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CONFIDENTIAL (FR)

December 13,

CURRENT ECONOMIC AND FINANCIAL CONDITIONS

By the Staff
Board of Governors
of the Federal Reserve System

1978

TABLE OF CONTENTS
Section
DOMESTIC NONFINANCIAL DEVELOPMENTS
Employment and production ............

Page

II
..... .. ........

Personal income and consumer spending..................

......

........

Business investment. ......................
.......
.............
Residential construction......................... .............

7
11

Government sector activity..................................

Prices.........................................................
Wages, productivity, and costs .................
.............

15
16

TABLES:
Changes in employment..........................................

Selected unemployment rates...............

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

Personal income..........................

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

Retail sales........... ..
.... ....
....... .... . ...
Auto sales. .........
... ............................. .. . . ....

6
6

Contracts and orders for plant and equipment..................

..........
Plant and equipment expenditures................
Business inventories
........................ ..... ...........
.

8
10

New private housing units...................................
Sales and inventories of new single-family homes..............
Recent changes in producer prices............................
Recent changes in consumer prices..............................

12
13
17
17

Hourly earnings

index.........

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

CHARTS:
Orders for nondefense capital goods............................
Manufacturers' newly approved capital appropriations...........

8a
8b

Productivity and costs.......................................

DOMESTIC FINANCIAL DEVELOPMENTS

III

Monetary aggregates and bank credit............................

........... ..................
Business finance ..........
Government securities markets................................
Mortgage markets ...............................................
.........
Consumer credit.. ....................... .............

10
17
20
25

TABLES:
Selected financial market quotations.........................

................. ....... ..........
Monetary aggregates .........
Commercial bank credit.....................................

4
8

TABLE OF CONTENTS
Section
DOMESTIC FINANCIAL DEVELOPMENTS (cont.)

Page

III

TABLES:
Gross offerings of corporate and
foreign securities....................
Government security offerings.................

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

.....

15
18

Interest rates and supply of mortgage funds
at selected S&Ls......................................

....

Secondary nome mortgage market activity.....................

Consumer instalment credit..................................

CHARTS:
Measures of credit union liquidity............................
Borrowing ratios at commercial banks........................
Business loan commitments at selected

7
11

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

Selected long-term interest rates and risk premia............
Savings and loan association mortgage
.. ...........................
commitments and cash flow.....

large banks...................

INTERNATIONAL DEVELOPMENTS

IV
..................

OPEC surpluses and investment flows...........................

Foreign exchange markets ..................

U.S. international transactions.............................

Foreign economic developments.................................
Individual country notes.......

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

.....

15
16

TABLES:
Estimates of OPEC current account and
investible surplus.................

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

U.S. merchandise trade, international
accounts basis..............................

U.S. international transactions summary......................
Real GNP and industrial production............................
Consumer and wholesale prices..............................
Trade and current-account balances...........................

13
17
18
19

CHART:
U.S. merchandise trade.....................................

II - T - 1

December 13, 1978

SELECTED DOMESTIC NONFINANCIAL DATA
AVAILABLE SINCE PRECEDING GREENBOOK
(Seasonally adjusted)
Latest Data

Period

Release
Date

Data

Per Cent Change from
Three
Year
Preceding
Periods
earlier
Earlier
Period
(At annual rate)

Civilian labor force
Unemployment rate (%) 1/
Insured unemployment rate (%) 1/
Nonfarm employment, payroll (mil.)
Manufacturing
Nonmanufacturing
Private nonfarm:
Average weekly hours (hr.) 1/
Hourly earnings ($) 1/
Manufacturing:
Average weekly hours (hr.) 1/
Unit labor cost (1967=100)

Nov.
Nov.
Nov.
Nov.
Nov.
Nov.

12-8-78
12-8-78
12-8-78
12-8-78
12-8-78
12-8-78

101.6
5.8
3.0
87.0
20.6
66.4

Nov.
Nov.

12-8-78
12-8-78

35.9
5.86

35.8
5.82

35.8
5.73

36.0
5.39

Nov.
Oct.

12-8-78
11-29-78

40.6
167.0

40.4
9.4

40.3
2.2

40.5
5.7

Industrial production (1967=100)
Consumer goods
Business equipment
Defense & space equipment
Materials

Oct.
Oct.
Oct.
Oct.
Oct.

11-15-78
11-15-78
11-15-78
11-'15-78
11-15-78

148.4
150.2
166.8
88.1
150.2

5.7
11.3
5.1
8.2
4.8

6.3
6.8
7.3
10.2
6.2

6.8
3.7
9.3
11.7
8.1

Consumer prices (1967=100)
Food

Oct.
Oct.
Oct.
Oct.

11-27-78
11-27-78
11-27-78
11-27-78

200.6
217.3
178.5
217.5

9.0
9.5
8.8
10.0

8.6
6.4
8.2
10.0

8.8
11.4
7.0
9.5

Nov.
Nov.
Nov.

12-7-78
12-7-78
12-7-78

216.4
216.0
215.2

11.7
9.3
19.3

9.6
8.4
13.8

10.6

11.9

Commodities except food

Services
Producer prices (1967=100)
Industrial commodities
Farm products & foods & feeds
Personal income ($ bil.) 2/

11-17-78

1764.2

14.6

(Not at annual rates)
Mfrs. new orders dur. goods ($ bil.) Oct.
Capital goods industries
Oct.
Nondefense
Oct.
Defense
Oct.

12-4-78
12-4-78
12-4-78
12-4-78

77.3
25.7
22.2
3.5

6.4
8.6
10.4
-1.5

18.6
32.8
30.2
51.9

21.6
25.0
38.1
-22.3

Inventories to sales ratio: 1/
Manufacturing and trade, total
Manufacturing
Trade

12-12-78
12-4-78
12-12-78

1.41
1.50
1.31

1.40
1.52
1.30

1.41
1.55
1.31

1.47
1.57
1.34

12-4-78

.576

.591

.598

.642

Ratio:

Sept.
Oct.
Sept.

Mfrs.' durable goods inventories to unfilled orders 1/ Oct.

Retail sales, total ($ bil.)
GAF 3/

Nov.

12-12-78
12-12-78

68.6
15.0

2.0
3.0

Auto sales, total (mil. units.) 2/
Domestic models
Foreign models

Nov.
Nov.
Nov.

12-7-78
12-7-78
12-7-78

10.9
8.8
2.1

-2.6
-4.0
3.7

1978 4/
QIII'78
QIV'78 4/
QI'79 47

12-7-78
12-7-78
12-7-78
12-7-78

153.09
155.41
161.24
163.34

-----

12.7
10.7
16.7
13.2

Capital Appropriations, Mfg.

QIII'78

12-5-78

15,976

-8.5

Housing starts, private (thous.) 2/
Lpading indicators (1967=100)

Oct.
Oct.

11-17-78
11-29-78

2,080
139.3

-1.8
2.4

-2.8
4.1

Plant & Equipment expen. ($ bil.) 2/
All Industries

2/
3/
6/

ctual data used in lieu of per cent changes for earlier periods.
At annual rate.
Excludes mail order houses.
Planned-Commerce December Survey.

11.2
8.0
-8.6
-10.2
-1.1

II - 1

DOMESTIC NONFINANCIAL DEVELOPMENTS

Growth of economic activity apparently was vigorous in November.
Hiring at nonfarm establishments was substantial, and industrial production posted a sizable gain.

Unit auto sales were off from a month

earlier, but retail sales rose sharply following a sizable upward-revised
October gain.

Business outlays appear brisk and indicators of near-

term spending remain favorable.

However, reports on capital spending

plans for 1979 continue to show sharp slowing of activity during the
year.

Housing starts remained at a relatively high rate in October,

and home sales rebounded strongly.

Prices increases remain very large

at both the producer and consumer levels.
Employment and Production
Employment growth was brisk in November, but the unemployment
rate remained at 5.8 per cent as labor force growth was rapid.

Job-

less rates for most groups of workers were little changed in November;
however, in recent months, rates have edged lower from the levels prevailing in the spring and summer.
Nonfarm payroll employment rose 470,000 in November, a second
robust monthly increase following three months of small gains.
surge in hiring was widespread by industry.

The

Labor demand in hardgoods

manufacturing, which has accounted for most factory hiring over the
past year, was again strong.

In addition, employment in nondurable

industries climbed sharply for the first time this year.

The average

workweek in manufacturing rose two-tenths hour to 40.6 hours.

- 2

CHANGES IN EMPLOYMENT 1/
(Thousands of jobs; based on seasonally adjusted data)

1977

QIII

1978
Oct.

Nov.

- - - Average monthly changes - - -

Nonfarm payroll employment 2/
Manufacturing
Durable
Nondurable
Construction
Trade
Services and finance
State and local government

284
66
50
16
30
79
82
28

380
55
43
12
54
84
78
47

56
-10
19
-29
7
45
71
-44

404
146
136
10
40
94
40
-3

467
162
96
66
42
65
118
44

Private nonfarm production workers
Manufacturing production workers

215
52

260
37

69
-20

264
121

417
164

Total employment 3/
Nonagricultural

347
340

368
343

16
37

324
354

543
659

1/
2/
3/

Changes are from final month of preceding period to final month of period
indicated.
Survey of establishments. Not strike adjusted.
Survey of households.

SELECTED UNEMPLOYMENT RATES
(Per cent; based on seasonally adjusted data)

1973

Annual average

1978

QII

QIII

Oct.

Nov.

4.9

6.2

5.9

6.0

5.8

14.5
7.8
2.5
4.0

16.9
10.3
3.5
4.9

15.9
9.4
3.3
5.1

16.2
9.4
3.3
5.3

16.3
8.7
3.4
4.9

16.2
9.1
3.1
4.9

White
Black and other

4.3
8.9

5.4
12.3

5.1
12.0

5.2
11.8

5.1
11.4

5.0
11.8

Fulltime workers

4.3

5.7

5.4

5.6

5.3

5.2

White collar
Blue collar
Craft and kindred
Operatives, ex. transport

2.9
5.3
3.7
6.1

3.5
7.1
5.1
8.0

3.6
6.5
4.3
8.0

3.6
7.0
4.4
8.7

3.3
6.9
5.0
7.7

3.3
6.6
4.0
7.7

Total, 16 years and older
Teenagers
20-24 years old
Men, 25 years and older
Women, 25 years and older

II -

Industrial production is estimated to have risen about 3/4
per cent in November.

Gains appear to have been widespread by sector.

Output of consumer goods apparently advanced moderately, with an increase
of 2 per cent in auto assemblies in November to a 9.7 million unit
annual rate.

Output of business equipment and of construction and

business supplies also are estimated to have continued to post gains
in November.

Materials production was up as well, with further increases

in metals (including raw steel) and in paper production.
Given the sustained gains in output, capacity utilization in
manufacturing appears to have increased to about 85-3/4 per cent in
November--the highest operating rate since August 1974 and only 2-1/4
percentage points short of the 1973 high.

However, the November rate

for materials industries shows somewhat greater slack, although rates
for some materials--such as steel and cement--have moved up significantly
this year.
Personal Income and Consumer Spending
Total personal income rose at a 14-1/2 per cent annual rate in
October, a little faster than the rate of rise in the third quarter.

The

October spurt was due primarily to a sharp pick-up in private payrolls.
The Federal pay raise effective October 1 added $2-1/3 billion to the
October rise.

Based on establishment reports of employment and earnings,

the increase in private wage and salary disbursements probably was
sizable again in November.

II -

Retail sales excluding automobiles and nonconsumption items
rose 2.5 per cent in November following an upward revised 0.8 per cent
rise in October.

Sales at these stores were up 4-3/4 per cent from

the third quarter average.
November.

Gains were widespread by type of store in

A particularly large rise occurred at general merchandise

stores following a small decline in October.
Sales of new domestic-type autos were at an 8.8 billion unit
annual rate in November, down almost half a million from the October
pace.

Brisk sales of new General Motors cars provided considerable

support for over-all sales; this contrasts with the company's setbacks
last fall when it introduced downsized intermediate models for 1978.
Weaker sales at other companies--particularly Chrysler and AMC--have
resulted in an appreciable build-up in dealer inventories, and both
companies have scheduled temporary shutdowns in selected plants.

Pur-

chases of foreign cars edged up to a 2.1 million unit annual rate in
November, bringing total sales for the month to a 10.9 million unit
annual rate.

For the first two months of the fourth quarter, total auto

sales have averaged 5 per cent below the average selling rate of last
spring and summer.
Despite recent advances in income and sales, consumers reportedly
have become more pessimistic about the economic outlook.

