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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 III - FOMC August 20, 1999 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS THE INTERNATIONAL ECONOMY Trade in Goods and Services ................ Page ......................... 1 Tables U.S. Exports and Imports of Goods and Services .......................... 4 Charts U.S. International Trade in Goods and Services ........................... 3 THE FINANCIAL ECONOMY Tables Selected Financial M arket Quotations ................................... 5 Commercial Bank Credit ........................................... 6 SUPPLEMENTAL NOTES U.S. International Transactions Trade in Goods and Services In June, the nominal U.S. trade deficit in goods and services was $24.6 billion, considerably larger than the deficit in May. For the second quarter, the deficit was $258 billion at a seasonally adjusted annual rate, $43 billion larger than in the first quarter. Net Trade in Goods & Services (Billions of dollars,seasonally adjusted) 1998 Annual rate 1999 Monthly rate 1999 1998 Q4 Q1 Q2 April May June Real NIPA' Net exports of G&S -238 2 -250 0 -303 6 -323.0 --- --- --- Nominal BOP Net exports of G&S Goods, net Services, net -164 3 -246 9 82 6 -173 0 -254 3 81 3 -2150 -296 8 81 8 -257.5 -338.6 81 1 -186 -25 3 67 -21 2 -27 9 67 -246 -31 4 68 1 Billions of chained (1992) dollars Source U S Department of Commerce Bureaus of Economic Analysis and Census n a Not available --- Not applicable The value of exports rose 1/2 percent in June, with small increases primarily in automotive products and service receipts. For the second quarter, the value of exports rose 1.1 percent over the first quarter level, nearly returning to the peak levels recorded in the fourth quarter of last year. Increases in the second quarter were spread among several major trade categories, including automotive products (mostly to Canada and Mexico), industrial supplies (especially fuels), computers, semiconductors, and service receipts. Exports of agricultural products rose moderately in the second quarter, while exports of aircraft declined sharply for the second consecutive quarter. The value of imports rose 3.9 percent in June, marking the second consecutive month of strong increases. Imports rose in all major trade -2- categories, with particularly strong rates of increase in capital goods, automotive products, and consumer goods. For the second quarter, imports were 4.6 percent above the first-quarter level, as all major trade categories registered increases. Much of the increase was in oil as the effects of sharply higher prices were augmented by a modest increase in quantity. Sizable rates of increase were also recorded for imports of computers, semiconductors, and industrial supplies (especially building materials). -3- U.S. International Trade in Goods and Services Net Fxports Contribunon ol \il _ Bil$ S\R I to RL.Il I)P'C(jrouih Pcrcentaiec oint, S\R \port, - 40O BOP bas, / - 80 S 120 I 1991 - 2 * I I 1993 I I 1995 3 -4 I I 1997 160 1999 Bil$. SAAR Net trade in computers and semiconductors - 200 0 ___---------- / S240 - 20 Net automotive trade Swith Canada and M xico 40 -280 I 1991 - 1991 I I 1993 I I I I I I60 1995 1997 1999 Selected Imports Bil$ SAAR 240 60 I 19 I 320 I I 1993 1997 / 1999 ;elected Exports B11 200 180 - 160 - -o - - 120 - - 100 - 0 S- Industri I I/ suppl - 180 - Consumer good M1 ichiner) 2/ S0- 220 / 0 S-\R - 160 140 -120 - Industrial Mahiner 2/ 100 supplies I/ Consumer goods 60 -__0 - f\Automotie - 80 I/ (overseas) - \irraft 10 60 - S20 199 1 I99O 1991 199 I Excludes agrilulturL and gold 2 Excludes compulcrs and semiconductors 1999 I 1991 I q93 I I 199q I Excludes oil and gold 2 Exlude ters and 2 Excludes computers and I I 1I sct.nondu.tors " Excludes Canada and MLxILO 11 40 199 U.S. Exports and Imports of Goods and Services (Billions of dollars, SAAR, BOP basis) Levels 1999 1999 June May 9355 940 4 Amount Change' 1999 1999 QI Q2 May June -192 98 -3 2 50 -23 -7 -4 -12 Exports of G&S Q1 9284 Q2 9382 Goods exports Agricultural Gold Other goods 657 2 47 3 29 607 0 662 49 3 610 7 3 3 1 661 5 49 2 20 6102 663 4 50 4 39 609 1 566 44.1 42 1 158 8 48 46 45 159 6 4 2 1 48 1 46 7 45 2 1594 714 42 7 103 184 75 1 446 114 19 1 126 1 796 28 2 271 2 Aircraft & pts Computers Semiconductors Other cap gds Automotive to Canada to Mexico to ROW Ind supplies Consumer goods All other Services exports 3 0 2 1 55 19 05 31 46 0 46 8 45.3 159.0 -7 0 -14 25 -16 -80 22 31 03 730 44 4 115 17 2 78.1 46.8 11.4 20.0 -3 3 -10 -17 -0 7 36 19 11 06 129 8 79 1 26 9 130 9 780 28 8 130.5 78.6 24.8 -36 04 19 37 -04 -13 27 -28 56 -04 06 -4 1 2755 2740 277.0 41 43 -15 30 Imports of G&S 11434 11957 11895 1235.9 228 523 27 7 464 Goods imports Petroleum Gold Other goods 9540 1001 3 424 