The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optimal character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Confidential (FR) Class II FOMC December 14, 1983 SUMMARY AND OUTLOOK Prepared for the Federal Open Market Committee By the staff of the Board of Governors of the Federal Reserve System DOMESTIC NONFINANCIAL DEVELOPMENTS Recent Developments. Economic activity appears to be expanding at a relatively rapid rate in the fourth quarter, with industrial production and employment recording sizable further gains in November and the unemployment rate again declining sharply. Retail sales have risen substantially, and capital expenditures appear to be expanding further. However, housing activity has weakened in net exports appear to have dropped further. recent months and Price increases in recent months have been somewhat larger than early in the year. The index of industrial production increased 0.8 percent in November, the same as in October. Output of business equipment and materials continued to rise rapidly in November. However, production of consumer goods and construction supplies rose only fractionally; auto assemblies remained at the 7.5 million unit annual rate posted in October. October, The rate of capacity utilization rose to 78.6 percent in and increased about 1/2 percentage point further in November. The expansion of output in October and November was accompanied by substantial gains in employment. The civilian unemployment rate dropped by an additional 0.4 percentage point to 8.4 percent in November, bringing it December. nearly 2-1/2 percentage points below its peak of last Nonfarm payroll employment rose 370,000 with another sizable increase in factory jobs; the manufacturing workweek, however, edged down further. Greater reliance on hiring and rehiring suggests that producers have become more confident that gains in sales are sustainable. To date, however, the strengthening in labor demand in this expansion has not drawn workers into the labor force in a major way. Indeed, the labor force participation rate in November was slightly below its level a year ago. After slowing during the summer, consumer spending has picked up reflecting both continuing high levels of consumer again recently, confidence and strong gains in income. In November, retail sales rose 1.9 percent, 1/2 percentage point more than in each of the two preceding months. The strongest gains were reported at automotive stores and general merchandisers. Purchases of domestic autos, at just over a 7 million annual rate in October and November, were only slightly higher than the thirdquarter average. But sales of imported cars in these two months averaged a 2.6 million unit annual rate, the strongest selling pace since early 1981; in November, stepped-up sales of European cars nearly offset slower sales of scarce Japanese units. In recent months homebuilding has weakened in response to the rise in mortgage interest rates earlier this year. During October, housing starts fell to a 1.6 million unit annual rate, down from a 1.8 million unit average in the third quarter. Nevertheless, homebuilding is still well above the depressed levels of 1982, and there are indications--an increase in permits in October and a rise in new home sales in the past two months--that the recent drop in activity is leveling off. comparative strength in housing appears attributable in The part to the availability of mortgage credit at below-market rates from mortgage revenue bonds and to increased use of adjustable rate mortgages. Although capital spending rose strongly in recent indicators have been mixed. the third quarter, Shipments of nondefense capital goods fell 3 percent in October to a level slightly above the third-quarter average, and spending on nonresidential offsetting the previous month's gain. construction was down 2 percent, Nevertheless, new orders of nondefense capital goods rose strongly in September and October, the backlog of unfilled orders increased sharply in both months. addition, sales of heavy trucks rebounded in and In October, and two sectors in the construction area that had been weak--oil drilling and nonoffice commercial building--have both strengthened significantly in months. Overall, the indicators suggest a further expansion in investment activity in the fourth quarter. After six quarters of liquidation, nonfarm inventories in recent the third quarter, in the fourth quarter. the rise in increased and current data indicate further inventory accumulation Nevertheless, the stock buildup has only matched final demands and inventory-sales ratios generally remain quite low by historical standards. Wage increases for most production workers generally continued moderate. In November the hourly earnings index was unchanged after rising about 1/2 percent in both September and October; since November last year, the wage index has risen 3.7 percent. Wage increases have been especially small in manufacturing and construction. Rapid cyclical productivity gains continued to damp the rise in labor costs as output per hour in the nonfarm business sector rose about 3 percent in the third quarter. The consumer price index in October rose at a 5-1/4 percent annual rate, essentially unchanged from the average pace in the third quarter. An easing of energy prices offset a drought-induced increase in prices. food Excluding food and energy, the CPI in recent months has been rising at about a 6 percent rate, compared with a 4-1/4 percent pace in the first half of the year. Price increases in recent months have been particularly large for new and used cars. Producer prices of finished goods were up in October at a 3-3/4 annual rate, somewhat above the pace in the third quarter. Outlook. The