The Survey

Research Center of the University of Michigan reported that its index
of consumer sentiment dropped sharply in November and was at its lowest
level since 1975.

Respondents were more pessimistic about present and

anticipated business conditions, and inflationary expectations remained
high.

II - 5
PERSONAL INCOME
(Based on seasonally adjusted data)

1977

1978
QII

QIII

Aug. 78
to
Sept. 78

Sept. 78
to
Oct. 78

- - Average monthly change, in billions of dollars - Total personal income
Nonagricultural income
Agricultural income

$13.5
12.3
1.2

$12.4
15.7
-3.3

$16.5
14.1
2.4

Wage and salary disbursements
Private
Manufacturing

8.3
7.0
2.7

13.1
12.2
4.0

10.6
9.6
1.9

Other income
Transfer payments

5.7
1.3

1.0
1.0

6.4
.2

$15.8
15.4
.4

$12.9
11.6
1.3

15.6
12.3
4.1

- - Per cent change, compound annual rate 1/
Total personal income
Current dollars
Constant dollars 2/
Wage and salary disbursements
Current dollars
Constant dollars 2/

11.4
4.4

9.3
1.4

13.8
2.6

11.0
4.1

12.1
3.9

15.9
4.5

1/ Monthly per cent changes at annual rates, not compounded;

12.0

3.1

14.6
5.5

8.6
.0

16.7
7.6

1977 per cent change from

QIV to QIV.
2/

$21.3
19.8
1.4

Deflated by the CPI for all urban consumers, seasonally adjusted.

II - 6

RETAIL SALES
(Per cent change from previous period;
based on seasonally adjusted data)

Nov.

1.3

2.0

n.a.

4.7

1.5

2.5

2.1

3.7

1.0

-.7

3.0

7.3
6.9
6.9

2.8
.8
2.8

5.3
5.3
4.0

-.4
-1.5
1.5

3.4
6.3
3.3
5.8
.1

1.5
4.6
1.1
.9
0

4.4
2.0
4.1
4.3
4.4

1.4
.5
.9
.9
2.5

QIII

Nov./QIII

4.7

2.0

4.7

2.1

Total, less auto and
nonconsumption items

3.9

2.1

GAF

6.1

Durable
Auto
Furniture & appliances
Nondurable
Apparel
Food
General merchandise
Gasoline

Total sales
1/
(Real)

1978
Sept.

Oct.

QII

n.a.

2.3
3.2
-.4

1.6
1.0
2.2

.8
-1.8
1.5
-.4
1.6

2.3
1.7
1.9
3.8
.4

Deflated by all commodities SA consumer price index.

AUTO SALES
(Seasonally adjusted, millions of dollars)

1978
QI

QII

QIII

Sept.

Oct.

Nov.

10.8

12.1

11.2

10.6

11.2

10.9

Imports

2.0

2.1

2.0

1.9

2.0

2.1

Domestic

8.8

10.0

9.2

8.7

9.2

8.8

Total

II - 7
Business Investment
Indicators of near-term business investment spending commitments continue to be strong.

New orders for nondefense capital goods

jumped more than 10 per cent in October and now have risen 22 per cent
since mid-year.

As in recent months, the strength in aircraft bookings

was particularly impressive.

In addition, machinery orders, which had

been on a plateau for most of this year have risen about 10 per cent
during the last two months.

Businesses also continued to award construc-

tion contracts at a substantial rate in October, bolstered by commitments for several large power plants.

While this series is volatile

from month to month, the real value of contracts for the first 10 months
of 1978 is running about 10 per cent ahead of the same period a year ago.
On the other hand, the Commerce Department November survey of
anticipated plant and equipment expenditures indicates slower growth
next year, in line with that reported in recent private surveys.

If these

plans are realized, nominal growth over the first half of next year will
decelerate to an 8 per cent annual rate from a 14 per cent rate over the
last half of 1978.

Although this survey is typically quite accurate,

it underestimated the actual growth of spending somewhat in the past
two years.
Data on manufacturer's newly approved capital appropriations
are consistent with other survey evidence.

Despite a rebound in the

third quarter, appropriations remained well below the level reached in

- 8

CONTRACTS AND ORDERS FOR PLANT AND EQUIPMENT
(Per cent change from preceding comparable period, seasonally adjusted)

QII

1978
QIII

11.6

-4.8

5.6

1977: first
10 months t
1978: first
10 months

Sept.

Oct.

11.6

-. 2

13.5

23.0

3.5

5.3

4.2

10.4

23.4

47.8

-40.2

57.9

-20.4

32.8

20.8

9.4

-5.9

8.8

-. 6

12.5

14.1

3.5

2.4

2.9

3.5

9.2

14.7

46.2

-42.3

54.1

-20.4

33.3

11.2

Current dollars
Totall/
Nondefense capital goods orders
Construction contracts 2/
1972 dollars
Total1/
Nondefense capital goods orders
Construction contracts 2/

The Commerce Department creates this series by adding new orders for nondefense
capital goods to the seasonally adjusted sum of new contracts awarded for commercial
and industrial buildings and for private nonbuilding projects (e.g., electrical
utilities, pipelines, etc.).
FRB staff estimate.
Derived by subtracting new orders for nondefense capital goods
from the published total for contracts and orders.

PLANT AND EQUIPMENT EXPENDITURES
(Per cent change from previous quarter, annual rate)

1/
1978

---- Anticipated --1979
QII
QI
QIV

QII

QIII

19.0

19.3

12.9

15.9

5.3

11.4

Manufacturing

1.0

41.9

3.3

36.3

-1.0

19.1

Durables

7.7

42.9

11.3

26.3

-. 7

22.3

-4.3

40.9

-3.3

46.0

-.3

16.5

35.0

4.3

21.1

1.7

10.7

All Business

Nondurables
Nonmanufacturing

Expenditure plans from November Commerce Survey.

5.5

- 8a

ORDERS FOR NONDEFENSE CAPITAL GOODS
(Billions of dollars, S.A.A.R.)

Ratio scale
Total

/ 3-month

moving average

Machinery

Nonmachinery

1975

177

197

1977

1979

MANUFACTURERS'

- 8b

NEWLY APPROVED CAPITAL APPROPRIATIONS
Seasonally adjusted

Quarterly rate, billions of dollar

1974

1976

1978

II -

the second half of 1977.

Since spending normally lags appropriations

by about one year, this year's appropriations pattern suggests a
distinct slowing of investment growth during 1979.
Inventory investment appears to have moderated in September
and October.

The book value of manufacturers' stocks rose at a seasonally

adjusted annual rate of $11-1/2 billion in October--the smallest monthly
increase so far this year.

As throughout this year, most of the accumu-

lation occurred in durable stocks, which increased at an annual rate
of $10-2/3 billion.

Manufacturers' inventory investment in October was

accompanied by a substantial increase in shipments (2 per cent); as a
result, the ratio of book-value inventories to sales for all manufacturers
declined to a near-record low.
Although over-all inventories do not appear to be out of line
with sales, some overhang emerged this fall at retailers of general
merchandise including department stores.

In the third quarter, the

constant-dollar ratio of inventories to sales for this category moved
above its 1974 peak.

Merchants appear to have recognized these imbalances,

however, and reports indicate that they have slowed deliveries, have
rerouted orders, and are offering exceptional Christmas sales.

Manufacturers'

inventory reductions were reported in October in the home goods and apparel
groupings--an area that had registered a rise in stocks in the preceding
month.

Moreover, the strong rise in general merchandise sales in November

should help ease the inventory problem in this area.

II - 10
BUSINESS INVENTORIES
(Annual rate of change in seasonally
adjusted book values; billions of dollars)

QII

1977
QIII

QIV

28.3

25.2

Manufacturing
Durable
Nondurable

15.7
7.8
7.9

Trade, total
Wholesale
Retail
Auto

12.6
2.6
10.0
2.2

Manufacturing and trade

1/
2/

QII

1978
QIII

Sept.1/

17.8

44.2

44.3

32.4

26.4

n.a.

10.2
7.7
2.4

2.8
3.8
-1.0

16.6
13.2
3.4

22.8
15.9
6.9

18.0
14.0
4.1

14.2
11.6
2.5

11.5
10.6
.9

15.0
4.7
10.3
1.5

14.9
7.5
7.4
2.9

27.6
19.5
8.1
.9

21.5
11.8
9.8
.2

14.4
6.1
8.2
-.2

12.2
13.2
-1.0
-1.2

n.a.
n.a.
n.a.
n.a.

QII

1978
Sept.1/
QIII

Oct.2/

Revised.
Preliminary.

INVENTORY TO SALES RATIOS

QII

1977
QIII

QIV

1.46

1.48

1.44

1.46

1.42

1.43

1.41

n.a.

Manufacturing
Durable
Nondurable

1.60
1.96
1.22

1.61
1.96
1.22

1.56
1.90
1.18

1.56
1.90
1.17

1.52
1.86
1.15

1.54
1.87
1.16

1.52
1.83
1.15

1.50
1.81
1.13

Trade, total
Wholesale
Retail

1.32
1.21
1.43

1.35
1.24
1.44

1.33
1.23
1.42

1.36
1.27
1.45

1.31
1.20
1.42

1.32
1.21
1.43

1.31
1.20
1.41

n.a.
n.a.
n.a.

Manufacturing and trade

1/
2/

Revised.
Preliminary.

Oct.2/

II - 11
Residential Construction
Private housing starts--at a 2.1 million unit annual rate in
October--have fluctuated since March in a narrow range just below last
year's fourth-quarter high.

Single-family starts held steady again in

October, continuing the pattern of little change that has prevailed for
seven months.

The more volatile multifamily starts rose moderately in

October, after a sharp rebound in September, but they remained below
the second-quarter high.

Total residential building permits were off

3 per cent in October, but were slightly above the reduced third-quarter
average.
On a regional basis, much of the strength in home building since
March has come from the South and the Northeast regions--both areas where
recovery from the 1973-1974 housing downturn had been relatively slow.
The West, which had been the early leader in the housing expansion, has
seen considerably less activity this year than in the strong final
quarter of 1977.
Sales of single-family houses rose sharply in October, after
falling off somewhat in September.

Sales of existing houses, which have

held up well so far this year, rose further, and there was a record surge
in new-house sales.

The substantial step-up in new-house sales--a

particularly volatile series--followed several months in which these
transactions had dropped below year-earlier levels.

The particularly

sharp increase in house sales during October may have reflected, in part,

II - 12

NEW PRIVATE HOUSING UNITS
(Seasonally adjusted annual rates, millions of units)

1977

1978

Per cent change
from:
Month
Year
earlier
earlier

QIV

QII

QIII

Sept./Oct.1/

Total
Permits
Starts
Under construction3/
Completions

1.79
2.15
1.25
1.69

1.57
1.72
1.26
1.76

1.72
2.11
1.30
1.90

1.64
2.08
1.31
1.95

1.73
2.08
1.31
1.97

1.68
2.08
1.33
1.84

-3
0
+1
-7

-6
-3
+12
+11

Single-family
Permits
Starts
Under construction 3
Completions

1.20
1.55
.77
1.28

1.01
1.23
.78
1.30

1.11
1.47
.77
1.43

1.05
1.45
.79
1.35

1.09
1.46
.78
1.45

1.13
1.45
.79
1.40

+3
-1
0
-3

-5
-6
+8
+12

.60
.60
.48
.42

.56
.49
.48
.46

.61
.64
.52
.47

.59
.62
.53
.59

.64
.62
.52
.52

.56
.63
.54
.45

-13
+2
+3
-15

-7
+4
+17
+7

.32

.29

.26

.27

.29

-10

Itifamily
Permits
Starts
Under construction3/
Completions
Mobile home shipments

1/
2/
3/

Preliminary.
Revised.
Seasonally adjusted,

end of period.

II -

SALES AND INVENTORIES
OF NEW SINGLE-FAMILY HOMES

Total

Sales
Existing

New

New
Homes for
Sale

Month's Supply
of New Homes
for Sale

1972
1973
1974
1975
1976
1977

2972
2968
2792
3002
3652
4392

2254
2334
2273
2453
3006
3572

718
634
519
549
646
819

416
422
350
316
358
408

5.9
8.1
9.0
7.3
6.1
5.5

1977-QI
QII
QIII
QIV

4113
4207
4469
4809

3267
3407
3653
3960

846
800
816
849

358
367
389
403

5.0
5.5
5.7
5.7

1978-QI
QII
QIII

4463
4644
4762

3670
3810
3973

793
835
788

404
418
419

6.1
5.9
6.4

1978-Aug.
Sept.
Oct.

