.15
3.17

2.42
6.88
3.13

2.47
6.83
3.17

2.44
6.56
3.11

Cattle, Oct.
Cattle, Apr.

74.90
75.05

75.12
76.45

75.07
76.57

75.20
76.65

75.37
76.95

75.22
76.97

Hogs, Oct.
Hogs, Apr.

43.47
43.10

40.30
40.25

44.12
43.72

45.72
44.85

44.92
43.40

45.55
44.05

Corn, Dec.
Soybeans, Nov.
Wheat, Dec.

1. The prices of corn, soybeans, and wheat are in dollars per bushel.
The prices of cattle and hogs are in dollars per hundredweight.

-18THE FINANCIAL ECONOMY
Senior Loan Officer Opinion Survey on Bank Lending

August

The August

1993

Senior Loan Officer Opinion

Lending Practices posed questions

Survey on Bank

about changes in bank lending

standards and terms, changes in loan demand by businesses
households,

bank capital levels, the effects

Availability Program, and loan sales.3
banks

and eighteen U.S.

Practices

and

of the Credit

Sixty domestic commercial

branches and agencies of foreign banks

participated in the survey.
The survey results show a continuation of the

easing of lending

terms and standards reported in the May survey and a strengthening
of demand for bank credit by both households

and businesses.

respondents reported some easing of terms and standards for
commercial and industrial loans than did so in the May survey.

Standards for commercial real estate loans were little changed, and
thus remain very restrictive.

A small fraction of respondents

indicated that they had eased standards on home mortgage loans, and
a larger fraction reported increased willingness to make loans to
individuals.

A substantial fraction of respondents indicated that

the demand for business loans had increased over the last three
months.

Household demand for bank credit was also reported to have

picked up, particularly for residential mortgages.
As in the last four surveys, almost all the respondents judged
their bank's capital position to be either fairly comfortable or
very comfortable.

The fraction of respondents taking a more

aggressive lending stance owing to fairly comfortable or very
comfortable capital positions increased from one-fifth in May to
more than one-third in the August survey.

As in May, however, most

3. The data on loan sales are not yet sufficiently complete for
discussion in this report.

-19of those taking a more aggressive lending stance reported difficulty
in finding attractive lending opportunities.
Special questions on the survey asked about the effects of the
Credit Availability Program on bank lending to small and mediumsized businesses.

Thus far, it appears that the program has had

little effect on lending to these businesses, although the
respondents expect that it will allow an easing of terms and
standards for such loans when fully implemented.
Business Lending
Commercial and industrial loans other than for mergers.
Domestic respondents reported a fairly significant net easing of
standards and terms for commercial and industrial loans in the
August survey.

Standards for approving business loans to medium-

sized firms had been eased by more than 20 percent of the
respondents.

The fractions that had eased standards for large and

small borrowers were somewhat smaller, but still well above the
fractions reported in the May survey.

Larger fractions of the

respondents reported having eased some lending terms, especially
price terms, on commercial and industrial loans and lines of credit.
Credit line costs and spreads for large and medium-sized firms had
been eased by 30 percent to 40 percent of the respondents, while
more modest, though still substantial, fractions had eased these
terms for smaller borrowers.

Fewer respondents reported having

eased non-price terms--including the sizes of credit lines, loan
covenants, and collateralization requirements.

Nonetheless, the net

easing of non-price terms was larger than in May.
U.S. branches and agencies of foreign banks reported no change
in business lending standards.

They reported very small mixed

changes in most loan terms, although there was a small net decrease
in credit line costs.

-20Real estate loans.

Most domestic respondents reported that

standards for commercial real estate loans were basically unchanged
over the last three months.

Very small net easings on commercial

real estate loans other than those for commercial office buildings
were reported, and the net tightening of standards for loans for
commercial office buildings was the smallest in any recent survey.
U.S. branches and agencies of foreign banks reported no changes in
standards for commercial real estate loans.
Demand.

A substantial fraction of domestic respondents

reported stronger demand for business loans by firms of all sizes in
the August survey.

The increase in demand was larger than in May

for middle-market and small firms, and it reversed the May survey's
reported decline in demand by large firms.

The causes of the

increased demand were about evenly split between inventory
investment and investment in plant and equipment.

Branches and

agencies of foreign banks reported a small net decrease in the
demand for loans after reporting a small increase in May.
Lending to Households
Respondents also reported increased willingness to lend to
households.

A third of the banks indicated that they were more

willing than they had been in May to make general purpose loans to
individuals, including loans taken down under home equity lines of
credit, while more than a quarter of the respondents reported
increased willingness to make consumer installment loans.