staff estimates that real GNP will increase by about 6-1/4 percent at an annual rate in the fourth quarter, a deceleration from the 7-3/4 percent rate of expansion in the third quarter. Consumption spending has been rising more strongly than in the third quarter, and a further swing toward inventory accumulation is projected. In addition, business fixed investment is expected to show continued strength. However, after strong advances in previous quarters, housing construction appears to be leveling off in the current quarter, and net exports are projected to continue weakening. Moreover, because of an expected reduction in inventories held by the Commodity Credit Corporation, total government purchases are forecasted to decline. The staff's assumptions about monetary policy are little changed since the last Greenbook. M2 is assumed to grow 8 percent or slightly more during 1984--near in the middle of the FOMC's tentative range. Interest rates are projected to remain near current levels next year. For fiscal policy, the staff estimates the budget deficit for fiscal year 1984 at roughly $190 billion, about the same as in the last Greenbook; we continue to assume no significant new tax legislation affecting fiscal 1984. The staff's projections of both real growth and inflation in 1984 have changed little since the last Greenbook. After rising 6-1/2 percent during 1983, real GNP is expected to grow about 4-1/4 percent during 1984. Growth in consumption spending and housing outlays are expected to moderate from the rapid pace of 1983, and the boost to real growth generated by inventory accumulation is expected to diminish. However, strength is likely to persist in the capital spending sector, reflecting rising capacity utilization and improved profitability. In addition, federal outlays for defense are expected to support the expansion of the economy. Exports of goods and services also are projected to be a source of strength; but with the dollar remaining stronger than expected in the last Greenbook, the gains are likely to occur somewhat later in 1984 than previously expected. Reflecting the surprisingly rapid decline in unemployment in October and November, the average level of the unemployment rate is now projected to be somewhat lower in 1984 than in the last Greenbook. However, the jobless rate is expected to decline only slowly over the course of the year, as the continued expansion of employment is likely to induce a pickup in labor force growth; by yearend, the staff projects a 7-3/4 percent unemployment rate. With a large increase in payroll taxes and a lower unemployment rate, labor costs are projected to rise somewhat faster in 1984 than in 1983. Reflecting tighter conditions I-6 in labor and product markets, and rising import prices stemming from an expected depreciation of the dollar, prices are expected to rise a little faster next year than in 1983. for gross business product is The fixed-weighted price index projected to increase 4-3/4 percent during the next year, about 1/2 percentage point more than during 1983. December 14, 1983 STAFF GNP PROJECTIONS Percent changes, annual rate Gross domestic business product fixed-weighted price index Nominal GNP Real GNP Excluding food and energy Total 11/9/83" 12/14/83 11/9/83 12/14/83 11/9/83 12/14/83 11/9/83 12/14/83 Unemployment rate (percent) 11/9/83 12/14/83 Annual changes: 1981 <1> 1982 <1> 1983 1984 12.2 4.0 7.9 10.1 7.6 9.7 9.6 8.3 7.6 9.7 9.6 8.0 -5.5 1.0 -1.0 -1.3 8.8 9.4 10.0 10.7 8.8 9.4 10.0 10.7 10.3 10.1 9.4 8.7 10.3 10.1 9.4 8.5 1.1 1.3 12.2 4.0 7.9 10.2 2.6 -1.9 3.5 5.5 2.6 -1.9 3.4 5.5 -5.5 1.0 -1.0 -1.3 Quarterly changes: 1982 Q1 <1> Q2 <1> Q3 <1> -1.4 6.6 2.7 Q4 <1> 2.5 -1.4 6.6 2.7 2.5 8.2 13.3 11.6 11.2 8.2 13.3 11.2 11.6 2.6 9.7 7.9 6.3 2.6 9.7 7.7 6.3 10.0 8.7 8.8 8.9 4.8 4.2 4.2 4.2 4.8 4.1 4.2 4.1 1983 Q1 Q2 Q3 Q4 1984 Q1 Q2 Q3 Q4 Two-quarter changes: <2> -2.3 -1.2 -2.3 -1.2 1982 Q2 <1> Q4 <1> 2.5 2.6 1983 Q2 <1> 10.7 11.4 10.7 11.4 6.1 7.1 6.1 7.0 9.4 8.9 9.3 8.9 4.5 4.2 4.4 4.1 2.0 -1.7 6.6 4.3 2.0 -1.7 6.5 4.3 Q04 1984 Q2 Q04 4.7 4.7 4.7 4.7 6.1 4.6 6.1 4.6 1.1 1.3 3.9 4.5 3.9 4.4 5.1 4.8 5.1 4.9 -. 6 -1.4 -. 6 -1.6 -. 3 -. 4 -. 5 -. 2 .9 2.4 -2.0 -.7 .9 2.4 -2.2 -.7 Four-quarter changes: <3> 1981 1982 1983 1984 Q4 <1> Q4 <1> Q4 Q4 10.8 2.6 11.1 9.1 10.8 2.6 11.1 9.1 <1> Actual. <2> Percent change from two quarters earlier. <3> Percent change from four quarters earlier. 9.2 5.4 4.9 4.7 9.2 5.4 5.0 4.7 December 14, 1983 CONFIDENTIAL - FR CLASS II FOMC GROSS NATIONAL PRODUCT AND RELATED ITEMS (Quarterly figures are seasonally adjusted. Expenditures and income figures are billions of current dollars at annual rates.) 1981 1 Q Q2 1982 Q3 Q4 Q1 Q2 Q3 Q4 Gross national product Final sales Private Domestic final purchases 2866.6 2855.7 2279.4 2247.5 2912.5 2897.5 2314.0 2292.9 3004.9 2971.4 2371.1 2348.3 3032.2 3017.9 2395.1 2365.9 3021.4 3047.1 2417.3 2387.4 3070.2 3081.4 2449.8 2416.5 3090.7 3095.6 2439.9 2439.0 3109.6 3165.9 2486.2 2480.6 Personal consumption expenditures Goods Services 1802.8 953.2 849.6 1835.8 964.0 871.8 1886.1 984.6 901.5 1904.1 978.5 925.6 1938.9 989.1 949.7 1972.8 997.6 975.2 2008.8 1010.0 998.9 2046.9 1025.1 1021.8 Gross private domestic investment Residential structures Business fixed investment Change in business inventories Nonfarm 455.5 111.6 333.1 10.9 8.1 472.1 109.5 347.6 15.0 5.0 495.8 101.7 360.6 33.6 24.1 476.2 94.3 367.6 14.3 6.2 422.9 87.3 361.3 -25.7 -27.6 432.5 91.0 352.7 -11.2 -8.8 425.3 87.9 342.3 -4.9 -2.3 377.4 96.8 337.0 -56.4 -53.7 Net exports of goods and services <1> Exports Imports 31.9 367.3 335.4 21.1 369.2 348.1 22.8 367.5 344.7 29.2 371.0 341.7 29.9 358.4 328.5 33.3 364.5 331.2 .9 346.0 345.0 5.6 321.6 316.1 Gov't. purchases of goods