4864
4742
5269

4080
3950
4290

784
792
979

418
419
412

6.4
6.3
5.1

Note:

All data are averages except new homes for sale which is
monthly data reported at the end of the period. Published
annual data may not agree with calculated quarterly data.

II- 14
some buying in anticipation of further increases in house prices and
mortgage interest rates.

In addition, the good weather that prevailed

throughout the month may have been a factor.
Government Sector Activity
Federal Government receipts on a unified budget basis were
larger than expected during the past two months, primarily because of
large flows from individual tax withholding.

Federal spending in October

also appears to have exceeded earlier expectations, as sizable increases
were reported for defense procurement, local public works, and direct
loans by the Small Business Administration.

Nevertheless, preliminary

Treasury data suggest Federal spending may have slowed during November.
One program that has experienced a sharp fall-off in spending
in recent months is the public service employment program.

It appears

that local program sponsors allowed the level of subsidized employment
to fall from 725,000 to about 650,000 during the third quarter in anticipation of the fiscal 1979 reduction in funding for the program.

While

these cutbacks likely have contributed to the recent weakness in State
and local employment, over-all hiring in this sector rebounded somewhat
by rising 40,000 in November.
Construction expenditures by States and localities have continued strong.

The October increase in the value of construction put-

in-place was $1.7 billion (annual rate); in real terms these expenditures
were up 15 per cent from a year ago.

II -

Prices
Inflation has continued unabated.

Consumer prices rose at

about a 9 per cent annual rate in October for the second month, and
they have risen at a 9-1/2 per cent annual rate so far this year.

November, producer prices of finished goods increased at about a 9
per cent annual rate--close to the rate in the preceding two months.
The food component has remained a major factor in price movements at all levels.

Retail food prices accelerated further in October

as meat and poultry prices turned up after several months of decline.
However, livestock and beef prices declined in November; consequently,
food price increases at the producer level--although still large--slowed
somewhat from the October rate.
Prices of several energy items, notably gasoline, have recently
become an important influence on the over-all inflation rate.

Large

gasoline stocks had held retail prices nearly unchanged in the first half
of the year; but supplies now are tighter, particularly for unleaded
gasoline, as a result of increased consumer demand and some production
problems.

At the same time, natural gas prices have continued to rise

rapidly, with a particularly sharp increase at retail in October.

More-

over, regulations implementing the Natural Gas Policy Act of 1978 took
effect at the beginning of December and these will permit further sizable
increases in natural gas prices.

II -

Price increases for items outside of the food and energy area
have accelerated in recent months, especially at the producer level.

particular, higher prices for some machinery, aircraft, tools, and equipment in November pushed the price index for capital equipment up at an
11-3/4 per cent annual rate; during the preceding 10 months these prices
had risen at about a 7-1/2 per cent annual rate.

In addition, there

were further large price increases for construction supplies.
Wages, Productivity, and Costs
Labor costs continued to rise at a rapid raee in recent quarters.
Wage rates, as measured by the average hourly earnings index, have risen
at an 8.3 per cent annual rate so far this year.

Hourly compensation,

which includes both wages and benefits, increased at almost a 9 per cent
annual rate during the second and third quarters.

At the same time,

productivity gains have provided only a small offset to compensation
increases.

Revised data indicate that output per hour in the nonfarm

business sector rose at a 2-1/3 per cent annual rate in the third quarter
to a level just 0.3 per cent above a year ago.

Reflecting these move-

ments in compensation and productivity, unit labor costs in the third
quarter stood 9 per cent above the level a year earlier.

II - 17
RECENT CHANGES IN PRODUCER PRICES
(Per cent change at compound annual rates; based
on seasonally adjusted data)1/
Relative
importance
Dec. 1977

1977

1978
QIII
Oct.

Nov.

Dec. 77
to
Nov. 78

Finished goods
Consumer foods
Consumer nonfoods
Capital equipment

41.2
10.3
18.7
12.2

6.6
6.6
6.1
7.2

10.5
17.9
8.2
7.9

5.0
-1.0
7.6
6.4

10.3
20.1
7.7
7.1

9.0
7.4
8.3
11.8

8.9
11.8
8.1
7.8

Materials:
Intermediate 2/
Construction
Crude nonfood
Crude food

45.5
8.3
4.6
6.3

6.4
8.3
6.8
1.4

7.9
11.9
13.9
34.1

6.7
8.5
12.2
-9.4

13.7
14.2
25.0
43.4

9.8
14.0
22.1
15.0

8.3
11.5
15.6
20.4

1/
2/

Changes are from final month of preceding period to final month of period
indicated. Monthly changes are not compounded.
Excludes intermediate materials for food manufacturing and manufactured
animal feeds.

RECENT CHANGES IN CONSUMER PRICES
(Per cent change at compound annual rates; based
on seasonally adjusted data) 1/
Relative
importance
Dec. 772/

All items
Food
Commodities (nonfood)
Services
Memoranda:
All items less food
and energy 3/
Gas and electricity
Gasoline
Homeownership
I/
2/
3/

1977

1978
QIII
Sept.

Oct.

Dec. 77
to
Oct. 78

100.0
17.7
41.6
40.7

6.8
8.0
4.9
7.9

10.4
18.4
6.6
10.4

7.8
3.0
7.8
10.3

9.1
6.2
10.2
9.5

9.0
9.5
8.8
10.0

9.5
12.7
7.2
10.4

73.7
3.4
4.2
22.8

6.4
8.7
4.9
9.2

9.0
17.0
-. 2
13.3

8.3
4.5
14.0
14.7

8.2
4.0
17.2
15.6

10.0
15.6
16.9
13.9

8.9
13.1
5.6
13.9

Changes are from final month of preceding period to final month of period
indicated. Monthly changes are not compounded.
Based on new index for all urban consumers.
Energy items excluded: gasoline and motor oil, fuel oil and coal, gas and
electricity.

II - 18
HOURLY EARNINGS INDEX 1/
(Per cent change at compound annual rates; based on seasonally adjusted data)

Total private nonfarm
Manufacturing
Contract construction
Transportation and public
utilities
Total trade
Services
1/

Dec. 76
to
Dec. 77

Dec. 77
to
Nov. 78

Dec. 77
to
Mar. 78

Mar. 78
to
June 78

June 78
to
Nov. 78

7.4

8.3

9.8

7.9

7.6

8.2
4.0

8.3
8.0

9.1
11.9

7.2
9.3

8.5
5.1

9.4
7.5
6.7

6.2
9.3
7.7

6.3
12.0
10.6

7.3
7.5
5.5

5.4
8.8
7.2

Excludes the effect of interindustry shifts in employment and fluctuations in
overtime pay in manufacturing.

- 19

PRODUCTIVITY AND COSTS
Nonfarm Business Sector
(Per cent change from same quarter a year ago)

Per cent

12
Hourly Compensation

4
8

Productivity

-4

16
12

Unit Labor Costs

S8
4
SI
1974

I
1976

I
1978

III-T-1
SELECTED DOMESTIC FINANCIAL DATA

Latest data
Indicator

Period

Level

Net Change from:

Per cent at annual rates

$ billions

1/
Monetary and credit aggregates
Total reserves
Nonborrowed reserves
Money supply
Ml
M2
M3
Time and savings deposits (less CDs)
CDs 2 /
Thrift deposits (S&Ls + MSBs
+ Credit Unions)
Bank credit (end of month)

Year
ago

Three
months ago

Month
ago

41.3
40.6

-3.8
13.2

4.0
8.5

6.6
7.2

November 360.7
November 870.6
November 1493.1
November
510.0
November
95.4

-4.3
4.4
7.0
10.9
7.2

4.5
8.0
10.4
10.7
9.1

7.3
8.1
9.2
8.7
24.5

November
November

10.9
6.5

13.9
8.7

10.8
11.4

November
November

622.5
970.0

Net Change from:
Latest

data
Per cent

Month

Three
months

Period

or index

ago

12/6/78
12/6/78
12/6/78
12/8/78
12/7/78
12/11/78

9.87
8.93
10.25
9.26
6.29
10.40

.10
.08
.24
.04
.12
.13

.57
1.33
2.18
.49
.16
.63

3.37
2.88
3.71
.92
.75
1.51

12/6/78
12/11/78

5.49
54.31

.05
1.59

.47
-6.07

.36
2.58

Indicator

Market yields and stock prices
Federal funds
wk. endg.
asury bill (90 day)
"
ercial paper (90-119 day)
"
ew utility issue Aaa
"
Municipal bonds (Bond Buyer) 1 day
FNMA auction yield (FHA/VA)
Dividend price ratio (common
stocks)
wk endg.
NYSE index (12/31/65=50)
end of day

Year

Net Change or Gross Offerings
Latest Year
Year to Date
Period
Data
ago
1978
1977
Credit demands
Business loans at commercial banks1/
Consumer instalment credit outstanding
1/3/
Mortgage debt outstanding (major holders)- Corporate bonds (public offerings)
Municipal long-term bonds (gross offerings)
Federally sponsored agcy. (net borrowing)
U.S. Treasury (net cash borrowing)

November
October
September
November
November
November
December

1.9
3.1
8.8
1. 6 e
e
4.1
1-.4
1.7

1.6
3.2
8.9
2.2
3.3
.5
10.0

Seasonally adjusted.
$ billions, not at annual rates
3/ Includes comm'l banks, S&Ls, MSBs,
e - Estimated

life ins.

cos, FNMA, and GNMA.

26.6
35.9
79.4
18.7

44.3
20.8
51.7

20.7
27.8
70.6
22.6
43.1
6.3
56.9

III - 1

DOMESTIC FINANCIAL DEVELOPMENTS
Aggregate borrowing by nonfinancial sectors during November
apparently continued at about the October pace. Short- and intermediateterm business borrowing increased, while gross issues of long-term
corporate securities remained around the reduced October volume.
Net mortgage borrowing by households apparently rose in November
while consumer instalment debt expansion probably changed little.
In the public sector, gross offerings of State and local debt exceeded
tne previous month's volume, reflecting major New York City financing
and increased borrowings by various local housing authorities.
Mainly because of sales directly to foreign governments, the Treasury
essentially completed its domestic market borrowing for this year
early in November.
M-1 contracted in November and growth in the other major
monetary aggregates slowed, reflecting continued weakness in both
demand and savings deposits at commercial banks.

To meet relatively

strong loan demands, banks reduced investments and expanded managed
liabilities.

Deposit inflows to thrift institutions also tapered

off despite sizable increases in money market certificates at S&Ls
and mutual savings banks.
The Federal funds rate has risen from about 9-5/8 per cent
to the 9-7/8 per cent area since the last FOMC meeting.

Against this

backdrop, other private short-term rates have increased somewhat, but
in many cases remain a bit below the peak levels reached in the first

III -

SELECTED FINANCIAL MARKET QUOTATIONS
(per cent)
1977

1978

2/
FOMC
Nov.

i Change from:
i
Oct.
Nov.
31
FOMC

High

Low

FOMC
Oct.
17

Short-term rates
Federal funds 1/

6.65

4.47

8.78

9.29

9.68

9.86-'

+.57

+.18

Treasury bills
3-month
6-month
1-year

6.27
6.51
6.62

4.41
4.55
4.67

8.15
8.62
8.45

8.75
9.23
9.13

8.83
9.08
9.09

8.86
9.21
9.22

-.11
-.02
+.09

+.03
+.13
+.13

Commercial paper
1-month
3-month

6.58
6.66

4.53
4.63

8.84
8.99

9.13
9.40

9.79
10.15

10.03
10.28

-.90
+.88

+.24
+.13

Large negotiable CDs 4/
3-month
6-month

6.62
6.84

4.60
4.65

9.35
9.70

10.13
11.00

10.40
11.00

10.50
11.00

+.37
0

+.10
0

Bank prime rate

7.75

6.25

10.00

10.25

11.00

11.50

+1.25

+.50

8.36
8.48

7.90
7.95

-9.03

9.23
9.24

9.25
9.24

9.26p
9 32
. p

+.03
--.08

+.01
-.08

Municipal
(Bond Buyer) 7/

5.93

5.45

6.10

6.21

6.11

6.29

-.08

+.18

U.S. Treasury
(constant maturity)
3-year
7-year
20-year

7.39
7.66
7.96

5.74
6.48
7.20

8.54
8.61
8.66

9.32
9.00
8.90

8.89
8.76
8.70

9.16
8.91
8.83

-.16
-.09
-.07

--.
27
+.15
+.13

Intermediate- and longterm rates
Corporate
New AAA 5/
Recently offered 6/

Stock prices
Dow-Jones Industrial
N.Y.S.E. Composite
AMEX
Keefe Bank Stock 6/

Oct.
31

Dec.
12

Low
8/

High
8/

FOMC
FOMC
Oct.
17

Oct.
31

FOMC
FOMC
Nov.
21

Dec.
12

Oct.
31

Nov.
FOMC

807.74
50.13
110.37
530

985.74
56.98
126.86
633

866.34
56.89
163.55
676

792.45
51.67
136.75
694

804.05
52.96
145.69
596

814.97
54.03
150.76
607

+22.52
+2.36
+14.01
-87

+10.92
+1.07
45.07
+11

Daily averages for statement week, except where noted.
One-day quotes except as noted.
Average for first 6 trading days of statement week ending December 13.
Highest quoted new issues.
1978 figures are averages for preceding week.
1978 figures are one-day quotes for preceding Friday.
1978 figures are one-day quotes for preceding Thursday.
Calendar week averages.