Moreover,

there was a small net easing of standards for residential mortgages
in August, reversing the small tightening reported in May.
About 30 percent of the respondents reported increased demand
by households for consumer installment loans and home equity lines
of credit over the last three months.
demand for residential mortgages.

About half reported stronger

-21Capital Ratios
The responses to the questions on capital adequacy indicate
that the respondents' views of their capital positions had changed
little since May.

As in the May survey, more than 90 percent of

domestic respondents reported that both their risk-based capital
ratio and their tier-1 leverage ratio were either "fairly
comfortable" or "very comfortable."
reported that either ratio was tight.

None of the respondents
More than one-third of the

respondents reporting comfortable capital levels said that they had
taken a more aggressive lending stance as a result, compared with
about 10 percent in January and 20 percent in May.

Those reporting

a more aggressive lending stance continue to note that it is
difficult to find attractive new deals, however.

As in May, most of

those respondents not taking a more aggressive lending stance
indicated that increasing their lending would require an
unacceptable increase in risk, given the weak state of loan demand.
About a quarter of the respondents reported taking steps over the
past quarter to improve their capital positions, somewhat less than
the fraction reported in the January and May surveys.

Issuance of

capital and loan sales and securitizations were the most common
steps reported.
Branches and agencies of foreign banks were less comfortable
with the capital positions at their parent institutions.

Although

the reported capital positions have improved somewhat since January,
about half the branches and agencies reported that their parent's
capital position was only "adequate."

None of the institutions

reported a fairly tight capital position, however, and one reported
a "very comfortable" position.

Of the eight branches and agencies

that reported "comfortable" or "very comfortable" capital positions,
three reported lending more aggressively as a result.

-22Effects of the Credit Availability Program
The August survey asked the domestic respondents a series of
questions about the effects of the Credit Availability Program (CAP)
on their lending to small and medium-sized businesses.

This

program, which was announced in March, includes provisions intended
to allow the strongest banks and thrifts to make and carry a limited
portfolio of loans to small and medium-sized businesses and to farms
with minimal documentation;

clarify the use of the category Other

Assets Especially Mentioned

(OAEM); reduce the appraisal burden on

loans secured by real estate;
of Other Real Estate Owned

change the rules regarding financing

(OREO); enhance and streamline the

appeals and complaint processes;

and improve examination processes

and procedures.
The survey responses suggest that the CAP has not had a
substantial effect on the supply of credit to small and medium-sized
businesses, although many of the respondents expect it to do so in
the future.

Only four of the respondents have implemented minimal-

documentation loan programs, although seven banks are in the process
of doing so and another twenty reported being likely to do so in the
future.

The number of loans made under the minimal-documentation

programs varied widely from bank to bank, as did the dollar volumes.
A total of nearly $140 million has been extended under the four
banks' programs.

The banks pointed out, however, that they would

have made most of these loans even in the absence of a minimaldocumentation program.
A substantial fraction of the respondents expect that the
proposed changes in appraisal requirements will allow their bank to
ease both terms and standards for small business loans.

The

anticipated effects of the proposed increase in the appraisal
threshold to $250,000 were about the same as those for the proposed

-23exemption for business
of,

loans of less than $1 million where the

or rental income derived from, the real

collateral

is not the primary

sale

estate taken as

source of repayment.

The anticipated effects of the other CAP

initiatives on the

volume of lending to small and medium-sized businesses varied.
substantial

fraction of respondents

financing rules

reported that

changes in OREO

and improved examination procedures would have

moderate effect on

lending.

Fewer respondents indicated that

clarification of OAEM use would have an appreciable effect, and very
few expected changes

in the appeals and complaint process to have

effect on their bank's lending.

-24MONETARY AGGREGATES
(Based on seasonally adjusted data excet as noted)

19921

Q23
2
01

-1992

May

J9=
-

Q22

May

Jun.

Aggregate or component

1
Jul

,j -I

7u:.

J.
;.

ip;

Aggregate

Percentage change

'(annua ra-e

14 3

6.6

10.5

27.4

1.8

-1.9

2.1

10.5

0.3

3.8

2.3

8.5

4. M1-A

13.7

6.2

13.0

5.
6.