and services Federal <2> State and local 576.3 215.7 360.5 583.5 220.4 363.2 600.3 232.4 367.9 622.8 248.5 374.3 629.8 249.7 380.0 631.6 244.1 387.5 655.7 261.7 394.0 679.7 279.2 400.5 Gross national product in constant (1972) dollars 1510.1 1512.5 1525.8 1506.9 1485.8 1489.3 1485.7 1480.7 Personal income Wage and salary disbursements Disposable personal income Saving rate (percent) 2338.3 1451.7 1967.6 5.7 2394.2 1478.1 2010.4 6.0 2490.9 1512.3 2092.0 7.2 2516.6 2528.1 2563.2 1530.6 1542.8 1563.8 2120.5 2127.9 2159.0 7.5 6.1 5.9 2591.3 1579.8 2191.5 5.6 2632.0 1586.0 2227.8 5.4 Corporate profits with I.V.A. and C.C. Adj. Corporate profits before tax 194.7 243.9 185.0 219.0 197.6 227.7 192.0 217.2 162.0 173.2 166.8 178.8 168.5 177.3 161.9 167.5 Federal government surplus or deficit (-) (N.I.A. basis) High employment surplus or deficit' (-) <3> -43.4 -15.4 -47.3 -12.3 -62.4 -29.7 -95.8 -46.4 -108.5 -38.1 -113.2 -32.7 -158.3 -64.9 -208.2 -99.6 35.3 5.4 36.7 6.1 37.3 5.9 32.0 .2 28.8 -3.5 32.0 -.8 31.3 -2.1 32.9 -1.2 108.2 7.4 108.8 7.4 108.6 7.4 109.1 8.3 109.3 8.8 110.1 9.4 110.6 10.0 111.0 10.7 91.0 20.2 91.2 20.3 91.4 20.3 91.0 19.9 90.3 19.4 89.9 19.1 89.3 18.7 88.8 18.3 151.8 80.6 82.7 152.5 80.8 81.9 153.0 80.3 82.0 146.3 75.9 76.2 141.7 72.9 73.0 139.4 71.6 70.7 138.2 71.1 69.4 135.2 69.0 67.2 .90 8.12 5.90 2.22 .95 7.53 5.53 1.99 1.12 7.78 5.56 2.22 State and local government surplus or (N.I.A. basis) deficit(-) Excluding social insurance funds Civilian labor force (millions) Unemployment rate (percent) Nonfarm payroll employment (millions) Manufacturing Industrial production (1967=100) manufacturing (percent) Capacity utilization: all Materials (percent) private (million units, Housing starts, New auto sales (millions, A.R.) Domestic models Foreign models A.R.) 1.39 9.96 7.31 2.66 1.18 7.89 5.63 2.25 .96 9.04 6.90 2.14 .87 7.36 5.13 2.23 1.26 8.57 6.08 2.49 <1> Balance of payments data and details underlying these estimates are shown in the International Developments section of this part of the Greenbook. <2> Components of purchases and total receipts and total expenditures are shown in the Federal Sector Accounts cable which follows. <3> Estimates in cable are evaluated at a 6.0 percent high employment uneaployment race. I-9 December 14, CONFIDENTIAL CLASS II FOMC FR 1983 PERCENT CHANGES IN GROSS NATIONAL PRODUCT AND RELATED ITEMS (Annual rates compounded quarterly) 1981 1982 Q1 Q2 Q3 9.0 6.8 .7 -. 9 7.3 6.6 Personal consumption expenditures Goods Services Q4 Q1 3.6 1.6 -4.9 -2.3 -5.5 -1.3 -. 6 1.1 -3.7 -1.6 .1 .8 2.6 -3.9 .0 .8 -. 9 3.4 5.9 8.3 3.3 .5 -1.6 2.8 3.5 3.5 3.6 -3.0 -6.8 1.4 2.4 2.0 2.9 3.1 1.5 4.7 .9 -. 1 2.1 3.6 5.1 1.9 Gross private domestic investment Residential structures Business fixed investment 26.3 -2.3 13.2 12.9 -11.7 6.0 12.3 -30.7 8.7 -22.4 -30.2 -1.6 -34.1 -28.5 -5.9 3.4 17.9 -14.3 -5.8 -13.0 -8.8 -34.6 53,2 -6.6 Gov't. purchases of goods and services Federal National defense State and local 4.5 12.5 6.7 .1 -2.0 2.2 13.4 -4.6 3.8 15.2 6.3 -2.7 3.9 10.0 7.5 .2 -. 2 .2 -1.3 -. 5 -5.0 -14.0 13.0 1.3 9.4 26.3 14.0 -. 4 10.6 28.3 5.1 -. 1 4.4 1.9 8.9 -1.4 -3.4 1.9 -. 3 2.6 Gross national product Final sales Private Domestic final purchases 20.5 16.1 16.9 15.3 6.6 6.0 6.2 8.3 13.3 10.6 10.2 10.0 3.7 6.4 4.1 3.0 -1.4 3.9 3.8 3.7 6.6 4.6 5.5 5.0 2.7 1.9 -1.6 3.8 2.5 9.4 7.8 7.0 Personal consumption expenditures Goods Services 14.7 16.6 12.7 7.5 4.6 10.9 11.4 8.8 14.3 3.9 -2.5 11.1 7.5 4.4 10.8 7.2 3.5 11.2 7.5 5.1 10.1 7.8 6.1 9.5 Gross private domestic investment Residential structures Business fixed investment 49.9 7.9 21.4 15.4 -7.5 18.7 21.6 -25.6 15.8 -14.9 -26.0 8.0 -37.8 -26.5 -6.7 9.5 18.2 -9.1 -6.5 -13.0 -11.3 -38.0 46.9 -6.0 Gov't. purchases of goods and services Federal National defense State and local 12.9 18.8 12.9 9.6 5.1 8.9 23.8 2.9 12.0 23.6 10.2 5.3 15.9 30.7 33.9 7.2 4.6 2.1 3.5 6.2 1.2 -8.7 18.0 8.1 16.1 32.1 20.8 6.8 15.5 29.5 16.5 6.8 Disposable personal income 13.1 9.0 17.2 5.6 1.4 6.0 6.1 6.8 Personal income Wage and salary disbursements 13.6 11.7 9.9 7.5 17.2 9.6 4.2 4.9 1.8 3.2 5.7 5.6 4.5 4.2 6.4 1.6 Corporate profits with I.V.A. and C.C. Adj. Corporate profits before tax 51.1 17.2 -18.5 -35.0 30.2 16.9 -10.9 -17.2 -49.3 -59.6 12.4 13.6 4.1 -3.3 -14.8 -20.3 1.7 .8 .9 2.4 1.1 .1 -1.8 -7.2 -3.0 -9.5 -1.8 -7.5 -2.7 -7.7 -2.3 -8.6 5.2 11.5 6.0 .4 7.3 6.9 3.8 9.6 5.6 -4.4 7.6 12.6 .1 10.0 9.9 -. 4 5.8 6.2 2.3 7.2 4.7 1.3 5.8 4.4 10.6 5.9 9.4 9.0 4.3 5.6 3.7 3.8 10.6 9.0 10.5 8.1 8.9 8.5 9.2 10.6 12.1 7.2 8.2 7.1 4.9 5.8 3.0 4.5 6.4 5.3 5.8 5.4 7.7 3.8 3.9 1.9 8.4 1.9 1.4 Q2 Q3 Q4 Constant (1972) Dollars Gross national product Final sales Private Domestic final purchases Disposable personal income 1.0 -. 8 -1.0 -1.5 -4.0 -1.3 4.5 3.0 Current Dollars Nonfarm payroll employment Manufacturing Nonfarm business sector Output per hour Compensation per hour Unit labor costs GNP implicit deflator <1> Gross domestic business product fixed-weighted price index <2> Excluding food and energy Consumer price index (all urban) Industrial production rates of change were: 1981-Q1, <1> Excluding Federal pay increases, 1 1982-Q1, 4.2 percent; 982-Q4, 3.5 percent. <2> Uses expenditures in 1972 as weights. -16.6 10.5 percent; -11.8 1981-Q4, -6.5 -3.4 8.1 percent; -8.2 CONFIDENTIAL - FR CLASS II FOMC December 14, 1983 GROSS NATIONAL PRODUCT AND RELATED ITEMS (Quarterly figures are seasonally adjusted. Expenditures and income figures are billions of current dollars at annual rates.) --------- Proj eced---1984 1983 Q1 Q2 Q3 Q4 Q1 Q2 ------ Q3 Q4 Gross national product Final sales Private Domestic final purchases 3171.5 3210.9 2533.5 2516.5 3272.0 3286.6 2603.2 2611.7 3360.3 3351.7 2652.3 2672.5 3453.6 3418.3 2714.4 2747.5 3536.6 3487.1 2767.6 