III - 3

half of November when international capital flows were significantly
affecting the domestic interest rates structure.

With reaucea

foreign official purchases, rates on short-aated Treasury bills
have risen more than 3/4 percentage point above their mid-November
lows.

Rates on intermediate -and long-term securities have risen

by 5 to 20 basis points, partly offsetting the rally in bond prices
in early November. In home mortgage markets, rates on new commitments
and secondary market yields have risen about 10 to 20 basis points.
Major stock price indexes, on the other hand, have edged up lowering
stock yields slightly.
Monetary Aggregates and Bank Credit
M-1 declined at an annual rate of 4-1/4 per cent in November, as demand deposit balances at commercial banks contracted.
The second consecutive month of weakness in M-1 following September's
strong gain partly reflected the accelerated rise in short-term
market interest rates since August, as well as transfers of funds
from demand accounts to savings accounts authorized for automatic
transfer services (ATS).l

Even in the absence of such deposit

shifts, however, M-1 growth in November would have declined at
about a 1 per cent rate, according to staff estimates.

At the end of November, almost one-third of all commercial
banks and 80 per cent of banks with assets over $300 million
were offering ATS. In all, ATS account balances at month-end
were estimated at $1.9 billion. Most of these funds--about 50
to 60 per cent--may have come from commercial bank demand
deposits, while less than 5 per cent appear to have shifted
from deposits at thrift institutions.

III - 4

MONETARY AGGREGATES
(Seasonally adjusted)1/

Nov. '77
to

1978

Nov.p Nov. '78

QII

QIII

6.2

9.9

7.6

14.1

3.7

-4.3

7.3

4.9

6.9

5.3

12.2

1.8

-6.7

5.0

6.9

7.9

8.9

12.5

7.0

4.4

8.1

7.7

7.8

10.1

14.0

10.0

7.0

9.2

12.8

10.1

9.5

13.8

7.9

23.9

12.1

7.3
2.6
2.4
2.6
11.4
3.6
26.9

6.4
1.6
1.8
0.0
10.5
6.8
17.3

10.0
1.3
2.5
-15.5
17.3
8.5
32.7

11.8
9.7
8.7
16.2
13.6
11.9
16.4

9.1
-1.6
-2.9
16.0
17.7
23.5
8.1

10.9
-10.7
-8.6
-39.5
28.1
4.7
66.6

8.7
1.1
1.5
-3.9
15.4
8.4
28.4

3.0

3.8

4.4

10.7

9.4

-3.9

4.3

Sept.

Oct.

Major monetary aggregates
(currency plus demand
M-1
1.

deposits)
M-1+ (M-1 plus savings

deposits at CBs and
checkable deposits at
thrift institutions)

3.
4.

M-2
M-3

(M-1 plus time & savings
deposits at CBs, other
than large CDs)
(M-2 plus all deposits

at thrift institutions)
Bank time and savings deposits
5.
Total
6. Other than large negotiable
CDs at weekly reporting banks
(interest bearing component
of M-2)
7.
Savings deposits
Individuals 2/
8.
Other 3/
9.
10.
Time deposits
Small time 4/
11.
12.
Large time 4/
13. Time and savings deposits subject
to rate ceilings (7+11)
Deposits at nonbank thrift
institutions
14. Total
15. Savings and loan associations
16. Mutual savings banks
17. Credit unions

5/
10.6
10.3
13.4
15.8
11.6
7.6
8.8
11.4
11.6
14.6
16.9
12.8
7.9
9.0
8.6
6.8
11.2
7.1
11.3
3.9
5.8
20.9
6.8
n.a.
n.a.
17.4
16.6
13.6
Average monthly changes, billions of dollars

MEMORANDA:
18.
19.
20.

-1.2
Total U.S. Govt. deposits6/
4.6
Total large time deposits 7/
Nondeposit sources of funds 8/ 1.7

1.1
2.8
0.7

1.5
3.1
1.2

1.3
3.2
1.0

3.8
0.8
5.1

0.5
13.0
-2.2

1.1
4.1
1.1

p--preliminary. n.a.--not available.
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 CDs at weekly reporting banks.
5/ Growth rates computed from monthly levels 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), Eurodollar borrowings, and
loans sold, less interbank borrowings.

III - 5
Despite the transfers to ATS accounts, total savings deposits
at commercial banks contracted at a 10-3/4 per cent annual rate in
November, a record monthly decline which may have been partly in
response to the widening differential between market rates and deposit
rate ceilings during November.

Although a quarter of these outflows

were from State and local government accounts, the bulk of the drop
occurred in the accounts of individuals.

Reflecting the weakness

in its major deposit components, the newly defined M-l+ declined
at an annual rate of 6-3/4 per cent.
Growth in small time deposits at banks slowed sharply in
November due to a contraction in deposits with an original term to
maturity of less than 4 years.

It is for this category of small

time deposits--excluding the money market certificate (MMC) component--that the differential between regulated interest rate ceilings and yields on market
greatest.

instruments of similar maturity has been

Net of MMCs, in fact, small time deposits have been

declining since May.

In contrast, those large time deposits not

subject to interest ceilings but included in M-2 rebounded from
the reduced October pace to advance at more than twice the already
high annual rate of the third quarter. On balance, the weakness
in savings and small time deposits along with the decline in M-1
reduced the rate of expansion in M-2 to 4-1/2 per cent, the slowest
pace in 3 years.
In addition to the sluggishness in M-2, a moderation
in thrift institution deposit growth contributed to a slowing of

III - 6
M-3 expansion in November.

S&Ls and mutual savings banks exper-

ienced smaller deposit gains despite stepped-up issuance of money
market certificates.1

The competition from MMCs and other higner

yielding investment outlets apparently had their first sizable impact
on credit union deposit flows in October, when share accounts fell
at an annual rate of 4 per cent (end-of-month basis). The National
Credit Union Administration responded to the deposit losses by authorizing Federally-chartered credit unions, as of November 20, to
offer 6-month MMCs at ceiling rates and in minimum denominations
applicable to other thrift institutions. Balance sheet positions
of many of these institutions have tightened substantially, as reflected in declines in aggregate liquid asset ratios to the lowest
levels in 10 years and in an unusually high loan-to-deposit ratio
(see Chart on page 7).
Total loans at commercial banks advanced slightly faster
in November than in the previous month.

A modest slowdown in lend-

ing to business, agricultural, and nonbank financial customers was
more than offset by an acceleration in real estate lending above
the already rapid rate of recent montns and a smaller run-off of

Survey results, available only for S&Ls, indicate that in
November deposits flowed into the 6-month money market certificates at a record $7-1/2 billion pace. Outstanding 6-month
certificate balances at S&Ls reached $32 billion in mid-November,
accounting for nearly 8 per cent of total deposits at these
institutions. At mutual savings banks, money market certificates
outstanding had increased nearly $3 billion in October to $9
billion, a figure approaching 7 per cent of total deposits at

MSBs.

III - 7

Measures of Credit Union
Liquidity
(seasonally adjusted)
Per Cent
-

Federal
Liquid Assets Ratio:Credit Unions with Assets

of $.5-2.0 million

S60

Liquid Assets Rtio:- Federal
Credit Unions with Assets
of $2 million and above

0
er Cent
96

Loan-to-Share Ratio:
All Credit Unions

1974

1976

1978

1/ The sum of Government securities, savings and loan association shares, and
loans to other credit unions as a per cent of notes payable and share accounts
larger than $5,000.

III

COMMERCIAL BANK CREDIT
(Per cent changes at annual rates, based on seasonally adjusted data)1 /

months
1978

QI
1.

Total loans & investments2/

Investments

Sept.

10.6

17.0

8.7

9.7

5.2

11.7

1.1

3.2

-4.5

-20.4

2.0

17.1

-8.6

-24.7

-61.8

-6.2

Treasury securities

2.1

Other securities

7.1

Total loans

-6.1

8.5

9.0

10.1

12.7

19.1

11.7

12.3

10.3

Oct.
9.8

7.1

Nov.

QIII

ending

QII

6.5

2.8

15.3

16.6

10.6

10.0

11.4

6.9
15.3
13.9

Business loans

15.3

17.4

Security loans

-34.2

88.9

Real estate loans

17.2

19.3

17.6

15.7

16.7

21.1

19.3

Consumer loans

16.4

23.7

15.6

12.9

17.3

n.a.

10. Commercial paper
issued by nonfinancial firms3/

-2.5

30.6

18.9

6.8

33.9

52.7

24.2

11. Business loans at
banks net of bank
holdings of bankers
acceptances

16.8

17.9

10.3

9.2

12.4

12.8

14.9

12. Sum of items 10 & 11

15.2

18.8

10.9

9.0

13.9

15.8

15.5

13. Memo item 12 plus
business loans from
finance companies

14.8

17.4

18.8

n.a.

-26.8

9.1
25.1

-67.7

-52.2

-12.4

MEMORANDA:

9.1

10.1

n.a.-not available.
1/ Last-Wednesday-of-month series except for June and December, which are
adjusted to the last business day of the month.
2/ Loans include outstanding amounts of loans reported as sold outright to a
bank's own foreign branches, nonconsolidated nonbank affiliates of the bank,
the bank's holding company (if not a bank), and nonconsolidated nonbank
subsidiaries of the holding company.
3/ Measured from end of month.
NOTE:

Data adjusted to reflect benchmarking for the June 30, 1978 Call Report.
A description of the revision will be available in the Greenbook Supplement.

III - 9

security loans.1

From late October to mid-November, large banks

increased their lending to foreign commercial banks by about $1-3/4
billion, and also may have increased net claims on their own foreign
branches.

These bank-related international transactions represented

part of the sizable outflow of private capital that was balanced by
an inflow of funds from foreign official institutions, which purchased
large amounts of Treasury securities with dollars acquired from
intervention in exchange markets.2

During late November, with

the emergence of official sales of Treasury securities, large-bank
lending to foreign commercial banks expanded only modestly while
net lending to own foreign branches apparently declined.
The need for funds by banks, associated with continued
robust loan growth and declines in deposits subject to rate ceilings,
was intensified at mid-month when the supplemental reserve requirement became effective.

As a result, bank dependence upon managed

liabilities increased substantially and security holdings were
reduced.

Weekly reporting banks issued large negotiable CDs heavily

througnout November, helping to raise the level of total large time
deposits outstanding at all banks by $13 billion.

Although banks

experienced an inflow of $5-1/2 billion (daily average basis) in
Treasury note balances under the tax and loan program introduced on November 2, traditional nondeposit sources of funds--with
1/

Information from weekly reporting banks also indicates a
substantial increase in consumer loans in November, which
may stem in part from a sale by Sears, Roebuck, and Company
of $600 million in receivables to 16 large banks.
Foreign official institutions purchased $9.4 billion of Treasury
securities from October 25 to November 15 but then sold about
$2 billion from mid-November to the end of the montn.

III -

a short average maturity similar to funds in Treasury note balances-fell by $2-1/4 billion, partly reversing the very large increase of
the previous month.

