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CONFIDENTIAL (FR)
SUPPLEMENT
CURRENT ECONOMIC AND FINANCIAL CONDITIONS
Prepared for the
Federal Open Market Committee
January 18, 1974
By the Staff
Board of Governors
Federal Reserve System
the
of
SUPrEMENTAL NOTES
The Domestic Economy
Auto sales,
Sales of new domestic-type autos in the first
10 days of January were at a seasonally adjusted annual rate of 7.4
million units as compared with a 7.9 million rate in the month of
December and a 10 million rate in January last year.
Of the 138,200 domestic-type cars sold in early January (not
seasonally adjusted) 39.8 percent were small cars, a record percentage
and far above the 24,7 percent of a year ago.
Housing starts.
Seasonally adjusted private housing starts,
which had turned up in November, dropped one-fifth in December to an
annual rate of 1.36 million units.
Both single-family and multifamily
starts shared in the sharp decline as did starts in each of the four
regions--for December and the fourth quarter as a whole.
Seasonally
adjusted residential building permits, already extremely low, dropped
moderately further in December from the upward revised November figure.
Starts for all of 1973 totaled 2.04 million units, 13 percent
lower than the record total in 1972, although virtually the same as in
1971.
Including mobile home shipments, which are now indicated to have
at least matched last year's high, the combined total came to 2.6
million units--the second highest on record.
-2PRIVATE HOUSING PERMITS, STARTS AND COMPLETIONS
(Seasonally adjusted annual rates, in millions of units)
1973
Percent change in
December from:
QIII I
1973
QIV(p) Nov.(r)
Permits
1.71
1.29
1.31
1.23
- 6
-49
Starts
2.03
1.57
1.70
1.36
-20
-43
1.12
0.89
0.68
0.94
0.76
0.76
0.91
0.59
-19
-22
-37
-49
Completions
1.90
n.a.
1.94
n.a.
-11/
- 21l
Memorandum:
Mobile home shipments
0.53
n.a.
0.53
n.a.
+191
1-family
2- or more-family
p.a.
1/
Dec. (p)
Month ago
Year ago
/
-211 /
-- not available.
Percent changes shown based on November 1973.
Capacity utilization.
The rate of capacity utilization in
manufacturing as a whole turned down in the fourth quarter, with the
rate dropping a little to 82.6 percent from 83.3 percent in each of the
two preceding quarters.
The rate of capacity utilization in major materials industries
was also down somewhat in the fourth quarter, falling to 95.1 percent
from a high of 96.0 percent in the third quarter.
The fourth quarter
rate was, however, above the first half of this year and well above the
92.4 percent rate of the fourth quarter of 1972.
Personal income.
Personal income rose $10.2 billion (annual
rate) in December, slightly less than the revised November increase of
$10.9 billion, but well above the average monthly gain of $7.2 billion
in the first half of the year.
Wage and salary disbursements rose by $6 billion in December,
following a $6.6 billion increase in the preceding month.
Wage and
-3-
salary disbursements advanced in all major groups, with the increases
primarily reflecting a rise in hourly earningsi
Nonwage income rose
rapidly; farm proprietors income continued very strong over the month
and dividends, pushed up by a large volume of year-end extras, rose
substantially.
Compared to a year ago personal income increased 10.8 percent,
and wage and salary disbursements were up by about the same amount.
PERSONAL INCOME
(Billions of dollars; seasonally adjusted, annual rate)
1973
Total personal income
Wage and salary disbursements
Government
Private
Manufacturing
Other
Farm income
Other nonwage income
Less: Personal contributions
for social insurance
Nov. 1973-
November
December
1079.4
717.8
150.4
1089.6
723.7
151.3
567.4
204.6
362.8
572.4
205.7
366.7
Dec. 1973
10.2
5.9
0.9
5.0
1.1
3.9
31.6
32.4
374.3
377.9
3.3
1.1
44.3
44.4
0.1
Gross national product (GNP) in the fourth quarter of last
year, at a seasonally adjusted annual rate of $1,334.0 billion according
to Commerce Department preliminary estimates, was up $29.5 billion
from the third quarter rate.
