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 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.

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 optical 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.

Content last modified 6/05/2009.

SUPPLEMENTAL NOTES

The Domestic Economy
Sales of new domestic automobiles in the first 20 days indicate that the August rate will be around 8.8 million vehicles, about
the same as the June and July rates and well above the 8.2 million
rate in April and May.

Deliveries this month are expected to be about

6 per cent above a year ago.
Dealer inventories of August 20 were down 11 per cent from
the end of July, a less than seasonal decline, and were a third higher
than a year ago.
The consumer price index rose .1 per cent in July to 110.2 per
cent of the 1957-59 average; increases of 3.3 per cent for meats and
10 per cent for potatoes were largely responsible for the advance.
Had excise taxes not been reduced, the index would have risen
an additional .2 per cent according to the BLS.

The tax reductions

especially affected household appliances which fell by 1.4 per cent.
Medical care costs advanced sharply by .4 per cent, while
prices of new cars and apparel declined slightly.
The Domestic Financial Situation
Yields on new offerings of corporate bonds have continued to
move upward this week; the new issue series (Aaa basis) rose 4 basis
points to 4.71 per cent.

At this level, underwriters have been able to

distribute these issues quickly.

In free market trading at week's end,

the one competitively-bid issue was selling at a 3 basis point premium
from offering price.

A $30 million debenture issue of General Telephone Co. of
California, originally scheduled for this week, was postponed indefinitely.

Company officials ascribed the action to "prevailing market

conditions and the number of current offerings of utilities debt
securities."
In the municipal market, yields on seasoned, high-grade
issues advanced 2 to 3 basis points.
Common stock prices--as measured by Standard & Poor's Index
of 500 stocks--have risen 0.5 per cent this week in heavy trading.
At the close on August 26, the index, at 87.14, was only 3-1/2 per cent
below its May 13 high.

Trading volume this week has averaged 5.4 mil-

lion shares daily with activity on the last two days exceeding 6.0 million.
In July, savings capital at savings and loan associations
declined by $435 million.

As the accompanying table shows, July is

usually a month of heavy withdrawals, but new savings have usually been
sufficient to offset them.
The substantial net outflow can be attributed to the slowdown
in growth of new savings this year.

Between June and July, new savings

increased about 2 per cent, compared to increases of 9.6, 20.5, and
12.5 per cent in 1964, 1963, and 1962 respectively.

Withdrawals actu-

ally increased less this year between June and July than in the other
years of the expansion period--90 per cent vs. 105, 147, 113, and 105
per cent in 1964 through 1961 respectively.

SAVINGS FLOWS AT ALL SAVINGS & LOAN ASSOCIATIONS

(Millions of dollars)

July

June

Net inflow

New savings

Withdrawals

Net inflow

New savings

Withdrawals

1965
1964
1963

1602
1765
1631

3945
3762
3243

2343
1999
1601

-435
16
-11

4011
4125
3909

4446
4087
3995

1962

1395

3027

1598

25

3405

3397

124

2974

2866

1961

1356

2758

1395

International developments
More complete, though still preliminary, data now indicate an
unadjusted U.S. payments deficit on regular transactions in July of
$265 million.
earlier.

This figure is $65 million higher than was

indicated

After rough allowance for seasonal factors, the payments posi-

tion was probably one of modest deficit, following the moderate surplus
of the second quarter.
U.S. imports in July dropped by 9 per cent to a seasonally adjusted annual rate of $20 billion.

However, about one-third of the

decline resulted from a change in statistical compiling procedures, and
a large part of the remaining fall is thought to have resulted from the
holding up of import arrivals by the seamen's strike on American ships.
A substantial further decline in bank-reported claims on
foreigners occurred in July.

According to preliminary data, the decrease

for long- and short-term claims together totaled $182 million.