The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Content last modified 6/05/2009. February 13, CONFIDENTIAL (FR) CLASS II - FOMC SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System 1976 TABLE OF CONTENTS Page THE DOMESTIC NONFINANCIAL ECONOMY Wholesale prices.......too ......................... ..... Industrial commodities................................ Inventories................................ .. ............. Merchant builder sales.................................... TABLES: Wholesale prices......................................... Home sales.................. .................... ....... THE DOMESTIC FINANCIAL ECONOMY Mortgage market.......................................... TABLES: Average rates and yields on newhome mortgages.. ........................................... Interest rates............................................ ERRATAS Part I..................................................... 6 Part II............................. 6 ................... SUPPLEMENTAL NOTES The Domestic Nonfinancial Economy Wholesale prices. The wholesale price index was virtually unchanged, seasonally adjusted, from December to January as a rise for industrial commodities offset a decline for farm and food products. WHOLESALE PRICES (Per cent changes at annual rates; based on seasonally adjusted data) 1/ Relative imporDec. 73 to tance Dec. 75 Dec. 74 All commodities Dec. 74 to Dec. 75 Dec. 74 to June 75 June 75 to Dec. 75 Dec. 75 to Jan. 76 100.0 20.9 4.2 Farm and food products 22.8 11.0 -0.3 -8.0 Industrial commodities Materials, crude and intermediate 2/ 77.2 25.6 6.0 3.4 8.7 4.5 48.3 28.2 5.3 2.1 8.6 3.6 18.6 11.8 20.5 22.6 6.7 8.2 3.9 8.4 9.6 7.9 9.3 11.1 13.0 Finished goods Consumer nonfoods Producer goods Memo: Consumer foods 1/ 2/ .3 8.3 - .2 3.1 -21.9 7.2 3.8 -26.4 Not compounded for one-month changes. FR estimate. Industrial commodities rose 0.4 per cent, seasonally adjusted, with increases widespread. Higher prices for machinery and equipment, lumber and wood products, transportation equipment, metals and metal products, and chemicals and allied products accounted for most of the rise. A decline for fuels and related products and power was partially offsetting. -2- The index of farm and food products fell 1.8 per cent, seasonally adjusted, owing largely to declines for livestock, meats, and fresh vegetables. Inventories. Book value of retail trade inventories fell at a $9.1 billion annual rate in December, slightly slower than the $9.6 billion November rate of decrease and averaging to a $.1 billion rate of increase in the fourth quarter. This compares to an increase of $8.8 billion in third quarter at an annual rate. The retail trade inventory- sales ratio fell to 1.41, the lowest level since March 1966, while the nondurable ratio was at its lowest point since October of 1947. For manufacturing and trade the rate of inventory runoff was $6.3 billion in December, slower than the $9.6 billion November rate of runoff, averaging only a $1.8 billion rate of accumulation in the fourth quarter compared with the $5.4 billion third quarter rate of growth. The manufacturing and trade inventory-sales ratio fell to 1.51 in December from 1.53 in November. Merchant builder sales of new single-family homes, which had increased sharply in November, edged down 3 per cent in December to a seasonally adjusted annual rate of 640,000 units. For the fourth quarter as a whole, sales averaged 12 per cent above the third quarter and more than 50 per cent above the recent trough in the fourth quarter of 1974. The strength in the fourth quarter home sales rate may have reflected, in part, the nearness of the year-end expiration date for the 5 per cent tax credit enacted late last March. - 3 - The stock of unsold single-family homes was unchanged between the end of November and the end of 1975. it represented about 7 months' At 379,000 units, supply at the December sales rate. Existing home sales reached a new high in December of 131 (1972=100), 6 per cent above a month earlier. The fourth quarter average was 13 per cent above the average in preceding quarter and 35 per cent above the low a year earlier. HOME SALES New Home Sales and Stocks Homes Homes Months' sold 1/ for sale 2/ supply (thousands of units) Median Prices Sales Indexes of Unit Vol. of Homes Sold (1972=100, sea. adjusted) New Existing New Existing homes homes (thou. of $) homes homes 3/ 1974 QI QII QIII QIV 523 550 490 417 452 436 414 400 10.4 9.5 10.1 11.5 73 77 68 58 106 105 99 93 35.2 35.6 36.2 37.3 30.9 32.2 32.8 32.2 QI QII QIII (r) QIV (p) 425 571 566 635 396 378 383 379 11.2 7,9 8.1 7.2 59 80 79 88 95 108 112 126 38.1 39.0 38.8 41.3 33.8 35.4 36.1 35.6 Oct. (r) Nov. (r) Dec. (p) 596 664 645 388 379 379 7.8 6.9 7.1 83 92 89 122 124 131 40.7 41.1 42.4 35.4 35.7 35.8 1975 1/ Seasonally adjusted annual rate. 2/ Seasonally adjusted, end of period. 