GNP in
The fourth quarter rate of increase in
real terms was 1.3 percent at an annual rate; real gross private
product also rose at a 1.3 percent per year rate.
Private nonfarm
product in real terms, however, declined at a .4 percent annual rate.
The GNP implicit price deflator rose at a 7.9 percent annual rate in
the fourth quarter, and the gross private product fixed weighted price
index at a 7.6 percent per year rate.
The Commerce estimates indicate an increase in inventory
investment in the fourth quarter to a $15.9 billion seasonally adjusted
annual rate, up from $4.7 billion in the third quarter.
Final purchases
were up $18.3 billion in the fourth quarter, but in real terms they
were off at a 2.4 percent annual rate.
This weakness in constant dollar
final purchases was in personal consumer expenditures for durable and
nondurable goods--down at a 7.1 percent annual rate, and residential
construction--down at a 38.1 percent annual rate.
Federal government
purchases were also off in real terms, but most of this decline reflected the sales of military equipment and supplies to Israel from
defense stocks (treated as a negative national defense purchase in
the
GNP estimates) and were reflected in the increase in exports of goods
and services.
Private final purchases excluding net exports in real
terms were off at a 3.9 percent annual rate.
Gross national product in 1973, at $1,288.2 billion, was
$133 billion more than in 1972 and final purchases $131.7 more.
GNP increased 5.9 percent last year,
Real
real final purchases 5.9 percent,
the GNP implicit deflator, 5.3 percent, and the gross private product
fixed weighted price index 6.0 percent.
From the fourth quarter of 1972 to the fourth quarter of 1973
the gains in current dollar gross national product and in
final pur-
chases were larger than for 1973 as a whole (see table).
But price
increases also were larger and real gains were less.
-5-
CHANGES IN GNP AND RELATED ITEMS
1972
1971-IV1972-IV
1973
1972-IV1973-IV
------- Billions of dollars-------99.7
99.7
Gross national product
Final purchases
134.8
127.1
Per cent ---------
-----------Gross national product, constant dollars
Final purchases, constant dollars
Gross national product implicit deflator
Gross private product fixed weighted
price index
115.0
112.1
133.0
131.7
6.1
6.9
3.2
5.9
5.9
5.3
7.0
6.9
3.3
3.9
3.4
7.1
3.2
6.0
3.4
7.6
CORRECTIONS:
Page 1-4,
line 9, change to:
in deficit after midyear.
Page 11-8, line 6, after sidehead refers to consumer instalment credit.
- 6 -
January 17,
1974
GROSS NATIONAL PRODUCT AND RELATED ITEMS
(Quarterly figures are seasonally adjusted. Expenditures and income
figures are billions of dollars, with quarterly figures at annual rates.)