64 5 32 3 2 908 4 933 6 9962 1040.4 67 9 69 8 30 3.3 925 4 967.3 19 1 -34 -3 3 25 9 47.3 222 -0 1 25 2 29 0 120 -0 2 17 2 441 19 03 41 9 04 45 39 37 10 13 24 63 06 51 0 1 90 Aircraft & pts Computers Semiconductors Other cap gds 77 6 334 145 9 226 820 37 3 149 7 22 80 38 148 7 8 1 8 23.3 85.9 38.2 157 7 -2 1 29 15 26 Automotive from Canada from Mexico from ROW 171 6 65 1 30 9 756 1750 62 6 33 3 79 2 175 1 63 4 343 77 3 185 5 64.5 34.4 86.7 104 70 03 31 106 35 32 38 Ind supplies Consumer goods Foods All other 142 2 229 1 417 44 6 146 232 43 44 144 226 43 44 8 9 6 6 148.5 237.8 45 1 45 3 -0 9 82 01 32 -0 2 -5 3 10 01 1894 1944 193 2 195 5 36 50 -13 23 11 21 1039 1201 1468 12 17 1528 1265 15 10 020 -099 081 429 094 164 048 -0 18 Services imports Memo Oil qty (mb/d) Oil prce ($/bbl) 22 2 1 3 8 8 1 Change from previous quartei or month Source U S Department of Commerce Bureaus of Economic Analysis and Census -5- Selected Financial Market Quotations (One-day quotes in percent except as noted) 1998 Change to Aug 19 from selected dates (percentage points) 1999 FOMC* June 30 Oct 15 Dec 31 FOMC* June 30 Aug 19 Oct 15 Short-term Federal funds FOMC intended rate Realized rate 500 5 40 475 458 475 472 500 5 02 00 38 25 44 25 30 Treasury bills 2 3-month 6-month 1-year 405 4 12 406 437 439 433 470 492 489 462 487 490 57 75 84 25 48 57 -08 05 01 Commercial paper I-month 3-month 527 5 13 490 484 518 5 12 5 18 527 09 14 28 43 00 15 Large negotiable CDs 2 I-month 3-month 6-month 535 5 31 510 501 497 497 521 5 32 543 529 543 5 87 -06 12 77 28 46 90 08 11 44 Eurodollar deposits 3 I-month 3-month 5 34 528 494 494 513 525 5 25 544 09 16 31 50 12 19 Bank pnme rate 825 775 775 800 25 25 25 Intermediate- and long term U S Treasury (constant matunty) 2-year 10-year 30-year 4 13 458 502 454 465 509 568 593 607 566 590 603 I 53 1 32 101 I 12 125 94 -02 -03 04 U S Treasury 10-year indexed note 369 388 401 402 33 14 01 Municipal revenue (Bond Buyer)4 5 21 5 26 562 5 86 65 60 24 Corporate bonds Moody's seasoned Baa 7 26 7 23 805 8 13 87 90 08 11 28 10 17 1053 1084 -44 67 31 649 5 6 677 558 763 593 8 15 624 166 88 I 38 66 52 31 Instrument High-yield corporate ' Home mortgages (FHLMC survey rate) 6 30-year fixed I year adjustable Record high 1998 Change to Aug 19 from selected dates (percent) 1999 Level Date Dec 31 FOMC* June 30 Aug 19 11,20984 141878 2.86448 491 41 12,97699 7-1699 7-16-99 7 16-99 4-21-98 7 16-99 9 181 43 I 22923 2.19269 421 96 11,317 59 10.815 35 1.351 45 2.642 11 45408 12.37795 1096384 1,32359 2,621 43 43277 12,06050 Stock exchange index Dow-Jones Industrial S&P 500 Composite Nasdaq (OTC) Russell 2000 Wilshire 5000 Dec 31 1 Average for two-week reserve maintenance period ending on or before date shown Most recent observation is average for current maintenance period to date 2 Secondary market 3 Bid rates for Eurodollar deposits collected around 9 30 a m Eastern time 4 Most recent Thursday quote 5 Memll Lynch 175 high-yield bond index composite 6 For week ending Friday previous to date shown * Data are as of the close on June 29, 1999 Record high -2 19 671 848 11 93 -706 Dec 31 1941 768 19 55 256 656 FOMC* June 30 1 37 -206 78 -469 -2 56 Commercial Bank Credit (Percent change, seasonally adjusted annual rate) 1999 Type of credit 1998 1999 Q1 Q2 May Jun Level, Jul Jul 1999 (billions of $) 1. Bank credit: Reported 110 -03 -05 14 88 -1 2 4,534 Adjusted1 103 19 17 2.0 11 0 01 4.461 2. 3 Securities: Reported 14 I -6 I -3 7 -1 1 175 163 1.221 4. Adjusted' 11 2 2 1 48 10 269 225 1.148 5. U.S government 59 4 1 43 -27 209 55 816 6. Other2 7. 324 8. 9. 105 389 405 18 07 24 57 -75 3.313 13 24 -64 73 I I 959 66 Real estate 19 11 9 Business -193 99 Loans 3 -245 78 31 67 39 07 1,355 10. Home equity 0 1 -24 49 12 1 -84 -662 94 11. Other 71 86 29 63 49 61 1.261 -1 5 29 -36 -103 -120 -204 485 60 34 07 -55 30 14 760 30 1 -127 -44 200 245 -322 515 12. Consumer. Reported Adjusted 4 13. 14. Other 5 Note Adjusted for breaks caused by reclassifications Monthly leels are pro rata alerages of weeklv (Wednesday) levels Quarterly levels (not shown) are simple averages of monthly levels Annual levels (not shown) are levels for the fourth quarter Growth rates shown are percentage changes in consecutive levels annualized but not compounded I Adjusted to remove effects of mark-to-market accounting rules (FIN 19 and FASB Is) 2 Includes secunties of corporations state and local governments and foreign governments and any trading account assets that are not U S gov emment securities 3 Excludes interbank loans 4 Includes an estimate of outstanding loans secuntized by commercial banks 5 Includes secunty loans loans to farmers state and local governments and all others not elsewhere classified Also includes lease financing receivables
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