3/ Converted to 1972 index for comparison with existing home sales, which are not available on any other basis. -4- The Domestic Financial Economy Mortgage market. According to the HUD (FHA) opinion survey, average interest rates on new commitments for conventional new- and existing-home mortgages declined during January by 10 basis points. Yields on FHA-insured new-home mortgages for immediate delivery in the private secondary market fell by 26 basis points to 9.06 per cent. These rate movements are generally consistent with the primary and secondary market yields cited in the Greenbook. AVERAGE RATES AND YIELDS ON NEW-HOME MORTGAGES (HUD-FHA Field Office Opinion Survey) Primary market End of Month 1975-Low High Conventional loans Level 2/ Spread 4/ Secondary market 1/ Level 3/ FHA-insured loans Discounts Spread 4/ (points) (per cent) (basis points) (per cent) (basis points) 8.90 (March) -70 (March) 8.69 (March) -91 (March) 2.4 (Dec.) 9.25 (Sept., 15 (Jan.) 9.74 (Sept.) 31 (Oct.) 6.2 (Aug.) Oct.) July 9.00 -25 9.13 -12 4.8 Aug. Sept. Oct. Nov. Dec. 9.15 9.25 9.25 9.20 9.15 -34 -45 +30 --- 9.32 9.74 9.53 9.41 9.32 -17 + 4 +31 --- 6.2 5.5 4.0 3.1 2.4 9.05 39 9.06 40 2.4 1976-Jan. 1/ 2/ Any gaps in data are due to periods of adjustment to missible contract rates on FHA-insured loans. Average contract rates (excluding fees or points) on changes in maximum percommitments for conventional first mortgage loans, rounded to the nearest 5 basis points. 3/ Average gross yield (before deducting servicing costs) to investors on 30-year minimum-downpayment FHA-insured first mortgages for immediate delivery in the private secondary market (excluding FNMA), assuming prepayment in 15 years. 4/ Average gross mortgage rate or yield minus average yield on new issues of Aaa utility bonds in the last week of the month. (There were no issues of Aaa bonds during the last week of November and December.) -5 - INTEREST RATES (One day quotes--in per cent) 1975 1976 11 Jan. 19 Feb. 5.13(5/21) 4.76(1/14) 4.73 1/2) 1/2) 1/1) 1/3) 4.38(6/16) 5.33( 6/2) 5.40(5/30) 5.69(5/21) 4.79 4.83 5.13 5.05 5.44 5.13 5.00 5.50 9.00( 1/1) 5.38(6/11) 5.00(1/14) 5.13 7.05(8/25) 8.75( 1/2) 5.13(6/11) 5.38(5/23) 5.07 5.25 7.67( 1/2) 5.68(6/12) 5.47 5.12 5.25 5.35(2/5) 8.38( 1/1) 5.75(6/18) 5.38(1/14) 5.50 7.35(8/21) 8.00(8/25) 5.37( 2/5) 6.03(2/20) 5.37 6.10 5.46 6.02(2/5) 8.00( 1/1) 4.35(3/15) 6.00(3/12) 3.40( 2/7) 6.25(1/14) 3.20(1/16) 6.00 3.05(2/6) 8.56(9/16) 8.71(9/16) 6.93(2/19) 7.58(2/21) 7.46 8.00 7.50 3.10 9.02(4/30) 10.63(1/20) 8.57(2/26) 10.27( 4/3) 8.60 10.22 8.57 10.12 9.80( 4/3) 8.89( 2/6) 8.64(1/16) 8.63(2/4) 7.67(10/2) 6.27(2/13) 7.09(1/14) 6.95 9.95(10/6) 9.95(10/6) 3.78(3/10) 8.78(3/10) 9.13(1/14) 9.13(1/14) 9.07(2/9) Highs Lows Short-Term Rates Federal funds (wkly. avg.) 3-month Treasury bills (bid) Comm. paper (90-119 day) Bankers' acceptances Euro-dollars CD's (NYC) 90-119 day Most often quoted new 6-month Treasury bills (bid) Comm. paper (4-6 mo.) federal agencies CD's (NYC) 180-269 day Most often quoted new 1-year Treasury bills (bid) Federal agencies CD's (NYC) Most often quoted new Prime municipals 7.70( 1/8) 6.90( 9.00( 9.00( 10.25( Intermediate and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa New Issue Aaa Utility Municipal Bond Buyer Index Mortgage--average yield in F1MA auction 9.07(219) -6- ERRATAS: GNP tables, pp. I - 9 to I - 12 Part I: GNP Final Purchases Private Excluding Total Total Final Net Exports Private purchases p. I-9 (Bill $, SAAR) LEVELS 1976 - I II III IV 1977 - I II p. I-10 1,610.3 1,651.9 1,260.7 1,295.1 1,242.2 1,277.8 1,694.5 1,738.5 1,781.3 1,824.6 1,330.1 1,364.4 1,400.0 1,436.9 1,314.3 1,349.7 1,387.4 1,426.4 CHANGES 1976 - I 36.9 1976 - I 9.7 II III IV (Bill $, SAAR) 35.0 31.1 (Per cent at Annual Rate) 10.5 11.5 11.1 10.7 1977 - I p. I-11 10.9 LEVELS 1976 p. 1-12 1,312.6 1,673.8 CHANGES 1.976 160.6 1976 10.6 (Bill $) 130.3 (Per cent) 11.0 1,296.0 135.2 Part II: PII-5, lower table; footnote should read: "NOTE: Real wage and salary disbursements and real personal income are published data deflated by the consumer price index. Reference months are specific highs and lows for deflated wage and salary component." -7- pII-10,lower table; second line of title should read: "(Seasonally adjusted, measured in millions of square feet)". pII-12,lower table; second line of title should read: "(Seasonally adjusted monthly averages, billions of dollars)".
@FedFRASER