1973
Preliminary
Amount
Change
from
1973-III
Amount
1972
Change
from
1973-IV
Preliminary
Amount
73-II
Change
from
73-III
1228.2
133.0
1304.5
32.5
1334.0
29.5
1280.8
131.7
1299.8
32.3
1318.1
18.3
1003.6
121.0
1020.8
28.6
1032.3
11.5
Excluding net exports
999.0
107.8
1013.2
23.8
1024.3
11.1
Personal consumption expenditures
Gross National Product
Final purchases
Private
805.0
78.5
816.0
20.4
829.0
13.0
Durable goods
Nondurable goods
131.1
336.3
13.7
36.4
132.8
341.6
0.0
11.3
126.8
351.1
-6.0
9.5
Services
337.6
28.4
341.6
9.0
351.2
9.6
Gross private domestic investment
Residential construction
Business fixed investment
Change in business inventories
Nonfarm
201.5
58.0
136.0
7.4
6.7
23.2
4.0
17.8
1.4
1.1
202.0
59.2
138.0
4.7
3.2
3.8
-0.4
3.9
0.2
-1.2
211.2
54.2
141.1
15.9
14.9
9.2
-5.0
3.1
11.2
7.8
Net exports of goods and services
Exports
Imports
4.6
101.3
96.7
9.2
27.8
18.6
7.6
104.5
97.0
4.8
7.3
2.6
8.0
113.5
105.6
0.4
9.0
8.6
Gov. purchases of goods and services
Federal
Defense
Other
State and local
277.2
106.9
74.2
32.7
170.3
22.2
2.5
-0.2
2.6
19.8
279.0
106.8
74.2
32.7
172.2
3.7
-0.5
0.0
-0.4
4.2
285.8
107.8
74.0
33.8
178.0
6.8
1.0
-0.2
1.1
5.8
GNP in constant (1958) dollars
837.3
46.6
841.3
7.0
844.1
2.8
Personal income
Wage and salary disbursements
Disposable personal income
Personal saving
1035.5
691.6
882.6
53.8
96.3
63.8
85.6
4.1
1047.1
699.3
891.1
51.1
28.1
16.7
21.4
0.1
1079.2
717.6
918.0
63.3
32.1
18.3
26.9
12.2
Saving rate (per cent)
6.1
--------
Gross National Product
Gross Private Product
Gross Private Nonfarm Product
GNP in constant prices
GPP in constant prices
GPNFP in constant prices
GNP implicit price deflator
GNP fixed weighted price index
GPP fixed weighted price index
--
5.7
--
6.9
--
Per Cent Change at Annual Rate--------
11.5
11.9
10.9
5.9
6.2
6.6
5.3
6.1
6.0
10.6
11.1
9.3
3.4
3.6
4.3
7.0
7.3
7.6
9.4
9.0
6.5
1.3
1.3
-0.4
7.9
8.1
7.6
- 7 -
The Domestic Financial Situation
Nonbank thrift institutions.
Deposit flows into savings and
loan associations during the first 10 days of January totaled approximately $1 billion, according to confidential FHLBB estimates.
This
compares with $1.4 billion during the same period in 1972 and 1971, the
only years for which comparable data are available.
The large New York City savings banks experienced a net outflow of deposits during the first 15 days of January.
Some outflow of
savings during the reinvestment period is typical at these institutions,
but the 1974 experience thus far has been poor relative to other recent
years.
NET DEPOSIT FLOWS INTO 17 LARGE NEW YORK CITY MSB's
DURING THE FIRST 15 DAYS OF JANUARY
(In millions of dollars)
1974
1973
1972
1971
1970
Consumer credit.
-85.3
75.8
83.3
66.2
-123.4
In November the seasonally adjusted
delinquency rate on auto contracts at finance companies reached its
highest level since the 1970 recession--2.49 percent.
The rate applies
to both new and used car loans at companies which hold roughly 85 percent of finance company auto paper.
The rate rose sharply in October
and November after fluctuating in a narrow, moderately high range since
March.
Other measures of collection experience on finance company auto
-8
-
paper also deteriorated somewhat in November, though most remain at
relatively modest levels.
These include the rate of contract refinancing,
repossession rates, and average loss on repossessed units sold.
Monetary aggregates.
The following table on monetary aggregates
incorporates the new revised data.
Growth in the deposit aggregates
slowed in December from the November rate, but the December rate of expansion in M, was well above that for the year as a whole.
The December
growth in M --which buoyed M2 and M3--was due in part to a reported bulge
in deposits held by foreign commercial banks at large U.S.
subsequently subsided as January progressed.
growth in M
banks, which
From the revised data,
for the year was 5.9 percent, with rates for -2 and M3 about
three percentage points higher.
In December, the adjusted bank credit
proxy accelerated to its highest rate since August, reflecting a turnaround in the runoff of large CD's at commercial banks.
-9MONETARY AGGREGATES
New Revised Basis, Unpublished
(seasonally adjusted changes)
1973
QII
QIII
QIV
Year
Oct.
Nov.
Dec.