2815.3 3611.1 3578.8 2825.9 2882.1 3688.5 3657.2 2883.4 2945.2 3768.0 3735.5 2943.3 3006.3 Personal consumption expenditures Goods Services 2073.0 1035.6 1037.4 2147.0 1077.3 1069.7 2182.9 1099.3 1083.6 2246.6 1131.6 1115.0 2298.3 1158.5 1139.8 2348.2 1183.6 1164.6 2394.3 1205.4 1188.9 2441.0 1226.6 1214.4 Gross private domestic investment Residential structures Business fixed investment Change in business inventories Nonfarm 404.1 111.3 332.1 -39.4 -39.0 450.1 128.4 336.3 -14.5 -10.3 498.2 139.9 349.6 8.7 18.8 536.2 139.9 361.0 35.3 36.9 566.5 144.4 372.6 49.5 45.5 566.2 148.9 385.0 32.3 36.3 582.2 152.9 398.0 31.3 30.3 597.8 153.9 411.4 32.5 31.5 Net exports of goods and services <1> Exports Imports 17.0 326.9 309.9 -8.5 327.1 335.6 -20.2 341.1 361.3 -33.1 346.3 379.4 -47.7 351.9 399.6 -56.2 361.5 417.7 -61.8 371.3 433.1 -63.0 382.5 445.5 Gov't. purchases of goods and services Federal <2> State and local 677.4 273.5 404.0 683.4 273.7 409.7 699.4 278.9 420.6 703.9 272.9 431.0 719.5 278.9 440.6 752.9 303.0 449.9 773.8 314.3 459.5 792.2 323.1 469.1 Gross national product in constant (1972) dollars 1490.1 1525.1 1553.6 1577.6 1596.3 1612.3 1628.8 1645.1 Personal income Wage and salary disbursements 2657.7 1610.7 2713.6 1648.4 2763.2 1682.0 2847.6 1723.9 2916.1 1762.1 2968.6 1798.0 3028.8 1834.0 3090.9 1871.2 Disposable personal income Saving rate (percent) 2255.9 5.4 2301.0 4.0 2363.1 4.9 2432.3 4.9 2487.5 4.9 2532.6 4.6 2582.6 4.6 2634.4 4.7 181.8 169.7 218.2 203.3 246.2 227.2 260.0 235.6 265.4 236.0 261.4 227.0 272.6 234.2 282.7 240.3 -183.3 -72.4 -166.1 -65.2 -188.5 -103.1 -186.5 -111.0 -180.2 -110.0 40.4 5.5 51.7 16.1 55.3 18.7 59.5 22.3 59.8 22.0 110.5 10.3 111.2 10.1 112.2 9.4 112.1 8.5 88.8 18.3 89.5 18.5 90.3 18.8 Corporate profits with I.V.A. and C.C. Corporate profits before tax Adj. Federal government surplus or deficit (-) (N.I.A. basis) High employment surplus or deficit (-) <3> State and local government surplus or deficit (-) (N.I.A. basis) Excluding social insurance funds Civilian labor force (millions) Unemployment rate (percent) Nonfarm payroll employment (millions) Manufacturing Industrial production (1967=100) Capacity utilization: all manufacturing (percent) Materials (percent) Housing starts, private (million units, A.R.) New auto sales (millions, A.R.) Domestic models Foreign models 138.5 70.7 70.1 144.5 73.9 73.5 151.8 77.4 77.5 1.69 8.46 6.06 2.40 1.68 9.10 6.81 2.28 1.79 9.22 6.92 2.31 -186.0 -126.4 -187.7 -132.2 56.9 18.5 55.1 16.0 53.9 14.1 112.8 8.1 113.3 8.0 113.8 7.9 114.3 7.8 91.4 19.1 92.2 19.5 92.9 19.8 93.6 20.1 94.3 20.4 156.2 79.2 79.6 158.7 80.1 81.0 161.0 81.0 82.1 163.3 81.8 83.3 165.5 82.5 84.3 1.70 10.00 7.50 2.50 1.73 10.15 7.60 2.55 1.73 10.25 7.70 2.55 1.65 9.70 7.15 2.55 1.70 9.75 7.40 2.35 -182.9 -118.2 <1> Balance of payments data and details underlying these estimates are shown in the International Developments section of this part of the Greenbook. <2> Components of purchases and total receipts and total expenditures are shown in the Federal Sector Accounts table which follows. <3> Estimates in table are evaluated at a 6.0 percent high employment unemployment rate. December 14, CONFIDENTIAL - FR CLASS II FOMC 1983 PERCENT CHANGES IN GROSS NATIONAL PRODUCT AND RELATED ITEMS (Annual rates compounded quarterly) - Projected 1984 1983 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Constant (1972) Dollars Gross national product Final sales Private Domestic final purchases 2.6 .6 3.0 3.9 9.7 6.8 8.8 11.9 7.7 5.1 5.1 5.8 6.3 3.1 4.9 7.5 4.8 2.9 3.4 5.4 4.1 6.5 4.4 4.7 4.2 4.3 3.8 3.6 4.1 4.0 3.9 3.2 Personal consumption expenditures Goods Services 2.9 4.4 1.4 10.0 13.5 6.4 3.0 4.4 1.5 7.5 8.3 6.7 4.4 5.1 3.6 3.6 3.9 3.3 2.4 2.2 2.6 2.4 2.1 2.7 Gross private domestic investment Residential structures Business fixed investment 28.7 57.3 -1.5 49.8 79.5 7.9 41.9 30.1 16.3 31.8 -4.3 11.6 22.5 8.4 10.5 -5.4 7.9 10.2 7.7 5.8 9.9 6.9 -2.6 9.7 -8.8 -18.0 6.5 -1.8 -1.1 -2.8 7.4 .0 5.3 6.0 1.8 4.7 -4.6 -16.4 14.4 4.0 1.1 -2.1 9.6 3.2 16.2 39.9 9.2 2.9 6.6 12.1 7.3 2.9 4.6 7.4 5.9 2.7 2.9 3.5 7.2 7.6 4.2 2.2 2.4 2.6 Gross national product Final sales Private Domestic final purchases 8.2 5.8 7.8 5.9 13.3 9.8 11.5 16.0 11.2 8.2 7.8 9.6 11.6 8.2 9.7 11.7 10.0 8.3 8.1 10.2 8.7 10.9 8.7 9.8 8.8 9.0 8.4 9.0 8.9 8.8 8.6 8.6 Personal consumption expenditures Goods Services 5.2 4.2 6.3 15.1 17.1 13.0 6.9 8.4 5.3 12.2 12.3 12.1 9.5 9.9 9.2 9.0 9.0 9.0 8.1 7.6 8.6 8.0 7.2 8.9 Gross private domestic investment Residential structures Business fixed investment 31.4 75.3 -5.7 53.9 76.7 5.1 50.1 41.1 16.9 34.2 .0 13.7 24.6 13.5 13.5 -. 2 13.1 14.0 11.8 11.2 14.2 11.2 2.6 14.2 Gov't. purchases of goods and services Federal National defense State and local -1.3 -8.0 7.8 3.5 3.6 .3 10.7 5.8 9.7 7.7 5.1 11.0 2.6 -8.3 19.7 10.3 9.2 9.1 19.7 9.2 19.9 39.3 14.9 8.7 11.6 15.8 12.6 8.8 9.9 11.7 11.3 8.6 Disposable personal income 5.1 8.2 11.2 12.2 9.4 7.5 8.1 8.3 Personal income Wage and salary disbursements 4.0 6.4 8.7 9.7 7.5 8.4 12.8 10.3 10.0 9.2 7.4 8.4 8.4 8.3 8.5 8.4 59.0 5.4 107.5 106.0 62.1 56.0 24.3 15.5 8.6 .8 -5.8 -14.3 18.1 13.1 15.7 10.9 Nonfarm payroll employment Manufacturing .1 -. 1 2.9 5.2 3.6 7.0 5.2 7.7 3.4 6.9 3.2 6.3 3.0 6.2 3.1 6.0 Nonfarm business sector Output per hour Compensation per hour Unit labor costs 3.7 6.8 3.0 6.6 4.3 -2.1 3.1 4.2 1.1 3.0 4.5 1.4 1.3 6.8 5.4 .6 5.2 4.6 .9 5.3 4.4 1.1 5.4 4.2 5.5 3.3 3.3 4.9 4.9 4.4 4.5 4.6 3.6 6.7 -. 