9.1
18-0

9.5
3.7

15.4

7.3

-2.6

-5.4

-1.4

1.8

-10.2

-17.0

-5.2
0.1
14.5
-15.8
14.8
21.5

-10.1
-2.2
1.6
-7.6
-8-9
-0.2
-19.0

-6-6

-13.0

3.5

-16.3
-15.4
-19.6

-17.8
-18.0
-17.5

18.2
7.9
-22.6

-14.1
9.9
0.0

1. M1
2. M2
3. M3

13.8

10.1

1 935.6

-1.3

-2,2

-0.6

4159.0

26.5

7.3

14.0

10-9

683.3

9.7
16.1

10.4
40.8

11.1
5.0

11.0
17.3

10.1
12.C

309.6
365.S

6.3

28.9

7.3

13.3

8.7

402.3

3.3

-0.1

-4.0

-2.9

2429.7

-57.5

53.3

17.0

-6.2

71.6

17.4
4.3
14.0
-10.3
2.5
9.0
-5.6

-1.4
-0.1
6.4
-10-2
-4.5
2-8
-13.6

-1.1
-4.4
0.5
-11-7
- .5
2.2
-15.2

-3.6
-1.1
3.5
-8.0
-6.0
1.1
14.2

335.8
1254.9
769.3
485.7
765.4
430.5
334.9

-2.2

-19.1

-22.0

-7-9

643.7

-1.3
0.3
-7.9

-0.3
3.0
-14.7

-13.2
-14-1
-9.3

18.6
-22.4
0.0

-10.4
-10.3
-10-7

336.8
273.1
63.8

0.4
29.5
32.3

14.4
5.4
38.2

-27.8
23.2
-34.7

-18.8
34.8
76-3

-9.0
21.8
0.3

195.0
92.3
47.1

Selected components

Currency
Demand deposits
Other checkable deposits

8. M2 minus M13
9.
10.
11.
12.
13.
14.
15.
16.

Overnight RPs and Eurodollars,
n.s.a.
General-purpose and brokerdealer money market funds
Commercial banks
Savings deposits
Small time deposits
Thrift institutions
Savings deposits
small time deposits

.7. M3 minus M23
Large time deposits
4
At commercial banks
At thrift institutions
Institution-only money market
mutual funds
Term RPs, n.s.a.
Term Eurodollars, n.s.a.

-5-5

-0.7
0.1
4.6
-6.7
4.8
0.7
11.4

Average monthly change (billions of dollars)
Memo
Managed liabilities at com'l.
banks (lines 25 + 26)
Large time deposits, gross
Nondeposit funds
Net due to related foreign
institutions
5
Other
U.S. government deposits at
6
commercial banks

3.2
-3.6
6.8

3.7
1.0
4.7

2.8
1.3
-4.1

4.8
-3.7
8.5

16.5
-8.1
24.6

2-8
4.1

2.0
2.7

-5.1
0.9

1.8
6.8

2.4

-5.1

7.0

4.1

15.2
9.4

-0.5

.
.

- .

. 714.0
344.5
. 369.5

S100.6
S268.9
. .

30.2

1. "Percentage change' is percentage change in quarterly average from fourth quarter of preceding year to
fourth quarter of specified year. "Average monthly change" is dollar change from December to December,
divided by 12.
2. "Percentage change" is percentage change in quarterly average from preceding quarter to specified quarter.
"Average monthly change" is dollar change from the last month of the preceding quarter to the last month of
the specified quarter, divided by 3.
3. Seasonally adjusted as a whole.
4. Net of holdings of money market mutual funds, depository institutions, U.S. government, and foreign banks
.d official institutions.
5. Borrowing 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 borrowing from the
Federal Reserve and unaffiliated foreign banks, loan RPs, and other minor items). Data are partially estimated.
6. Treasury demand deposits and note balances at commercial banks.

-25COMMERCIAL BANK CREDIT AND SHORT-

AND INTERMEDIATE-TERM BUSINESS

CREDIT 1

(Percentage change at annual rate, based on seasonally adjusted data)
Dec.

I
1993
Q1

1991
to Dec.
1992

Type of credit

1993
Jul. p

1993
Jun.

1993
May

1993
Q2

Level,
Jul
1993 p
($billions)

Commercial bank credit
1.

Total loans and securities
at banks

2.
3.

U.S.

4.
5.

9.5

8.6

3,037.9

11.6

10.7

4.4

12.7

5.2

888.7

13.0

12.0

4.0

16.4

6.1

707.8

5.9

5.6

6.0

-1.3

1.3

180.9

-. 8

5.9

10.4

8.2

10.0

2,149.2

-3.2

-1.0

1.0

6.9

3.9

-2.2

592.6

2.1

Loans

8.6

-1.1

Other

7.3

17.5

government

2.7

13.0

Securities

3.6

-. 9

5.3

7.5

7.9

4.0

906.6

Business

Real estate

Consumer

-1.8

7.7

6.5

9.6

3.9

12.1

371.9

Security

18.4

-4.3

48.0

122.7

50.4

170.2

82.1

1.1

-13.6

8.8

15.7

11.1

195.9

10.