Per cent at annual rates
M
(Currency plus private
demand deposits)
11.5
-0.2
8.0
M 2 (M1 plus commercial bank
time and savings
deposits other than
large CD's)
11.1
5.2
M3 (M2 plus time and
savings deposits at
mutual savings banks
and S&L's)
10.4
4.5
Adjusted bank credit proxy
12.6
10.5
3.5
10.2
9.3
5.9
5.0
10.4
8.5
8.6
10.8
10.9
8.7
8.6
9.1
9.7
8.8
10.7
1.6
2.7
6.2
Time and savings deposits
at commercial banks
a,
Total
17.8
14.0
5.7
15.9
3.4
3.3
10.3
b.
Other than
large CD's
10.4
10.4
12.4
11.2
16.1
11.0
9.7
Billions of dollars l /
Memoranda:
a,
1/
U.S. Government
demand deposits
-0.1
b,
Negotiable CD's
c.
Nondeposit sources
of funds
0.2
2.5
1.6
0.5
-1.3
-0.1
1.0
-0.2
-0.8
1.6
-2.9
-1.8
0.8
0.2
-0.4
0.2
0.3
Change in average levels month-to-month or average monthly change for the
quarter, measured from last month in quarter to last month in quarter, not
annualized.
- 10 Mortgage market.
Offerings to FNMA in the January 14 auction
of forward commitments to purchase FHA/VA home mortgages were quite low
even though four weeks had elapsed since the previous auction.
The
average yield on accepted bids--which were again a very high proportion
of offers received--declined further to 8.71 percent.
offerings to FNMA in
The volume of
its associated auction of forward commitments to
purchase high loan-to-value ratio conventional mortgages also remained
limited, and the average rate on commitments for such mortgages declined
by 5 basis points to 8.77 percent.
Due to the continued low volume of offerings, the next auction
will not be held until February 11.
FNMA COMMITMENT AUCTIONS
(FHA/VA HOME MORTGAGES)
Percent
Offerings
of offers
Accepted
Received
accepted
(millions of dollars)
1972 - High
336 (5/1)
365 (511)
37 (11/27)
61 (11/27)
Low
1973 - High
289 (9/4)
551 (9/4)
Low
25 (10/15,
11/26)
17 (10/15)
Yield to
FNMA I/
(percent)
92 (5/1,7/24)
7.74(10/30)
42 (3/20)
7.53 (3/20)
88 (4/16)
9.37 (9/17)
43 (8/20)
7.69 (1/8)
Sept. 4
17
551
138
289
108
52
78
9.27
9,37
1
15
30
33
25
28
25
17
22
76
68
79
9.11
8.97
8.94
Nov. 12
26
29
25
23
21
79
84
8.87
8.81
Dec.
39
36
94
8.78
Oct.
17
1974 - Jan. 14
40
36
89
8.71
1/ Average gross yield on mortgages FNMA has commited to purchase within four
months, assuming a prepayment period of 12 years for 30-year loans.
The yield
is calculated before deduction of 38 basis points paid by FNMA for mortgage
servicing and without inclusion of FNMA commitment charges.
- 11 INTEREST RATES
Highs
1973 a
Lows
December 17
1974
January 17
Short-Term Rates
Federal funds (wkly. avg.)
10.84(9/26) 5.61(1/3) 10.04(12/12)
3-month
Treasury bills (bid)
Comm. paper (90-119 day)
Bankers' acceptances
Euro-dollars
CD's (prime NYC) 60-89 day
Most often quoted new
9.05(8/14)
10.50(9/19)
11.00(9/20)
11.69(8/9)
5.12(1/4) 7.47
5.63(1/12) 9.25
5.75(1/11) 9.25
5.81(1/5) 10.50
10.50(9/19) 5.38(1/3)
7.86
9.00
9.25
9.63
9.50(12/12)
9.13(1/16)
7.28
9.00
8.16
7.75
8.75
8.39
8.20(12/12)
8.25(1/16)
8.50(9/13) 5.40(1/4)
9.49(8/13) 5.86(1/2)
6.69
7.72
6.98
7.82
8.50(9/19) 5.75(1/3)
6.00(8/8) 3.20(1/3)
7.00(12/12)
4.05(12/14)
7.50(1/16)
4.40(1/18)
6.71
7.23
6.93
7.77(8/24) 7.10(1/2) 7.67
8.68(8/30) 7.88<1/12) 8.50
7.87
8.59
6-month
Treasury bills (bid)
9.00(9/13) 5.38(1/4)
Comm. paper (4-6 mo.)