4 4.1 3.5 4.3 4.4 5.1 4.7 4.5 4.6 5.4 4.8 4.7 5.2 4.8 4.7 5.2 4.8 4.5 5.4 4.9 4.8 5.3 10.1 18.4 21.4 12.1 6.6 5.9 5.8 5.5 Gov't. purchases of goods and services Federal National defense State and local Disposable personal income Current Dollars Corporate profits with I.V.A. and C.C. Adj. Corporate profits before tax GNP implicit deflator <1> Gross domestic business product fixed-weighted price index <2> Excluding food and energy Consumer price index (all urban) Industrial production <1> Excluding Federal pay increase, the rate of change in 1984-Q1 is 4.5 percent. <2> Uses expenditures in 1972 as weights. I-12 December 14, CONFIDENTIAL - FR CLASS II FOMC 1983 GROSS NATIONAL PRODUCT AND RELATED ITEMS (Expenditures and income figures are billions of current dollars.) -Projected-1983 1984 1977 1978 1979 1980 1981 Gross national product Final sales Private Domestic final purchases 1918.3 1895.3 1501.5 1505.5 2163.9 2137.4 1705.5 1706.6 2417.8 2403.5 1929.1 1915.9 2631.7 2641.5 2103.7 2079.7 2954.1 2935.6 2339.9 2313.6 3073.0 309'. 5 24- .3 243 j. 9 3314.4 3316.9 2625.9 2637.0 3651.0 3614.6 2855.0 2912.2 Personal consumption expenditures Goods Services 1204.4 657.0 547.4 1346.5 728.5 618.0 1507.2 813.5 693.7 1668.1 883.5 784.5 1857.2 970.0 887.1 1991.9 1005.5 986.4 2162.4 1085.9 1076.4 2370.4 1193.5 1176.9 324.1 95.8 205.2 23.0 21.9 386.6 111.2 248.9 26.5 25.4 423.0 118.6 290.2 14.3 8.6 401.9 102.9 308.8 -9.8 -4.5 474.9 104.3 352.2 18.5 10.9 414.5 90.8 348.3 -24.5 -23.1 472.1 129.9 344.7 -2.5 1.6 578.2 150.0 391.7 36.4 35.9 -4.0 182.7 186.7 -1.1 218.7 219.8 13.2 281.4 S268.1 23.9 338.8 314.8 26.3 368.8 342.5 17.4 347.6 330.2 -11.2 335.4 346.5 -57.2 366.8 424.0 393.8 143.4 250.4 431.9 153.6 278.3 474.4 168.3 306.0 537.8 197.0 340.8 595.7 229.2 366.5 649.2 258.7 390.5 691.0 274.7 416.3 759.6 304.8 454.8 Gross national product in constant (1972) dollars 1369.7 1438.6 1479.4 1475.0 1513.8 1485.4 1536.6 1620.6 Personal income Wage and salary disbursements 1540.4 983.2 1732.7 1106.3 1951.2 1237.6 2165.3 1356.7 2435.0 1493.2 2578.6 1568.1 2745.5 1666.2 3001.1 1816.3 Disposable personal income Saving rate (percent) 1314.0 5.9 1474.0 6.1 1650.2 5.9 1828.9 6.0 2047.6 6.6 2176.5 5.8 2338.1 4.8 2559.2 4.7 Corporate profits vith I.V.A. and C.C.Adj. Corporate profits before tax 167.3 194.7 192.4 229.1 194.8 252.7 175.4 234.6 192.3 227.0 164.8 174.2 226.5 208.9 270.5 234.4 Federal government surplus or deficit(-) (N.I.A. basis) High employment surplus or deficit(-) -45.9 -30.6 -29.5 -29.2 -16.1 -18.6 -61.2 -36.0 -62.2 -25.9 -147.1 -58.8 -181.1 -87.9 State and local goverment surplus or deficit (-) (N.I.A. basis) Excluding social insurance funds 28.0 10.1 30.3 10.0 30.4 6.6 30.6 3.5 35.3 4.4 31.3 -1.9 51.7 15.6 56.4 17.6 Civilian labor force (millions) Unemployment rate (percent) 99.0 7.1 102.3 6.1 105.0 5.8 106.9 7.1 108.7 7.6 110.2 9.7 111.5 9.6 113.6 8.0 Nonfarm payroll employment (millions) Manufacturing 82.5 19.7 86.7 20.5 89.8 21.0 90.4 20.3 91.2 20.2 89.6 18.9 90.0 18.7 93.2 19.9 147.0 79.6 80.4 150.9 79.4 80.7 138.6 71.1 70.1 147.7 75.3 75.2 162.1 81.3 82.7 Gross private domestic investment Residential construction Business fixed investment Change in business inventories Nonfarm Net exports of goods and services Exports Imports <1> Gov't. purchases of goods and services Federal <2> State and local Industrial production (1967-100) Capacity utilisation: all manufacturing (percent) Materials (percent) 138.1 82.2 82.6 146.1 84.7 85.6 152.5 86.0 87.6 Housing starts, private (million units, A.R.) New auto sales (millions, A.R.) Domestic models Foreign models 1.96 11.13 9.07 2.06 2.00 11.29 9.29 2.00 1.72 10.68 8.36 2.32 1.30 9.04 6.62 2.42 1.10 8.56 6.24 2.32 1982 1.06 8.00 5.77 2.23 1.71 9.12 6.74 2.38 -184.2 -121.7 1.72 10.04 7.55 2.49 <1> Balance of payments data underlying the" estimates are shown in the International Developments section of this part of the Greenbook. <2> Components of purchases and total receipts and total expenditures are shown in the Federal Sector Accounts table which follows. I-13 CONIDENTIAL - FR December 14, 1983 PERCENT CHANGES IN GROSS NATIONAL PRODUCT AND RELATED ITEMS CLASS II FOMC 1977 Constant (1972) 1978 1979 1980 1981 1982 -Proj ected1983 1984 Dollars Gross national product Final sales Private Domestic final purchases -. 3 .5 .1 -1.0 -1.9 -. 7 -1.3 -.1 Personal consumption expenditures Goods Services 5.0 5.1 4.9 4.5 4.2 4.8 2.7 1.9 3.7 .5 -1.4 2.7 2.7 2.1 3.3 Gross private domestic investment Residential structures Business fixed investment 16.1 18.6 11.7 10.5 2.8 12.8 -. 2 -5.3 7.3 -11.8 -20.3 -2.4 9.2 -5.1 5.2 2.0 -. 1 .4 3.3 1.3 1.8 2.6 1.1 4.0 4.9 2.7 .6 3.2 Gross national product Final sales Private Domestic final purchases 11.7 11.1 11.7 13.2 12.8 12.8 13.6 13.4 11.7 12.4 13.1 12.3 8.8 9.9 9.0 8.5 12.2 11.1 11.2 11.2 4.0 5.5 4.6 5.1 Personal consumption expenditures Goods Services 11.1 9.8 12.7 11.8 10.9 12.9 11.9 11.7 12.2 10.7 8.6 13.1 11.3 9.8 13.1 7.3 3.7 11.2 Gross private domestic investment Residential structures Business fixed investment 25.7 33.1 17.9 19.3 16.1 21.3 9.4 6.6 16.6 -5.0 -13.2 6.4 Gov't. purchases of goods and services Federal National defense State and local 8.8 11.0 8.0 7.5 9.7 7.1 8.0 11.2 9.8 9.6 11.5 9.9 13.4 17.1 17.3 11.4 10.8 16.3 17.4 7.5 Disposable personal income 10.0 12.2 12.0 10.8 Personal income Wage and salary disbursements 10.7 10.5 12.5 12.5 12.6 11.9 Corporate profits with I.V.A. and C.C.Adj. Corporate profits before tax 21.1 17.1 15.0 17.7 Nonfarm payroll employment Manufacturing 3.9 3.6 5.1 4.2 Nonfarm business sector Output per hour Compensation per hour Unit labor costs 2.2 7.5 5.2 .6 8.6 8.0 Gov't. purchases of goods and services Federal National defense State and local Disposable personal income 1.4 .1 2.9 -14.5 -15.4 -4.8 12.5 38.8 .3 18.5 10.2 11.0 3.3 4.4 .8 3.8 5.2 -1.0 .5 Current Dollars GNP implicit deflator Gross domestic business product fixed-weighted price index <1> Excluding food and energy Consumer price index (all urban) Industrial production <1> Uses expenditures in 5.9 1972 as weights. 