On balance, the ratio of managed liabilities--

which exclude Treasury balances--to net assets at banks increased
by more than in any other month of the current expansion, and
tne more comprehensive measure (i.e. including all large CDs)
approached the previous peak in early 1975, the first observation
for this series (see Chart on page 11).
On the asset side, banks sold net $5 billion of Treasury
securities in November, nearly matching the accumulated net sales
over the previous 3 months, and also curtailed accumulation of
other securities.
Business Finance
Net borrowing by nonfinancial firms at banks and in the
commercial paper market accelerated to a 15-3/4 per cent annual rate
of growth in November, while the gross volume of long-term security
offerings remained near the previous month's moderate pace. Bank
business loans (net of holdings of bankers acceptances) expanded
at a 12-3/4 per cent annual rate, up somewhat from October. Business
loan activity at small banks picked up sharply, while lending by
large banks (net of acceptances) fell below the third-quarter pace.
According to the Senior Loan Officer Opinion Survey in mid-November,
covering 121 large banks, there was only a slight decline in
perceived loan demand from the mid-August survey, despite a

III

Borrowing Ratios At Large Commercial Banks1 /

Per cent

\
\

Borrowings defined inclusive
of all
large time deposits

'a-',

1975

1977

-4

"I'

Borrowings defined
exclusive of large
nonnegotiable time
deposits

1973

1978

The numerator includes gross liabilities of banks to their foreign
branches, large negotiable CD's, net Federal funds purchased, and
borrowings from others. Beginning in 1975 all large time deposits
are included. The denominator is total assets less Federal funds
sold less cash items in process of collection. The data are monthly
averages of Wednesday figures, plotted for the last month of each
quarter through 1977 and monthly in 1978.

III - 12
considerable increase since August in the nominal cost of credit
and a substantial further tightening of non-price lending terms.1
The commercial bank prime rate has been raised 1/2 percentage
point since the November FOMC meeting, to 11-1/2 per cent. 2
Corporate treasurers reportedly have been seeking recently
to augment their revolving credit lines in order to ensure continuity of bank financing in the face of possibly more restrictive
overall credit conditions.

The most recent data from the Federal

Reserve's monthly survey of large banks show that unused business
loan commitments generally, and especially those made under formalized revolving agreements, rose sharply from mid-year to October
(see Chart on page 13).

This increase in unutilized commitments,

coupled with declining Treasury holdings and rising managed
liabilities, suggests some increased vulnerability at large
banks to further liquidity pressures.
Commercial paper issued by nonfinancial firms rose $800
million in November, considerably more than the monthly average
gain this year.

About half the expansion was accounted for by

1/ A summary of the Senior Loan Officer Opinion Survey will appear
in the Greenbook Supplement.
2/ Since the middle of November some major banks in Pittsburgh and
Boston as well as a few smaller institutions in other parts of
the country have announced a base rate for loans to small businesses that is lower than the conventional prime rate charged
to larger firms but will move with it. The differential ranges
between 100 and 150 basis points. In most cases small businesses
are defined as those having less than $1-1/2 million in assets
or less than $1/2 million in net worth. Possible motivations for
announcing a small-business prime include the desire to maintain
or increase the bank's market share of high-quality small-business loans and to forestall legislated controls of interest rates.

III -

1/
BUSINESS LOAN COMMITMENTS AT SELECTED LARGE BANKS(End of period; not seasonally adjusted)

Billions
of
dollars
--

Total Outstanding

Total Unused

Unused Made Under Formalized
Revolving Agreements

1975

1976

1977
accounting
banks
reporting
weekly
Sample consists of 136

cent of commercial and industrial loans.

1978
for about 85 per

250

III -

greater than seasonal issuance by electric and gas companies.
Also issuing commercial paper were several new entrants along
with a few firms which had been out of the market for more than
a year.

Business credit at finance companies bounced back in

October (latest data available), rising $1.8 billion or 37 per
cent (SAAR), after a $300 million decline in September.

Expansion

in wholesale automotive paper accounted for more than half of
the increase, as car dealer inventories expanded.
The volume of publicly offered corporate bonds increased
slightly on a seasonally adjusted basis in November, although it
remained below the pace recorded in the third quarter.

While

bond offerings by public utilities fell below the large October
volume, industrial corporations and financial concerns--mainly
finance companies--increased their offerings, with higher-rated
obligations dominating the November slate.
Corporate bond yields have edged higher, since the
November FOMC meeting, in part reflecting upward pressure from
recent increases in short-term interest rates. Although yields
have returned to near their highest levels for the current business

expansion, risk premia remain relatively narrow (see Chart on
page 16).
The volume of stock offerings was about unchanged in November from October's level, but somewhat below the third-quarter pace.
The sharp deterioration of stock prices that occurred in late

III -

GROSS OFFERINGS OF CORPORATE AND FOREIGN SECURITIES
(Monthly totals or monthly averages, in millions of dollars)

1977
Year

1978
H1

QIIIe

1979

Oct.e/

Nov.-

Dec.-

Jan.- /

Seasonally adjusted
Corporate securities--total

4,518

3,587

4,676

3,759

3,750

3,500

3,700

Publicly offered bonds

2,016

1,489

2,314

1,619

1,700

1,750

1,800

Privately placed bonds

1,501

1,366

1,393

1,425

1,325

1,250

1,200

Stocks

1,001

732

969

715

725

500

700

1,400

2,200

Not seasonally adjusted
Publicly offered bonds
By quality 1/
Aaa and Aa
Less than Aa 2/

2,016

1,695

1,724

1,800

1,600

1,089
927

820
875

870
854

950
850

1,100
500

692
700
624

525
578
592

770
540
414

1,100
400
300

520
480
600

621

640

328

790

358

437
184

466
174

183
145

750
40

250
108

By type of borrower
Utility
3
Industrial3/
Financial
Foreign securities--total
Publicly offered4/
Privately placed

1/
2/
3/
4/
e/
f/

Bonds categorized according to Moody's bond ratings.
Includes issues not rated by Moody's.
Includes equipment trust certificates.
Classified by original offering date.
Estimated.
Forecast.

III

Selected Long-term Interest Rates and Risk Premia
(Weekly)

Per Cent
Per Cent

Interest Rates

Recently Offered Aaa Utility

U.R-.

rn't.

20-vr

CrnnQt.

Mat.

Basis Points
200
-

150
-100
-

1974

1975

1/ Source: Salomon Brothers

1976

1977

1978

III -

October resulted in the postponement of several issues in November
As in other months during 1978, public utilities accounted for the
majority of new stock issues.
Major stock price indexes have edged higher since the
last FOMC meeting, but remain well below their 1978 highs recorded
in mid-September.

Market professionals cite the recent strengthen-

ing of the dollar on foreign exchange markets as contributing to the
improvement in stock prices, although gains have been muted by unfavorable consumer and wholesale price statistics, upward movements in
interest rates, and predictions by many private economists of a mild
recession in 1979.
Government Securities Markets
Rates on Treasury issues in each maturity class have risen
since the November FOMC meeting, in a range of 5 to 25 basis points
The term structure of yields on Treasury securities continues to
exhibit the steeply humped pattern that began to emerge in September
of this year, with the peak still centering on the 12-month maturity
area. For maturities beyond 5 years, the curve is essentially flat.
The recent accentuation of the hump in the yield curve seems to
indicate market expectations of a turning point in late 1979 in the
business and interest rate cycles. Similar indications can be found
in the Treasury bill futures market where rates begin to decline
for delivery dates after mid-1979.
Since the last FOMC meeting, the Treasury has raised no
new cash through marketable borrowing in domestic markets.

This

III - 18

GOVERNMENT SECURITY OFFERINGS

(Monthly totals or monthly averages, in millions of dollars)

1978

1977
Year

Oct.

QIII

Nov.e /

Dec.f/

Jan.f/

Seasonally adjusted
State and local government
securities, gross offerings
Total
Long-term
Short-term

5,811
3,917
1,894

6,364
4,394
1,970

4,120
3,011
1,109

5,600
4,200
1,400

5,350
3,800
1,550

4,400
3,000
1,400

3,654
2,320

3,080
1,641

-325
307

-255
3,053

-838
1,258

3,605
1,238

U.S. Government securities,
net offerings
U.S. Treasury1/
Sponsored agencies

Not seasonally adjusted
State and local government
securities, gross offerings
Total
Long-term
Short-term

5,771
3,891
1,880

6,204
4,092
2,112

6,017
4,187
1,830

4,522
3,087
1,435

5,400
4,100
1,300

4,200
3,000
1,200

3,422
601

2,382
2,012

3,560
2,130

1,823
697

1,700
2,667

1,350
797

2,700
915

U.S. Government securities,

net offerings
U.S. Treasury/
Sponsored agencies
1/ Marketable issues only.
e/
f/

Estimated.
Forecasted.

III -

unexpected development mainly reflects exceptionally large sales
of nonmarketable issues to foreign accounts,1 together with a
smaller than anticipated deficit.

As a result, the Treasury was

able to cancel a large cash management issue in early December
and has essentially completed its market borrowing for the year.
Borrowing by sponsored credit agencies increased markedly
in November, totaling about $3 billion, seasonally adjusted, compared with only $300 million in October.

Borrowing by the housing

agencies accounted for the bulk of this increase and represented
the largest one-month total for the year to date.
Gross offerings of State and local long-term debt totaled
$4.2 billion in November, about $1 billion above the October volume.
Virtually the entire total was for new capital. The increase in
offerings partly reflected sales of securities by various housing
authorities--up about $300 million over October-and security offerings
by the Municipal Assistance Corporation and New York City as part of
the $4.5 billion 4-year financing plan. 2

A long-term bond sale

For the quarter to date, foreign purchases of nonmarketable
issues have totaled about $5.5 billion. In addition, approximately one-third of the $6.0 billion of total marketable
borrowing estimated for the fourth quarter was purchased by
foreign official institutions.
MAC publicly offered $250 million of 30-year bonds and
privately placed $401 million of mostly 20-year securities
and New York City privately placed $200 million of Federallyguaranteed City bonds with New York public employee pension
funds. The City is planning a public sale of short-term nonguaranteed notes in early 1979. If successful, this sale
would represent the City's first entry into the public
securities market since March 1975.

III -

scheduled for December by Cleveland, Ohio--another financially
troubled municipality--was canceled after the City Council refused
to approve the sale.l
Mortgage Markets
Net mortgage lending apparently picked up somewhat further
in November, but remained below last year's fourth quarter peak,
even in nominal terms.

As noted earlier, real estate loans at

commercial banks expanded somewhat more rapidly than in October.
FNMA gross mortgage purchases declined moderately in November,
but new issues of GNA-guaranteed mortgage-backed securities held
near the strong October pace, and net mortgage acquisitions at
S&Ls probably rose further from the reduced third-quarter rate.
Although S&Ls experienced slower deposit growth in
October, they issued an enlarged volume of new mortgage commitments,
and their outstanding loan commitments increased for the third
consecutive month--reaching a new high that was 7 per cent above
the June-July low and 3 per cent above year-earlier levels.

Con-

sequently, based on staff deposit projections through January, the
ratio of outstanding commitments to subsequent 3-month cash flow
continued to rise from the June low (see Chart on page 21).

1/ In addition, Moody's once again lowered its rating on Cleveland's
general obligations (to B from Ba) because of lack of planning to
retire debt obligations and failure to enact revenue raising
measures. Around $15 million of bond anticipation notes issued
by Cleveland mature December 15. The City is attempting to
negotiate with local banks for a rollover of these obligations.

III - 21

Savings and Loan Association Mortgage
Commitments and Cash Flow
(SA)

Billions of

24
Commitments
Outstanding

1972
Ratio

2.2

1.8

1.4

1.0

1/ Cash flow is net deposits plus mortgage repayments for the subsequent three
Forecasted cash flow figures were used to compute the ratios
month period.
for August, September, and October of this year.

III -

The average contract interest rate on new commitments
for 80 per cent conventional home mortgage loans at sampled S&Ls
rose for the seventh consecutive week (ending December 8). Within
States where usury ceilings were not restrictive, this series
has increased about 15 basis points since the last FOMC meeting
to 10.35 per cent, 67 basis points above early June and well
above usury ceilings of 10 per cent or less that prevail in 19
States.1

Average commitment rates rose to 10.75 per cent in

the West and were at 10.25 per cent in other FHLMC regions.
In the more volatile secondary market for home mortgages-which remains largely exempt from the direct effect of usury
ceilings--yields also rose further.

On FHA/VA loans, average

yields in the latest FNMA biweekly auction (December 11) of
optional delivery forward purchase commitments increased an additional 7 basis points to 10.40 per cent, only 18 basis points
below the peak reached in September 1974.