10.50(9/20) 5.63(1/12)
Federal agencies
9.80(9/13) 5.64(1/3)
CD's (prime NYC) 180-269 day
Most often quoted new
9.38(8/15) 5.63(1/3)
1-year
Treasury bills (bid)
Federal agencies
9.77(1/16)
CD's (prime NYC)
Most often quoted new
Prime municipals
Intermediate and Long-term
Treasury coupon issues
5-years
20-years
Corporate
Seasoned Aaa
Baa
New Issue Aaa Utility
8.13(8/7)
7.83(8/7)
6.23(1/4)
6.04(1/3)
7.47
8.52(8/8)
7.29(1/10) 7.97(12/12)
8.27(1/16)
Municipal
Bond Buyer Index
5.59(8/1)
4.99(10/10)5.06(12/12)
5.24(1/16)
Mortgage--average yield
in FNMA auction
9.37(9/17)
7.69(1/8)
8.71(1/14)
8.78(12/17)
A - 1
SUPPLEMENTAL APPENDIX A *
MONTHLY SURVEY OF BANK LOAN COMMITMENTS
Total unused commitments and total new commitments for loans at
132 large banks showed less rapid growth in November than in the previous
month, according to data from the most recent Monthly Survey of Bank Loan
Commitments. Consistent with the increase in total loans at all weekly reporting banks, loans under commitment in November accelerated, reversing
October's decline.
The November data on unused commitments, as well as those for the
previous four months, are shown in Table 1. In November, unused commitments
to commercial and industrial borrowers grew quite modestly (column 1) when the
only strong advance in revolving credits (column 3).
Unused commitments to
nonbank financial institutions (column 7) continued the strong upward trend
of that series, with the November increase reflecting a larger decline in
takedowns than in new commitments. In contrast, unused commitments for real
estate mortgages (column 8) have declined for the third straight month,
leaving such commitments almost 10 per cent below the level four months
earlier. (The real estate mortgage category, it should be noted, in effect
excludes home mortgages because the majority of respondents to this survey
report only for loans and commitments in excess of $100,000).
Total loans under commitment (loans outstanding under commitments
currently or previously in force) are shown in Table 2. The November growth
was substantial after October's downturn and was produced mainly by large
takedowns of C & I revolving credits (column 3) and real estate mortgages
(column 8).
New commitments (Table 3), which behave erratically, advanced little
in November, but their composition changed considerably. Declines in new
commitments for nonbank financial institutions (column 7) and real estate
mortgages (column 8) were offset by an increase in new commitments to C & I
borrowers (column 1).
The utilization ratios (the ratios of loans under commitments to
the sum of loans under commitment and unused commitments) have shown mixed
trends in recent months, although the overall ratio has remained stable
(Table 4). In November, the usage ratio for real estate mortgages rose to
a new high for the series while that for nonbank financial institutions slid
to the lowest level in five months.
*
Prepared by Paul W. Boltz, Economist, Banking Section, Division of
Research and Statistics.