10.2 9.0 8.7 10.4 8.6 8.0 9.1 9.6 9.9 9.3 13.9 43.1 -1.0 22.5 15.5 13.6 9.0 12.9 16.5 6.6 6.4 6.2 12.4 6.6 9.9 10.9 14.9 9.2 12.0 6.3 7.4 9.5 11.0 9.6 12.5 10.1 5.9 5.0 6.5 6.3 9.3 9.0 1.3 10.3 -9.9 -7.1 9.6 -3.3 -14.3 -23.2 37.5 19.9 19.4 12.2 3.6 2.6 .6 -3.6 .8 -. 6 -1.7 -6.5 .4 -1.0 3.6 6.7 -. 1 7.8 7.9 3.3 5.7 2.3 2.0 5.3 3.3 -1.5 9.0 10.7 18.2 1.4 14.1 -. 7 10.4 11.1 -12.7 -13.0 -1.1 7.4 8.6 9.2 9.4 6.0 4.2 4.5 8.0 7.8 7.6 9.9 8.6 11.3 10.0 8.5 13.5 9.5 9.3 10.3 6.0 6.9 6.2 4.2 5.0 3.3 4.6 4.6 5.1 5.8 4.4 -3.6 2.6 6.6 9.8 -8.1 December 14, 1983 FEDERAL SECTOR ACCOUNTS (8illione of dollars) Unified budget receipts Unified budget outlays Surplus/deficit(-), unified budget Surplus/deficit(-), off-budget agencies 3 Combined deficit to be financed Means of financing combined deficit: Net borrowing from public Decrease in cash operating balance 4 Other Cash operating balance, Sponsored agency borrowing Memo: NIA end of period 5 Fiscal Year 1982* Fiscal Year 1983* 618 728 -III CY1983e/ F.R. Board FY1984e 2/ F.R. Admin. 1/ Board CY 1982* 601 796 -195 668 48 -180 667 856 -189 609 740 -I11 612 802 -190 -17 -12 -14 -12 -15 -11 -128 -204 -194 -202 -146 -202 FRB Staff Estimates Calendar quarters; not seasonally adjusted 1984 1981 I II III II* III* IV 1982 IV* I* 137 205 -68 140 201 -61 167 196 -29 -I -2 -4 157 194 -37 148 211 -63 1R6 217 -31 15R 213 -55 174 215 -41 ' -69 -63 -34 0 -3 -5 -5 -42 -63 -58 -35 -45 -5 135 -11 4 212 -8 3 194 0 0 181 17 3 161 -8 -8 186 II 5 62 10 -2 56 4 3 47 -13 -1 48 -9 4 36 28 -0 53 -1 6 49 -10 -4 43 0 2 29 37 20 20 20 9 20 15 28 W 9 10 20 20 20 -3 n.a. 14 17 1 -2 -3 0 1 2 4 4 4 628 740 251 173 78 489 -112 634 820 276 197 80 544 -187 701 873 300 227 73 573 -172 700 884 292 224 68 592 -184 617 764 259 179 79 506 -147 647 828 275 202 73 553 -181 613 821 279 191 89 542 -208 623 807 274 194 79 533 -183 Seaaonally adjusted annual rates 709 653 646 667 698 878 892 819 834 853 273 279 303 274 279 229 199 202 211 221 58 74 74 77 62 545 555 580 599 589 -166 -189 -186 -180 -183 727 913 314 236 79 599 -186 -46 -85 -83 -116 -59 -88 -100 -72 budget Receipts Expenditures Purchases Defense Nondefense All other expenditures Surplus/deficit(-) High Employment (H.E.) surplus/deficit(-) evaluated at the unemployment rate of 6 percent a-actual e--estimated 1. Mid-Session Review of the 1984 Budget, July 1983. The August CBO estimate of the First Concurrent Resolution on the Budget -- Fiscal Year 1984 indicated revenues of $677 billion and outlays of $860 billion. The lack of Congressional action on revenue measures led CBO to reestimateFY1984 receipts to he $666 billion and outlays to be $858 billion. 3. Includes Federal Financing Bank, Postal Service Fund, Rural Electrification and Telephone Revolving Fund, Rural Telephone Bank and (beginning in FY1982) the Strategic Petroleum Reserve. NOTE: Ouarterly figures may not add to yearly totals due to rounding. 4. 5. -65 -103 -111 n.a.--not -110 -118 -126 available Checks issued less checks paid, accrued items and other transactions. FRBstaff estimates and actuals include Federal Home Loan Banks, FHLMC (excluding participation certificates), FNMA (excluding mortgage-backed securities), Federal Land Banks, Federal Intermediate Credit Banks for Cooperatives. and Student Loan Marketing Association marketable debt on a payment basis. DOMESTIC FINANCIAL DEVELOPMENTS Recent developments. essentially no change. M1 growth continued weak in November, registering Growth in nontransactions balances--particularly small time deposits--remained strong, however, and M2 rose at just under an 8 percent rate during the month. The rate of M3 growth spurted to 12.5 percent, but much of this acceleration reflected a transitory adjustment of managed liabilities as Treasury balances dropped sharply while bank credit growth remained fairly strong. All the monetary aggregates remained within their longer-run ranges, although M1 was near its lower bound and M3 near its upper limit. Interest rates moved up, on balance, during the intermeeting period. The federal funds rate remained, on average, in the 9-1/4 to 9-1/2 percent range that has prevailed since August, but market expectations changed in response to evidence of continued, and perhaps surprising, strength in the economic recovery. Short-term rates increased by about 30 to 40 basis points while longer-term Treasury yields moved up slightly less. Commitment rates on conventional fixed-rate mortgages did not rise along with other rates. After trending downward in late summer and early fall, these interest rates have leveled out during most of the period, remaining in a narrow range around 13.4 percent. been fairly stable. Similarly, ARM rates have Nonetheless, rates appear to have been high enough during the fall to cause some softening of mortgage demand. In October, new commitments for mortgages at S&Ls slowed considerably from the rapid third-quarter pace. As in the case of mortgage rates, lending rates for consumer credit have flattened out recently after a period of decline. I-15 In contrast to I-16 home loans, however, consumer credit growth has strengthened recently. Consumer installment credit advanced at a rapid 16 percent rate in October, about doubling the September pace and exceeding the average thirdquarter rate. Growth of consumer loans at banks remained brisk in November but was somewhat below the heady 25 percent rate in October. Financing demands of nonfinancial business, on the other hand, are remaining fairly moderate in the current quarter, despite the rise of investment (fixed capital and inventories) above internal funds. Growth in short-term financing at banks and in the commercial paper market, which had picked up in the summer, has accelerated only