Other

Short- and intermediate-term business credit
11.

Business loans net of bankers

-3.3

-1.6

6.0

3.9

-3.5

583.3

2.0

-33.1

-5.2

-5.1

-20.5

-20.9

22.6

-3.1

-2.9

5.6

3.2

-4.5

605.8

9.5

-9.3

15.8

17.5

-1.6

38.4

158.0

-. 8

-4.2

3.5

7.8

2.4

4.1

763.8

-16.9

-10.4

-14.2

-16.1

-16.4

n.a.

21.7

1.8

-5.1

-. 4

-1.2

n.a.

303.1

-. 5

-4.6

2.0

5.3

n.a.

1,086.0

acceptances
12.

Loans at foreign branches 2

13.

Sum of lines 11 and 12

14.

Commercial paper issued by
nonfinancial firms

15.

Sum of lines 13 and 14

16. Bankers acceptances, U.S.
trade-related 3 ,4
17.

Finance company loans to

business 4
18.

Total (sum of lines 15,

16,

.10

and 17)
1. Except as noted, levels are averages of Wednesday data and percentage changes are based
on averages of Wednesday data; data are adjusted for breaks caused by reclassification;
changes are measured from preceding period to period indicated.
2. Loans to U.S. firms made by foreign branches of domestically chartered banks.
3. Acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage
of goods.
4. Changes are based on averages of month-end data.
5.
p

June 1993.
Preliminary.

n.a.

Not available.

-26SELECTED FINANCIAL MARKET QUOTATIONS
(Percent except as noted)

Change to Aug 12,
Instrument

From
Sept. 4

SHORT-TERM RATES
2
Federal funds
3
Treasury bills
3-month
6-month
1-year

From FOMC.
Jul 7

3.19

3.11

2.97

-0.22

-0.14

2.92
2.96
3.06

3.04
3.11
3.29

3.01
3.13
3.32

0.09
0.17
0.26

-0.03
0.02
0.03

3.22
3.22

3.17
3.20

3.14
3.19

-0.08

-0.03
-0.01

3.06
3.06
3.11

3.11
3.15
3.33

3.08
3.13
3.32

0.02
0.21

-0.03
-0.02
-0.01

3.31
3.31

3.06
3.19

3.06
3.13

-0.25
-0.18

0.00
-0.06

6.00

0.00

4.38
6.40
7.29

4.38
5.80
6.68

4.43
5.77
6.37

0.05
-0.63
-0.92

0.05
-0.03
-0.31

6.31

5.75

5.68

-0.63

-0.07

Corporate--A utility
recently offered

8.06

7.48

7.21

-0.85

-0.27

Home mortgages
FHLMC 30-yr. fixed rate
FHLMC 1-yr. adjustable rate

7.84
5.15

7.23
4.58

7.21
4.55

-0.63

-0.02
-0.03

Commercial paper
1-month
3-month
Large negotiable CDs
1-month
3-month
6-month
4
Eurodollar deposits
1-month
3-month
Bank prime rate

-0.03

0.07

INTERMEDIATE- AND LONG-TERM RATES
U.S. Treasury (constant maturity)
3-year
10-year
30-year
5
Municipal revenue
(Bond Buyer)

-0.60

Record high
Stock exchange index
Level

Dow-Jones Industrial
NYSE Composite
AMEX Composite
NASDAQ (OTC)
Wilshire

3583.35
251.36
440.95
718.77
4477.53

Date

Low.
Jan. 3

FOMC,
Jul 7

8/11/93 2144.64 3475.67 3569.09
245.68
249.17
3/10/93 154.00
6/4/93
305.24
431.79 437.58
8/9/93 378.56
698.79 717.12
8/9/93 2718.59 4392.49 4463.04

1. One-day quotes except as noted.
2. Average for two-week reserve maintenance
period closest to date shown. Last observation
is average to date for maintenance period ending
August 18. 1993.
3. Secondary market.

-0.40
-0.87
-0.76
-0.23-0.32

1993

66.42
61.80
43.36
89.43
64.17

4. Bid rates for Eurodollar
deposits at 11 a.m. London time.
5. Based on one-day Thursday quotes
and futures market index changes.
6. Quotes for week ending Friday
previous to date shown.

2.69
1.42
1.34
2.62
1.61

Full text of Federal Open Market Committee Meeting Minutes, Transcripts, and Other Documents : Meeting, August 17, 1993 : Greenbook Supplement

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