NOT FOR
QUOTATION OR
PUBLICATION
MONTHLY SURVEY OF BANK LOAN COMMITMENTS
AT SELECTED LARGE U.S. BANKS 1/
(AS OF NOV. 30t 1973)
TABLE 1 - UNUSED COMMITMENTS
(DCLLAR AMOUNTS IN BILLIONS)
JULY 31
AUGUST 31
SEPTEMBER 30
OCTOBER 31
NOVEMBER 30
JUL 73
- NOV 73
AVERAGE
(1)
I
12)
I
(3)
(4)
I
(5)
I
(6)
I
(7)
I
(8)
I
C
I
I
C
I
I
CCI
I
CCI
C
I
I
C
I
I NON-BANK
I
REAL
FIRMS
I
TERM
I REVOLVING ITERM LOANS tI CONFIRMED I
OTHER
I FINANCIAL I ESTATE
TOTAL
LOANS
I
CREDITS IREV. CREDITSI
LINES
ICOMMITMENTS IINSTITUTIONSI MORTGAGES
AMT
IX CHGI AMT
I! CHGI AMT
I CHGI AMT
IS CHGI AMT IX CHGI AMT
IZ CHGI AMT
II CHGI AMT
12 CHGI
I
I
I
I
I
I
I
I
I
I
78.11
0.01
5.31
0.01
18.11
C.01
24.11
0.01 50.81 0.01
3.21 0.01
23.61
0.01
9.41
0.01
I
I
I
I
I
I
I
I
I
I
78.31
0.21
5.21 -0.61
18.61
2.91
23.81 -1.21
51.51
1.31
3.01 -8.31
24.81
5.21
9.41
0.91
I
I
I
I
I
I
I
I
I
I
77. | -1.21
5.01 -3.71
18.01 -3.41
23.01 -3.51 51.51
0.11
2.91 -3.81
25.11
0.91
9.01 -5.01
I
I
I
I
I
I
I
I
I
1
1
I
I
I
80.11
3.61
5.21
2.81 18.11
1.01
23.1.41 53.61 4.51
3.01 5.41 26.21 4.51
8.61 -4.31
I
I
I1
I
I
I
I
I
I
I
I
I
I
I
I
80.71
0.71
5.01 -2.51
18.81
3.41
23.81
2.11
53.91 0.31
2.91 -3.21
26.81
2.31
8.51 -1.21
I
I
I 11
I
I
I
I
I
I
I
I
I
1
11
I
I1
I
I1
I
I
I
I
I
I
I
I
I
I
I
I
78.91
0.81
5.11 -1.01
18.31
1.01
23.6
-0.31 52.31
1.51
3.01 -2.51
25.31
3.21
9.01 -2.41
NUMBER OF BANKS
1/
BANKS PARTICIPATING
IN THE MONTHLY LOAN COMMITMENT SURVEY
-
SELECTID WEEKLY REPORTING BANKS WITH TOTAL DEPOSITS OF $100
** NOTE:
MILLION OR MORE.
MINOR INCONSISTENCIES MAY OCCUR DUE TO ROUNDING. **
(9)
TOTAL
COMMITMENTS
AMT
IX CHG
I
111.11
0.0
112.51
1.2
111.41 -1.0
114.91
3.1
115.91
0.9
113.21
1.1
NOT FOR
QUOTATION OR
PUBLICATION
MONTHLY SURVEY OF EANK LOAN COMMITMENTS
AT SELECTED LARGE U.S. BANKS I/
(AS OF NOV. 30, 1973)
TABLE
2 - LOANS
UNDER COMMITMENT
(DOLLAR AMOUNTS IN BILLIONS)
(1)
I
CCI
FIRMS
I
I
TCTAL
I
AMT
I2 CHGI
I
I
JULY 31
65.51
0.01
I
I
AUGUST 31
65.31
-0.21
SEPTEMBER 30
67.21
2.81
I
I
(6)
(2)
I
(5)
I
(3)
I
(4)
I
(6)
(7)
I
I
(9)
I
Ct
I
C
I
I
C C
I
C
I
I
C
I
I NON-BANK
REAL
I
TOTAL
TERM
I REVOLVING ITERM LOANS Ct CONFIRMEL I