a little further since then. Meanwhile, at the prevailing level of longer-term corporate bond rates, nonfinancial corporations--especially industrial firms--have been issuing only a small volume of bonds. Equity issuance by nonfinancial firms has also slowed in the past couple of months as the stock market has shown no sustained vigor. In the municipal sector, interest rates have risen in response to the pressure of large supplies. Although there was a temporary lull in November, offerings of long-term bonds by state and local governments in December have accelerated to a very rapid pace. Issuance of tax-exempt bonds for private purposes is the dominant feature of the current period as state and local agencies strive to raise the maximum amount permitted prior to the possible imposition of new restrictions. Authorization for mortgage subsidy bonds for owner-occupied residences lapses on December 30 until further congressional action is taken. on industrial development bonds. Also under consideration are new limitations I-17 In the federal sector, credit demands also remain strong as the growing structural deficit has offset the effect of the economic recovery. Marketable borrowing in the current quarter, however, appears likely to fall somewhat short of the Treasury's November estimate owing to delays in raising the debt ceiling. Outlook. The monetary and credit aggregates appear likely to remain within their ranges for this year, although M3 may be well the upper end of its target, while M1 will be low in its range. As the new year begins with a continued solid pace of economic expansion, however, demands for money and credit may strengthen, putting some upward pressures on interest rates over the winter months. Federal borrowing requirements will again be sizable in the first quarter. It appears that issuance of marketable debt will be within the range of $50 billion to $55 billion that the Treasury tentatively projected in November, while the cash balance will remain near the more normal level likely to be reached by the end of this year. In the private business sector, financing needs are likely to increase: the staff's GNP projection points to a widening financing gap. Since there appears to be a reluctance by businesses to borrow in the long-term market, these demands are likely to impinge to a considerable degree on the banks and on the commercial paper market. Equity issuance also could remain an important source of funds, although not as large as in the first half of this year without some further gains in the stock market. Household sector borrowing seems likely to remain fairly strong in the next few months. In view of the sizable growth in personal income and the favorable attitudes of both borrowers and lenders, consumer credit I-18 growth seems likely to remain rapid, tapering off only gradually with the ebbing of some pent-up spending desires and some slowing of purchases of durable goods that are associated with buying new homes. Mortgage lending may slow somewhat, but only a small decline seems probable in the near term in view of the large stock of outstanding commitments remaining to be taken down. Following the turn of the year, the pace of bond offerings by state and local governments is likely to slow appreciably as their role in financial intermediation to households and businesses is at least temporarily reduced. Borrowing by these governments for their own purposes seems unlikely to decline, however, in view of a backlog of capital spending projects. INTERNATIONAL DEVELOPMENTS Recent developments. The dollar has appreciated considerably further since the last FOMC meeting, rising over 3 percent on a trade-weighted average basis. Gains against most continental European countries were about 3-1/2 percent; against sterling the rise was nearly 5 percent, but the dollar was up only about 1 percent against the yen and Canadian dollar. Relative interest rates moved only slightly in favor of dollar assets over the period, while the reported U.S. trade deficit for October was up sharply. Support for the dollar probably came in some degree from the response of asset holders to continued political problems in the Middle East and elsewhere. Weakness in the mark was likely related to German political difficulties, and sterling's relative weakness was probably connected with softness in the oil market. On the whole, however, it is difficult to find sufficient cause in current developments for the upsurge of the dollar since early October. . U.S. authorities purchased $50 million equivalent of marks on December 5. During the period the U.S. subscriptions to the IMF's quota and GAB increase were approved (totalling SDR 7.6 billion) and monetary authorities of the industrial countries -- not including I-19 I-20 the U.S. authorities -- also agreed to provide SDR 3 billion in interim financing to the Fund. Economic recovery in Europe has continued at a slow pace. The recovery in Germany and the United Kingdom has been weak, and France's austerity program will retard any increase in activity. Italy has just begun to show signs of recovering from a prolonged recession. In contrast, Canadian activity has matched the U.S. pace, and Japan is likely to show slightly faster growth reflecting recent policy actions. Inflation in most industrial countries abroad remains moderate, but has not shown signs of further deceleration. Unemployment rates have been generally unchanged recently, though they remain well above year-ago levels except in Canada. On balance, the international debt situation has improved somewhat over the past month, but with many troublespots remaining. Brazil, the largest debtor, reached agreement with the IMF on a revised program and progress was