On conventional loans,

FNMA auction yields were up 13 basis points further to 10.77 per
cent.

The FHLMC series has recently been adjusted to reflect freemarket rates by excluding quotations from S&Ls in States with
binding usury ceilings. Inclusion of S&Ls in States with
binding ceilings would have lowered the December 1 average by
9 basis points (latest available).

III - 23
INTEREST RATES AND SUPPLY OF MORTGAGE FUNDS
AT SELECTED S&Ls

Conventional home mortgages
Average rate on
Basis point
Spread1 /
change from
new commitments
(basis
month or
for 80% loans

week earlier

points)

Period
1977--High
Low

(Per cent)

1978--High
Low

10.30
9.00

+101

1978--Aug
Sep
Oct

9.80
9.78
9.88

+100
+72
+65
+65
+75
+95
n.a.

---

9.00
8.65

Nov

3
10
17
24

9.90
10.05
10.20
10.28

Dec

1
8

10.30
10.35

92/

Per cent of S&Ls2/
with mortgage funds
in short supply
22

+92
+37

+30

+103
+109

Average mortgage rate minus average yield on new issues of Aaa utility bonds.
Per cent reporting supply of funds slightly or substantially below normal
seasonal patterns.

SECONDARY HOME MORTGAGE MARKET ACTIVITY
FNMA auctions of forward purchase commitments
Govt.-underwritten
Conventional

1977--High
Low
1978--High
Low
1978--Nov

Dec

Amount

Yield

($ millions)

to
FNMA1/

Offered

Accepted

416
108

278
83

9.21

8.81

4
11

Offered
885
50

Accepted
570
35

Yield
to

FNMA!/
8.98
8.46

1011
130

605

10.40

9.48

9.28

9.13

8.43

10.49

453

182

10.27

9.40
9.35

10.64

335

139

10.33

9.43

10.77

283

144

10.40

9.39
9.43

10.77

6
13
20
27

Amount

($ millions)

Yields on GNMAguaranteed
mortgage-backed
securities for
immediate
delivery 8.39
7.56

9.39

Average gross yield before deducting fee of 38 basis points for mortgage servicing.
Data, based on 4-month FNMA purchase commitments, reflect the average accepted bid
yield for home mortgages, assuming a prepayment period of 12 years for 30-year loan
without special adjustment for FNMA commitment fees and related stock requirements.
Mortgage amounts offered by bidders relate to total eligible bids required.
Average net yields to investors assuming prepayment in 12 years on pools of 30-year
FHA-VA mortgages carrying the prevailing ceiling rate on such loans.

III -

Consumer Credit
Growth in consumer instalment credit outstanding slowed
during October--on the basis of newly revised datal--to an annual
rate of about 14 per cent, down from 17 per cent in the third
quarter and from a peak rate of 21 per cent in the second quarter.
A large increase in debt liquidations coupled with only a moderate
rise in newly extended credit accounted for the reduced growth
rate in the stock of debt outstanding.
Preliminary estimates suggest continuation of moderate
expansion in consumer credit during November, as less robust
domestic-model auto sales may have restrained increases in credit
extensions associated with a pickup in sales of other consumer
durables.

Despite the apparent pickup in instalment lending by

commercial banks noted earlier, the reduced aeposit flows and
tighter balance sheet positions at credit unions observed in
October may have begun to restrain consumer credit availability
by last month.

Historical revisions of consumer credit statistics have incorporated certain improvements in estimation methods, corrections
for nonbank holders, and newly-available detail on open-end
instalment credit at gasoline companies and retailers. As a
result, recent levels of credit outstanding have been raised
about 7 per cent. Growth in credit outstanding during 1977,
formerly $31 billion, was revised to $35 billion, an increase
of 18-1/4 per cent as compared with the previous estimate of
17 per cent.

III -

Delinquency rates on auto loans at major finance companies
retreated in October from their fairly high third-quarter mark.
The average delinquency rate on commercial bank consumer instalment
loans in the third quarter remained essentially unchanged from
its second-quarter level, which was well below the 1975-Q1 peak.
Consumer finance rates--as of the third quarter--were
less than fifty basis points above year-earlier levels.

Usury

ceilings may be restraining rate increases in some States.

U.S. International Transactions
(in million of dollars; receipts, or increase in liabilities, +)

RESTRICTED

1976

Aug.

Sept.

Oct.

-31,059
120,585
-151,644

-10.170
29,457
-39,627

-11.201
30,664
-41,865

-7.802
35,067
-42,869

-7.947
37,033
-44,980

-1.872
12,513
-14,385

-2.548
12,986
-15,534

-2.499
13,000
-15,499

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

-9.935

-3.907

-5.142

-6.211

2.700

-674

-1.496

1,982

-670

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

-6,282
-3,220

-2,717
-2,203

-5,545
-147

-3,526
-2,369

4/
4/

1,980
-772

-236
-595

6,380
-3,125

-2,566
2,353

-3,142

-423

-487

-180

-2,523

-1,082

-859

-1,110

2,709

1,436

1,037

-136

641

417

-414

653

-7,829
415
853
-9,097
2.641

-3.050
1,130
1,325
-5,505
543

38
206
580
-748
-297

-514
123
341
-978
881

81
158
1,027
-1,104
805

61
415
108
-462
-1.034

-9
238
-102
-145
-108

325
107
254
-36
671

-553
205
-56
-702
291

13.062

35.456

15.152

14.964

-5.483

&.577

1.945

-936

7.714

Trade balance 1/
Merchandise exports
Merchandise imports

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

9. Private securities transactions, net (excl. U.S. Treas.
Foreign net purchases of U.S. corp. bonds
LO.
Foreign net purchases of U.S. corp. stocks
11.
U.S. net purchases (-) of foreign securities
12.
Foreign net purchases of U.S. Treasury obligations
13.
14.

-9,353
114,694
-124,047

I.
2.
3.

7.
8.

1978

1977
Year

Year

5.
6.

December 13, 1978

Change in foreign official reserve assets in U.S.

Oblig.)

(increase +)

15.
16.
17.

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

3,922
6,802
2,338

29,414
5,989
53

14,476
757
-81

12,327
1,354
1,283

-3,099
-2,389
5

5,436
-1,645
786

3,261
-1.466
150

-379
-335
-222

5,628
1,463
623

18.
19.

By Type
U.S. Treasury securities
Other 2/

9,315
3,747

30,218
5,238

12,900
2,252

12,979
1,985

-5,728
245

3,167
1,410

1,328
617

-652
-284

4,652
3,062

-2.532

-237

-2

246

328

-67

-85

13.946

2,254

421

11,35

9.371

5.003

1,491

573

-4,198

-6,959

-6,854

-3,261

n.a.

20. Change in U.S.
21.

reserve assets (increase -)

All other transactions and statistical discrepancy

MEMO:
Current account 3/
1/
/
3/
4/

International accounts basis, seasonally adjusted.
Includes deposits in banks, commercial paper, bankers'
Seasonally adjusted.
Data not shown separately because of break in series.

4,339

acceptances,

-15,265

and borrowing under repurchase agreements.

RESTRICTED

n.a.

INTERNATIONAL DEVELOPMENTS

Foreign exchange markets.

In the last two weeks of November the

dollar's average exchange value rose by 2 per cent, and on December 1
the weighted-average exchange value of the dollar was nearly 11 per cent
above its low point just before the November 1 announcement of dollarsupport measures.

In early December, however, the dollar came under renewed

selling pressure, apparently triggered by the political unrest in Iran
and the approach of the December 16 OPEC meeting to decide on future oil
prices.

As a net result of these movements,
the dollar's average exchange value gained about 1 per cent over the four
week period since the last green book.

The dollar's fluctuations over the past month were most pronounced
against the Japanese yen and Swiss franc.

Each of these currencies depre-

ciated by about 6 per cent against the dollar in the last two weeks of
November, then rose by about 2 per cent against the dollar in early December.
Announcements during the period regarding the formation of the European
Monetary System had little net impact on the dollar's exchange value.
As expected, France announced that it would re-join the European currency
band, or "snake".

The Italian government also stated its intention --

IV - 2

subject to parliamentary approval -- to join the arrangement at the beginning of the year, with initially wider fluctuation margins for the lira.
The British decided not to participate, and Norway, which had been a member
of the snake although not a member of the EC, announced that it would not
join the EMS and withdrew from the snake.
The New York Trading Desk intervened on both sides of the market
over the past month, purchasing foreign currencies,
, at times when the dollar was rising and providing

intervention support at times when the dollar was under downward pressure.
On a net basis the Desk sold foreign currencies equivalent to $880 million
on behalf of the System and $520 million equivalent for the account of
the Treasury.

Over 90 per cent of the Desk's net foreign currency sales

were of German marks with the remaining operations in Swiss francs and
Japanese yen.

The System made additional swap drawings to finance its

share of this intervention, raising outstanding System swap debt to $4.6
billion equivalent.

The Treasury augmented its foreign currency holdings

through sales of SDR's.

In late November the Treasury sold SDR's to the

Bundesbank and the Bank of Japan, receiving $760 million equivalent of
marks and $640 million equivalent of yen.

On December 12 the Treasury

sold three- and four-year mark denominated notes (schuldsheine) for value
December 15.

This was the first phase of the Treasury's planned sale of

up to $10 billion worth of securities denominated in marks, Swiss francs
and possibly yen.

IV - 3

OPEC surpluses and investment flows.

The OPEC current-account

surplus will probably be at the lower end of E $5-10 billion range, much

smaller than earlier expected and far less than the 1977 surplus of about
$30 billion.

We expect the 1978 surplus on goods and services to be on

the order of $10 billion (compared with $35 billion last year) and OPEC

grant aid this year to decrease to $3-4 billion.

(See table.)

The

decline in OPEC's terms of trade has been a major factor in the reduction
of the surplus.
Almost one-half of this year's contraction in the OPEC surplus
will be borne by Saudi Arabia, whose surplus will probably fall from an
estimated $14 billion last year to about $3 billion this year.

There have

also been smaller surpluses this year in most of the other Middle East
countries and Indonesia, while the deficits of Nigeria and Venezuela have
widened.

Algeria and Ecuador appear to have kept their deficits from

increasing.

The reduction in the all-OPEC surplus, which began to be

sizable in the second half of last year, seems to have bottomed out
around mid-1978 as oil exports began to revive, and the current-account
balance for the second half may approximate the $3 billion of the first
half.

The second-half surplus could be less if the current wave of

strikes in the Iranian oil fields persists.
OPEC oil exports (accruals basis) declined 8-1/2 per cent in
the first half of 1978 compared with the year-earlier level.

This

resulted from a price rise of about 1-1/2 per cent (in mid-1977) and a
volume decrease of 10 per cent caused by inventory cutbacks in consumer
countries and increased oil supplies from non-OPEC sources.

Exports rose

IV - 4

Estimates of OPEC Current Account and Investible Surplus
(in billions of dollars)

1st H

1977
2nd H

Year

1st H

136
10

62
5

1978
2nd H1

Year1

Current Account
Oil exports
Other exports

68
5

69
5

68
5

129
11

Imports f.o.b.

-40

-45

-84

-47

-51

-99

Trade balance
Net services & private transfers
Balance on above
Grant aid
Current-account balance

33
-13
20
-2
17

29
-14
15
-3
12

61
-27
35
-5
30

20
-16
4
-2
3

22
-16
6
-2
3

42
-32
10
-4
6

-3
0
3rd Q
0
-1.8
-1.8
-1.0
0
.5
.5
n.a.

-1
5

Investible Surplus
Current-account balance

5
Credit to (-) or from oil companies
Investible
22
Investments:
5.4
In United States
a. Treas. bills & bank deposits ;4
3.8
b. Other securities
c. Other capital flows2 /
1.2

-2
10

3
33

3
6

3.8
-. 9
3;7
1.0

9.2
-. 5
6;5
2.2

.6
.2
.4

;1
-.1
.2

;7
.1
.6

-.1
-;2
.1

.1
.1
0

In Euro-currency market3/

8.9

3.0

11.9

-.5

n.a.

Other investments

7.1

3.1

11.2

6.6

n.a.

In United Kingdom
a. Liquid sterling assets
b. Other loans & investments

1/ Projected.
2/ Direct investment, import prepayments, debt repayment, real estate,
miscellaneous.
3/ Including domestic-currency deposits outside the U.S. and U.K.
Note: Numbers may not add to totals because of rounding.

IV - 5

again in the third quarter, as economic activity in the major industrial
countries continued to pick up and oil inventories began to be rebuilt in
anticipation of a year-end price rise.