made on arrangments for official and commercial bank financing in 1984. Both Mexico and Chile are meeting their objectives under their IMF programs, but are naturally concerned with the depressed conditions in their economies. Peru, Argentina and the Philippines are still negotiating with the IMF on their programs for 1984, and Venezuela's new government still is reluctant to come to terms with the IMF or settle overdue private sector interest payments. In the U.S. international accounts, a record trade deficit was registered in October as imports rose sharply while exports were about unchanged from the third-quarter rate. The increase in imports was spread over many product categories, reflecting rising U.S. demand and I-21 the strong dollar. Petroleum imports were about unchanged in value from the third-quarter rate, though prices were up slightly (but probably temporarily). The continued sluggishness of exports reflects both the slow pace of recovery abroad and the drag from the relatively high value of the dollar. After registering sizable inflows in the third quarter, private capital transactions, mainly through banking channels, resulted in a net outflow in October. Much of the shift reflected net outflows from U.S. banks to their foreign offices in October, but partial data show a reversal to large net inflows from foreign offices in November. Also contributing to net outflows in October was a slowdown in foreign purchases of U.S. corporate stocks. Data for foreign lending by U.S.-chartered banks (including loans by their foreign branches) in the third quarter show a small decline in claims on non-OPEC developing countries. Through September the net increase in these loans this year has been only about $1/2 billion. Outlook. The contrast between the strong pace of recovery in the United States and the slower pace in Europe has become somewhat more prominent, though the staff's projection of a 2-1/2 percent growth for foreign industrial countries during 1984 is above the 1983 rate. At economic policy meetings the views expressed by European officials suggest little inclination to change policies even if there were developments that resulted in a lower dollar. Projected U.S. external deficit in 1983 and 1984 have not been changed significantly in the past month; the effects of a somewhat higher average level of the dollar have been about offset over the year I-22 ahead by a lower estimate for oil imports resulting from a downward revision of trends in oil consumption. The staff continues to expect that the effect on the dollar of the balance between supportive factors (interest rates and political developments) and the normally negative consequences of huge current and anticipated trade and current account deficits will be a relatively moderate depreciation of about 10 percent from the early months of next year to the fourth quarter. CONFIDENTIAL (FR) FOMC CLASS II DECEMBER 14, 1983 EXPORTS AND RELATED ITEMS OUTLOOK FOR U.S. NET SEASONALLY ADJUSTED ANNUAL RATES) (BILLIONS OF DOLLARS, 1982 ANN. 1983-P 1984-P ANN. ANN. 1982 03 1982 C4 1983 01 1983 Q2 1983 63 1983-P 04 1984-P 1984-9 1984-1 19844 C3 G2 it 1. GNP NET EXPORTS U.S. U.S. 12.3 136.4 123.9 10.4 14.0.6 130.2 2.9 140.7 137.8 -3.2 140.7 143. 9 -4.2 142.8 147.0 -3.5 144.9 148.4 -1.3 147.8 149.1 89.7 88.7 87.4 89.4 90.0 89.1 8.7.8 86.6 -45.4 -35.2 -58.6 -71.6 -84.9 -99.6 -110.3 209.0 33.8 175.2 193.4 33.1 160.3 198.0 36.0 162.0 195.7 35.3 160.3 203.1 37.8 165.3 205.3 38.7 366.6 207.0 38.9 .168.0 209.4 39.3 170.0 213.4 39.4 174.1 220.2 40.0 180.2 324.2 65.8 258.4 261.3 68.9 192.3 238.8 60.5 178.3 133.3 42.0 191.3 254.3 52.1 202.2 27'.6 66.3 208.3 290.3 62.6 227.7 .306.5 63.6 242.9 319.6 65.7 253.9 330.5 66.6 264.9 34CG. 67. 272.6 -88.7 -26.4 -26.5 -14.3 -38.8 -47.0 -61.2 -77.2 -87.Q -94.1 -96.6 -57.2 366.8 424.0 1.0 346.0 345.0 5.5 321.6 316.1 17.0 JA6.9 309.9 -8.5 327. 335.6 -20.2 341.1 CONSTANT 72 $, NET EXPORTS OF G+S IMPORTS OF G+S 28.9 147.3 118.4 11.5 138.7 127.2 -3.0 144.0 147. 1 24.0 146.4 122.4 23.0 336.5 113.5 20.5 1J7.3 .1136.8 84.6 88.8 88.4 83.9 84.6 -36.4 -62.9 -111.7 -52.3 EXPORTS (EICL. BILITAI) AGlCUtTUSL ON AGRlC ULIO AL 211.2 37.-2 174.0 200.3 37.0 163.4 212.5 39.4 173.1 JnPOSTS 247.6 61.2 186.4 263.2 55.7 207.5 -11.2 -40.3 MERCHANDISE BAICE BALANMC CUOBENT ACCOUNT 2/ BALANCE Of WBCH:M:ET INVISTallN 4. -63.L 386.5 445.5 -11.2 335.4 346.5 PEIBCOLUM ANC kIODCTS NOMPEITGLEUD 3. -56.2 361.5 417.7 17.4 347.6 330.2 TERMS OF TRADE (1972=100) 1/ 2. -47.1 .351.9 399. 7 -61.4 371.3 361.3 -33.1 346.3 379.4 NET CURRENT $, EXPORTS OF G+S IMPORTS OF G+S FOREIGN OUTLCON COUNTBIBS 3/ 1NC0BI 27.3 26.3 26.5 0.0 1.2 2.3 8.1 5.7 5.4 27.3 24.0 20.4 23.7 0.7 2.3 1.4 2.4 6.0 4.5 6.0 5.3 3 0.9P 30.( 27.4 26.9 2.1 2. 2. 5.8 5.4 5.4 S433.1. -11i1. -139.9 26.0 25.6 .5 2.8 IBk INDOSTIJAL kBAL GMP, I CUANGE, AhLOAL RAIBS CONSOBME PRICES, I CIANGI, ANNUAL BAAS -1.5 6.0 1/ GNP EXPORT ILPLICIT DBILATIO DIVIDED B 1Gp IMJPORT 19ILICIT DIfLAtO 2/ INT2BNATIONAL ACCOUNTS BASIS 3/ GEOMBTRIC BEJIHTS USED TO AGGaaGATE FORE1GN RBAL GNP AND CONSOUE AIaICS -- TRADE. QBERIIiAN (20.8) , JAPAN (6.4S), <SWkDNEN (4.25), P/ PROJECTIC (13.65), IIRACE (13.11), SMIIEBLAND (3.62) OUNITED KINGDOI (11.83ll , CANAiA PABCAN SHARE IN TN-COOUNtl 49.15)1, ITALIE 9.05), 5.2 5.1 TOTAL IULi.LAIEIAL 181 ktBTLAIDS 48.3J5, bELGIUI BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence Date December 19, 1983 Subject To FOMC From Normand Bernard GREENBOOK CORRECTION The growth in commercial paper issued by nonfinancial firms in November should read 5.2%, not 15.2%, in (1) the table entitled "commerical bank credit and short-and intermediate-term business credit" on p. III-6 in the greenbook and (2) in the same table in the greenbook supplement.
@FedFRASER