Because of the higher demand and

because increased Saudi output made up for some Iranian production losses
during the November strike in Iran, OPEC oil exports in the second half
of 1978 may approximate the year-earlier level.

Even so, for the full

year 1978 oil exports may be 5 per cent ($7 billion) below the 1977 total
of $136 billion, with Saudi Arabia absorbing three-fourths of the
shortfall.

The new strike in Iran could cut the 1978 total further

depending on its severity and duration and on whether Saudi production is
further increased.

Iranian exports normally average $60 million per day.

Commodity imports of OPEC countries in dollar terms increased
in the first half of 1978 by nearly 20 per cent from a year earlier, of
which two-thirds was due to higher prices, including the higher dollar
cost of imports from countries with appreciating currencies.

For the

full year 1978 the dollar value of imports is projected to increase
18 per cent ($14-1/2 billion) of which over 14 percentage points would
reflect higher prices, roughly two-thirds of which latter would be
related to the decline in the dollar.

The all-OPEC terms of trade are

estimated to have deteriorated 16 per cent from 1977-I to 1978-III.
Another $5 billion of the decline in the current surplus will stem from
higher net payments for services imports.
In the first six months of 1978 the OPEC countries appear to
have had an investible surplus of $6 billion, of which one-half was an
excess of cash receipts over shipments of oil exports due to the normal lag

IV - 6

in payments and the downturn in shipments.

This cash surplus did not

show up in the markets for which we have current data on OPEC investments.
The net inflow of OPEC funds (official and nonofficial) to the United
States in the first half was approximately zero:

a $1/2 billion net

outflow on banking and security holdings, and a net inflow on other types
of investments.

Net purchases of Treasury bonds and notes, other bonds,

and equities dropped to $0.5 billion from half-yearly rates of $3-3/4 billion in 1977,

mostly reflecting a shift from accumulation to liquidation

of Treasury bonds and notes.

There was a $1 billion net liquidation of

Treasury bills and bank deposits,
flows slowed.

mostly the former, and other investment

OPEC holdings of Euro-dollar deposits were reduced $2.4 bil-

lion and sterling assets $0.1 billion, while holdings of Euro-currency and
domestic-currency deposits in other currencies increased $1.9 billion at
current exchange rates.

In the second half of 1978 there may have been

no investible surplus at all because of the payments lag preventing higher
oil export shipments from being fully reflected in cash receipts.

The

third quarter saw a further $1.7 billion decrease in banking and security
holdings in the United States.
OPEC decisions on 1979 prices are scheduled for December 16.
If oil prices were not raised, in 1979 the OPEC current account would
probably show a deficit, even with an expected smaller rise in imports
reflecting a stronger performance of the dollar.

Some projections show

even balance in the OPEC current account with a 5 per cent oil price
rise; assuming price increases of 10 or 15 per cent would raise the

IV - 7

current account surplus to $5-1/2 or $11 billion, respectively.

Accord-

ing to these projections each 5 percentage points of price increase would
raise oil exports $6-1/2 billion (the price effects on demand being

negligible), which OPEC imports would rise $1 billion as higher revenues
eased payments problems in some countries.

IV - 8

U.S. International Transactions.

The merchandise trade

deficit for October was $30 billion at an annual rate, slightly
below the average for the second and third quarters,
the $45 billion for the first quarter.

and far below

Conditions seem favor-

able for continued improvement as economic activity abroad picks
up relative to the United States and as the increase in United
States'price competitiveness due to depreciation takes full effect.
In October both exports and imports remained at about

their high September levels.

The volume of non-agricultural exports

during each of the past two months was about 10 per cent above the
levels recorded during the previous 6 months.

This increase appears

to have been broadly based, spread among industrial supplies,
machinery, and aircraft.

There is some evidence that this strength

will continue into next year since export orders for durable goods
are stronger this year than in the last few years (even when motor
vehicles and aircraft are excluded).
Agricultural exports in October remained at about the
September level of $30 billion at an annual rate, although somewhat below the peak level achieved during the second and third
quarters.

No marked change in the value of U.S. agricultural

exports is expected in 1979 as a result of the recently announced
acreage set-aside program for feedgrains.

The program is essentially

a repeat of this year's and is not expected to have any additional
effect on prices or output.

IV - 9
U.S. Merchandise Trade
Accounts Basis
International
Billions of dollars, seasonally adjusted, annual rate
Monthly Data

Quarterly Data -

-180

1
.

IMPORTS

IIS

16 0

140

EXPORTS

140

120

11 1 1 1 1 I I I I I

1 1 1 1 1 1 1 1 1 1 1T

Billions of dollars, seasonally adjusted, annual rate

TRADE DEFICIT

.20

S40

S60
60

1976

1977

1978

IV -

U.S. Merchandise Trade, International Accounts Basis
(billions of dollars, seasonally adjusted annual rates)
1977 i

1 9 7 8
r

Year

EXPORTS
Agric.
Nonagric.

120.6
24.4
96.2

122.7
26.0
96.6

140.3
32.0
108.3

148.1
31.5
116.6

155.8
30.1
125.7

156.0
29.6
126.4

IMPORTS
Petroleum
Nonpetrol.

151.7
45.0
106.7

167.5
39.8
127.7

171.5
43.2
128.2

179.9
43.3
136.6

186.4
46.8
139.6

186.0
42.1
143.8

BALANCE

-31.1

-44.8

-31.2

-31.8

-30.6

-30.0

*Sept

*Oct.

NOTE: Details may not add to totals because of rounding.
r/ Revised
*/ The monthly International Accounts figures are only rough estimates
and are subject to considerable revision.

Non-oil imports in October continued the upward trend
evident in
quarter.

the third quarter,

after having been flat in

the second

The trend over the past four months has been largely due

to increases in volume,
earlier in
moderate in

the year.

contrast to strong increases in

prices

Import price increases have been relatively

recent months,

as the inflationary effects of the dollar

depreciation have been partly offset by sharp declines in
prices of our major food imports,

coffee,

cocoa,

the world

and sugar.

IV - 11

During the first six months of the steel trigger-price
system (May-October) there was a 10 per cent decline in import
tonnage compared to the same period last year.

This decline coupled

with the growth of domestic demand, reduced the share of imports
to about 17 per cent of the domestic market, compared with about
19 per cent during May-October 1977, and about 21 per cent during the
6 months just preceding the trigger-price restrictions.

The average

price of steel imports during May-October 1978 was nearly 20 per cent
higher than a year earlier.

Part of this price increase is attributable

to the trigger-price system, while part reflects the dollar's
depreciation.
The failure of Congress to extend the President's power
to waive countervailing duties past January 2, 1979 is not likely
to have a large impact on U.S. imports in 1979.

The value of

imports involved is small ($560 million in 1977) and the average
duty rate to be imposed is only 8 per cent.

The imposition of

duties could, though, have a very important impact on the progress
of the GATT trade negotations currently taking place in Geneva.
Oil imports were $42.1 billion at an annual rate in
October.

Volume was 8.7 million barrels per day, the same as

the average for the first 10 months of 1978.

The unit value for

oil imports in October was still below the high levels reached in
the first 2 months of 1978.

IV - 12

Capital account transactions showed that the G-10 countries
increased their official reserve assets in the United States by $5.6
billion in October and by an estimated $5 billion more in the first
two weeks of November.

During the rest of November their assets fell

by about $1.4 billion.

The surge in foreign official demand for Treasury bills, a

by-product of the large intervention purchases of dollars, had a
marked effect on the interest rate differentials between Treasury
bills and other short-term money market instruments during late
October and early November.
OPEC banking and securities holdings in the United States
increased by $1.5 billion in October.

The increase was largely

the result of a shift by Venezuela of funds previously on deposit
in the Eurodollar market to banks in the United States.

IV - 13

(in

U.S. International Transactions Sumary
billions of dollars, n.s.a., (-) = outflow)

1977

Year

Q-2

-31.1

-11.1

-7.3

Trade balance, n.s.a. 1/

2.
3.
4.

Private capital trans. adj. 2/
Private capital as rept. net
Reporting bias 3/

-6.4
-6.4
--

-7.6
-5.8
-1.8

5.
6.

OPEC official net investments
Other foreign official assets

6.0
29.5

1.4
13.6

7. U.S. reserve assets

-.2

8. All other

2.2

1 9 7 8
Q-3

Q-1

.3
3.4

Aug.

Sept. Oct.

-9.5

-2.7

-2.6

-2.3

4.6
3.6
.5

-1.3
-1.6
.3

-1.6
-1.6
--

1.9
2.9
-1.0

-.1
-.9
.8

-2.4
-3.1

-1.6
6.2

-1.5
3.4

-.3
-.6

1.5
6.2

-. 1

-l1

7.9

6.2

2.4

1.7

-5.2

Memorandum (seasonally adjusted annual rates)
10.

11.

Trade balance
GNP net exports of goods

-31.1

-44.8

-31.2 -31.8 -22.5

and services
Current account balance

-10.9
-15.3

-24.1
-27.4

-5.5
-13.0

-6.6
n.a.

n.a.
n.a.

-30.6 -30.0

n.a.
n.a.

1/ International accounts basis. For seasonally-adjusted number see line 9.
2/ Includes bank-reported capital, foreign purchases of U.S. Treasury
securities, and other private securities transactions.
3/ Adjusted for reporting bias in bank-reported data associated with weekend transactions. See page IV 10-11 in the June 1976 greenbook.
4/ Includes service tranaactions, unilateral transfers, U.S. government
capital, direct investment, nonbank capital transactions, and statistical
discrepancy.
*/ Less than $50 million.

n.a.
n.a.

IV - 14

In total, the increase in foreign official reserve assets
in the U.S.

in October equaled $7.7 billion dollars (lines 5+6 on

the previous table).

Since the trade deficit during October (line 1)

was only about a third of this size and since there are net receipts
on services, large private capital outflows must have supplied much
of the dollars purchased by foreign officials.

The figures reported

by banks and security dealers show only a $100 million net outflow
(adjusted) for October as a whole.

Partial weekly data reported by

banks do show a larger net outflow for late October and the first
two weeks in November.

The rest of the private capital outflow for

October shows up in the statistics as part of line 8,

"all other

transactions and statistical discrepancy" ($-5 billion).
likely that this figure largely reflects alterations

in corporate

financing practices in anticipation of further depreciation of the
dollar.

IV - 15

Foreign Economic Developments.

The view that foreign growth

will strengthen moderately in the next few quarters hinges increasingly
on a pickup in German economic activity.

The U.S. growth outlook has

been lowered, thus imparting less stimulus to the rest of the world.

is now apparent that Japan will not attain its FY1978 7 per cent real
growth target after 4 per cent growth (s.a.a.r.) for the second and third
quarters of 1978.

Previously reported indications of the renewed strength

of the German economy have been confirmed by recent industrial production
figures; a recovery of investment may now be underway.

In Canada and the

United Kingdom, GNP and investment spending slackened in the third quarter,
but the figures for 1978 as a whole should compare favorably with other
major countries.

In Italy the mid-year pause may be coming to an end,

and in France activity continues to recover gradually.
trial countries exhibit a mixed pattern:

The smaller indus-

indicators in Belgium and the

Netherlands on balance are signalling improvement, but Switzerland and
Denmark currently are undergoing slowdowns.
The increasingly positive German outlook includes a reduction
in year-over-year consumer price inflation to 2.2 per cent in November,
down from 3 per cent earlier in the year.

A factor contributing to the

good inflation performances in Germany, Japan, and Switzerland is the
past appreciation of their currencies

-- in the cases of Japan and

Switzerland, beyond levels warranted by relative changes in consumer
price indices.
Of the three countries with the largest surpluses on currentaccount -- Germany, Japan, and Switzerland -- only in Japan has the appre-

ciation of its currency resulted in declining net exports.

The decline in

IV - 16

Japanese export volume accelerated in October,

and the monthly current-

account surplus fell dramatically, although mainly because of a oncefor-all $1 billion payment to the U.S.

for uranium enrichment services.

The October German current-account surplus (n.s.a.) was the largest
monthly figure in several years.

The Swiss current account is projected

to show a surplus of about $5 billion in 1978 -- huge in relation to

Swiss GNP.
Individual Country Notes.

In Japan, data released for the

third quarter show an increase in GNP of only 4 per cent (s.a.a.r.)
over the previous quarter.

This disappointing rate of GNP growth --

together with a slightly downward revised figure of 4 per cent growth
(s.a.a.r.) in the second quarter -- implies that real growth will not
meet the official 7 per cent goal.

Japanese officials already concede

the expected shortfall, and the recent change in government has provided
a convenient occasion to withdraw officially from their summit commitment
on GNP growth.
The third-quarter GNP figures reveal that domestic demand remained relatively strong (7.2 per cent growth s.a.a.r.),

despite a vir-

tually unchanged level of private investment, primarily because of
increased private consumption expenditure.

The gain in domestic demand

was largely offset, however, by an 0.7 per cent decline in the ratio of
net exports to GNP in the quarter.
The current-account surplus in October declined dramatically
to a level of only $160 million (from an average monthly level of over
$1.6 billion in the previous nine months), mainly because of the inclusion in the import statistics of a $1 billion advance payment to the

Real GNP and Industrial Production in Major Industrial Countries
(percentage change from previous period, seasonally adjusted)

1977

1978

1976

1977

1.3
-5.4

5.5
5.1

2.7
4.0

1.5
1.4

0.7
0.6

1.0
1.4

0.9
1.6

ance: GDP
IP

-0.5
-8.9

5.8
9.8

2.0
1.5

0.5
-0.8

1.8
2.7

0.3 n.a.
0.8 -0.5

rmany: GNP
IP

-2.0
-5.5

5.7
7.9

2.6
2.7

1.5
0.9

Italy: GDP
IP

-3.5
-9.2

5.7
12.4

1.7
1.1

-0.1
-2.1

Japan: GNP
IP

1.5
-11.1

6.3
11.1

5.2
4.2

United Kingdom: GDP
IP

-2.0
-4.8

2.3
1.9

1.0
3.8

United States: GNP
IP

-1.3
-8.9

1975
nada: GNP

dt
;N aeno

pbise

5.7
4.9
10.1
5.6
o mnhl

July
*
0.8

2.8

n.a.
*

0.8

0.0
*

0.8

n.a.

2.7

n.a.
*

n.a.
0.7

1.5
1.5

2.6
2.9

1.0
1.7

1.0
0.5

0.1
-0.4

0.8
1.2

1.6 n.a.
3.7 -0.4

0.8
0.6

0.0
0.2

2.1
3.1

"NP data are not published on monthly basis.

*0
0.8

1.8 0.4
5.5 -2.2

ass

-0.8

October

0.8
2.0

September

n.a.
2.9

2.1
-0.1
0.0 -0.6

August

1.7

-0.8
*

0.8

-1.3

-0.8

1.2

-0.8

1.2

-0.5

-0.2

0.8

-0.3
*

-1.0

n.a.

0.8

0.6

0.5

0.8

0.6

0.5

Consumer and Wholesale Prices in Major Industrial Countries
(percentage change, from previous period or as indicated)

Latest 3 Months
from:
1977
1975

1976

1977

1978
02

2.2
0.9

2.2
1.1

1.8
2.7

2.4
3.0

2.5
1.5

Canada: CPI
WPI

10.8
6.5

7.5
4.3

8.0
9.1

France: CPI
WPI

11.7
-5,7

9.6
7.4

9.5
5.6

2.4
-0.9

1.9
0,0

1.6
1.2

2.9
2.0

2.7
1.8

5.9
3.4

4.6
5.8

3.9
1.8

0.2
-1.8

0.2

1.3

0.9

0.0

-0.9

1.0

0.3

-0.6

Italy: CPI
WPI

16.9
8.5

16.8
22.9

18.4
17.4

2.5
1.5

3.3
2.0

2.6
2.1

3.0
2.3

2.4
1.8

Japan: CPI
WPI

12.1
3.0

9.7
5.0

8.3
1.9

0.8
-0.7

0.9
-0.5

2.0
-0.3

0.8
-1.7

United Kingdom: CPI 24.2
WPI 24.1

16.6
16.4

15.8
19.2

1.6
3.3

1.5
1.6

1.7
2.5

2.7
2.0

5.7
4.6

6.5
6.1

1.5
0.2

1.1
1.1

1.7
2.4

2.6
3.0

Germany: CPI
WPI

United States: CPI
WPI
-

9.1
9.2

0.3
-0.5

_ ~__

Previous
3 Months
(at Ann. Rate)

6.4
12.0

9.8
8.7
-1.4

Year
Aeo
Y
8.9

Latest
Month
October

9.91 October
9.2
6.1

October
October

-4.2

2.2
-0.1

November
October

11.4
8.0

11.8
8.4

October
October

-5.1

4.1
-3.7

November
November

1.7
2.1

6.7
7.0

7.9
8.4

October
November

2.4
1.5

9.0
8.2

8.4
9.2

October
November

5.3

a/
Trade and Current-Account Balances of Major Industrial Countries(billions of U.S. dollars; seasonally adjusted)
1978
Q2

1976

1977

1977
Q4

Canada: Trade
Current Account

1.2
-3.9

2.2
-3.9

0.4
-1.2

0.7
-0.7

1.2
-0.6

0.6
-1.0

France: Trade
Current Account

-4.2
-6.0

-2.2
-3.3

-0.5
-0.8

0.1
-0.4

-0.1
0.0

0.3
1.0

Germany: Trade
b/
Current Account

13.5
3.9

16.5
3.8

3.7
-2.0

4.8
3.8

4.3
1.6

5.0
2.0

Italy: Trade
b/
Current Account

-6.5
-2.9

-2.5
2.3

-0.2
2.3

-0.2
0.7

-0.1
0.3

9.9
3.7

17.5
11.0

4.2
2.7

4.6
3.1

7.4
5.5

6.8
4.8

United Kingdom: Trade
Current Account

-6.3
-2.0

-2.9
0.6

-0.1
1.0

0.1
0.9

-1.1
-0.6

United States: Trade
Current Account

-9.3
4.3

-31.1
-15.3

-7.3
-2.9

-10.2
-7.0

-11.2
-6.9

Japan: Trade
Current Account

1978
Aug.
Sept.

Oct.

July

0.6
-1.2

0.0
*

0.1
*

0.5
*

0.1
*

0.2
*

-0.2
*

0.3
*

0.2
*

1.3
-1.0

2.0
0.0

2.3
0.2

n.a.
1.8

-1.1
*

0.2
*

0.1
*

0.3
*

6.7
4.5

2.1
1.4

2.4
1.6

0.8
0.2

-0.3
0.3

-0.5
-0.1

-0.3
-0.1

0.1
0.3

-0.4
-0.3

0.2
0.4

-7.8
-3.3

-7.9
na.

-3.5
*

-1.9
*

-2.5
*

0.3
n.a.
5.5
-0.8

0.5 -0.8
n.a. n.a.

a/ The current account includes goods, services, and private and official transfers.
b/ Not seasonally adjusted.
* Comparable monthly current-account data are not published.

United States for uranium enrichment services.

Even without this special

item, however, the monthly current-account figure would have been significantly below previous levels because of an almost $1/2 billion reduction
in exports in October.

Export volume in October was more than 8 per cent

(s.a.) below the September level, indicating that the previously noted
adjustment of trade volumes to the appreciation of the yen is continuing.
Recent data in Germany tend to confirm the improvement in the
outlook which occurred this summer.

In the third quarter, industrial

production recorded its sharpest jump since early 1976.

GNP growth pro-

jections for 1978 have consequently edged upward into the 3 to 3-1/2 per
cent range.

There are indications that investment may now be responding

to stronger demand in the other sectors.

Orders for investment goods

for the home market (s.a.) rose sharply in September, and a recent survey by one of the major research institutes reports a planned increase
in investment outlays.
Germany's trade- and current accounts showed larger surpluses
in the first three quarters this year than in the corresponding period
of 1977.

For October the trade surplus (n.s.a.) of DM4.8 billion and

the current-account surplus (n.s.a.) of DM3.6 billion are the largest
monthly figures in several years.
The historically high unemployment rate has declined only
marginally, although employment has risen slightly.

The strike of the

steelworkers since November 28, in which a reduction of weekly working
hours from 40 to 35 is the major issue, is viewed with growing concern,
with regard to both production disruption and the cost effects of a
settlement.

IV - 21

Canadian real GNP rose 3.6 per cent (s.a.a.r.) in 1978:Q3,
down from a rate of 4 per cent in the previous quarter.

Consumer

expenditures on durable (automobiles) and semi-durable goods increased
sharply (8.6 per cent s.a.a.r.), partly in anticipation of higher sales
tax rates reimposed in early October by most of the Provinces.

Real

gross fixed capital formation did not increase in the third quarter of
1978, but it was still about 9 per cent (s.a.a.r.) above its level in
1978:Q1, following a substantial rise in the second quarter.

The export

sector showed the strongest profit gains, no doubt due to the depreciation of the Canadian dollar.

Combined with a further rise of manufac-

turing capacity utilization and improving investment sentiment registered
by surveys, the outlook for investment remains positive.
In the United Kingdom, the preliminary estimate of 1978:Q3 GDP
(based on output data) indicates that real growth between the second and
third quarters was only about 2 per cent (s.a.a.r.), compared with the 8
per cent figure recorded for the previous quarter.

Nevertheless, the

preliminary third quarter figure is 3-1/2 per cent above the 1977:Q3
level and thus indicates that U.K. economic activity has been reasonably
strong during the past year. Most of this strength has come from consumer spending --

in the third quarter consumption rose 8 per cent

(s.a.a.r.) and was 6 per cent above the 1977:Q3 level.

Provisional

data on fixed investment spending in 1978:Q3 indicate that total investment rose 2 per cent (s.a.a.r.) and manufacturing investment rose 4 per
cent (s.a.a.r.) over their second quarter levels.

Between 1977:Q3 and

1978:Q3 these growth rates were 4-1/2 and 6-1/2 per cent, respectively.

IV - 22

In the 12 months ending in September, average earnings rose
16 per cent, while retail prices increased at only half that rate.
Ford Motor Company's recent wage settlement involving an increase in

labor compensation of about 17 per cent has put the British government's
policy of holding wage increases to 5 per cent in jeopardy.

The govern-

ment has announced certain sanctions against Ford, such as suspension
of some government purchases of Ford automobiles.
French developments continue to be marked by an improving
external position, gradual increases in output and fairly high inflation.

Another trade surplus was recorded in October.

The cumulative

surplus since January stands at FF 2.6 billion (about $600 million),
compared to a deficit of FF 10.8 billion in the same period last year.
Current-account results are even stronger:

a surplus.of around FF 8

billion (about $1.9 billion) for 1978 as a whole is now expected.
Industrial production rose slightly in October, but output
is still below levels recorded earlier this year.

Hourly wage rates

in the third quarter rose about 2.7 per cent -- less than the 4.2 per
cent increase registered in the second -- and stood 12.5 per cent above
the comparable 1977 period.
rise of consumer prices.
tion" in France --

Little deceleration is yet evident in the

The continued advance of economic "liberaliza-

notably the dismantling of price controls --

contributed to some price increases.

has

Remaining price controls on ser-

vices and retail margins are scheduled to be dropped at the end of the
year.
In Italy, the rise in industrial production in September was
the strongest monthly increase since the beginning of the year and may

IV - 23

indicate that recovery is resuming after a mid-year pause.

The substan-

tial increase in the value of imports between August and October (14 per
cent s.a., not a.r.) also points in the same direction.
In the Netherlands, industrial production continued the upward
tendency observed since June.

On the negative side, industrial orders

were unchanged in October, and the Central Statistical Office projects
little change in industrial activity for November - January.

In Belgium,

the National Bank's composite economic indicator, which is considered
reliable, rose 1.5 per cent in October to the highest level in the last
two years.

The Belgian unemployment rate is the highest in the EEC,

and increased further in October.
The Swiss short-term outlook is deteriorating.

Retail sales

declined 1.3 per cent in real terms in October after a 1.6 per cent fall
in September.

The Swiss current account is expected to show a large

surplus in 1978, on the order of $5 billion.

Unlike other countries in

surplus, the Swiss surplus results from invisibles (returns to capital
and services) rather than the trade balance.
Inflation in Sweden over the past year (October to October)
was down to 8 per cent, and it now looks as though inflation this year
will be below the level which would trigger an automatic renegotiation
of wages.

At the same time, resurgent export growth has led to a 1.8

per cent rise in real GNP in January - September 1978, after a 2.5 per
cent decline in 1977.

Full text of Federal Open Market Committee Meeting Minutes, Transcripts, and Other Documents : Meeting, December 19, 1978 : Greenbook Part 2

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