OTHER
I
FINANCIAL I
ESTATE
LOANS
LINES
ICOMMITMENTS IINSTITUTIONS I MORTGAGES
IREV. CREDITSI
LOANS
I
CREDITS
It CHG
AMT
I. CHLI AMT
It CHGI AMT
It CHGI AMT
I, CHCI AMT
1%f CHGI AMT
It CHGI AMT
I
Lh&GI AMT
I
I
I
I
I
I
I
I
I
I
0.0
97.8
16.61 0.01 17.11
0.01
16.51
0.01 15.81
0.01
0.O0
5.21
0.01
35.11
0.01
25.21
I
I
I
I
I
I
I
I
I
I
I
I
I
I
0.3
16.41 -0.71
16.41
4.21
98.2(
4.81 -7.CI
25.11 -0.3|
17.81 7.61 17.61 2.81 35.41
0.81
I
OCTOBER 31
NOVEMBER 30
JUL 73 - NOV 73
AVERAGE
66.21 -1.51
I
I
67.41
1.81
66.510.71
71
66.51
18.01
0.81
lb.41
4.51
36.31
2.71
26.01
3.51
4.91
0.91
17.01
I
17.91 -C.41
I
I
18.01 0.71
I
I
I
I
2.21
17.91
1F.61
19.41
1.31
4.11
36.51
37.41
0.51
2.41
24.71 -4.91
I
I
24.91
0.91
25.21 I
I
I
18.51
3.21
36.41
1.61
25.21 -(.21
5.01
I
1.51
I
5.11
2.CI
I
I
I
I
4.91
-c.61
I
3.71
I
17.51
2.51
I
I
17.11 -1.91
I
I
I
17.01
I
0.91
17.11
4.01 101.31
I
16.71
I
-1.91
I
17.11
I
I
16.81
3.1
1
100.41 -0.9
I
2.21 101.61
I
2.11
100.41
NUMBER CF BANKS
1/
/
*
BANKS PARTICIPATING
IN THE MONTHLY
LOAN COMMITMENT
SURVEY -
1.2
1
SELECTED WEEKLY REPORTING BANKS WITH TOTAL DEPOSITS OF $100 MILLION OR MORE.
LOANS UNDER COMMITMENTS ARE DEFINED AS ALL LOANS MADE UNDER COMMITMENTS CURRENTLY OF PREVIOUSLY IN FORCE, LESS REPAYMENTS OF THE PRINCIPAL.
THE REPORTED DATA ARE DISTORTED BY TAKEDOWNS OF LOAN COMMITMENTS BY OVERSEAS BRANCHES OF U.S. BANKS AND LOAN SALES.
NOTE: MINOR INCONSISTENCIES MAY OCCUR DUE TO ROUNDING.
0.9
-
NOT FOR
CLUOTTION OR
PUBLICATION
MONTHLY SURVEY OF BANK LOAN CCMMITMENTS
AT SELECTED LARCE U.S. BANKS I/
(AS OF NOV. 30, 1973)
TABLE 3 -
NEW COMMITMENTS
(DOLLAR AMOUNTS IN BILLINS)
(8)
(9)
(7)
I
(6)
I
(5
14)
(3)
I
12)
REAL
TOTAL
NON-BANK
I
C
I
C c I
CC
I
C E I
I
c CI
ESTATE
COMMITMENTS
I
FINANCIAL
OTHER
CONFIRMED I
I kEVOLVING ITERM LOANS &I
FIRMS
TERM
I
MORTGAGES
ICOMMITMENTS IINSTITUTIONSI
LINES
IEV. CREDITSI
CREDITS
I
TOTAL
I
LOANS
I! CHGI AMT It CHG
I CHGI AMT
I-_LHGI A,T
AMT
HGI I A HG
C GHGI
AT
HI I AMT
It CHGI AMT
CHGI AM
It
AMT
(1 )
I
C L
I
I
4.41 0.01
I
I
4.41 -0.11
I
I
JULY 31
AUGUST 31
SEPTEMBER
I
30
3.81-15.51
I
OCTOBER 31
4.41
I
16.71
I
I
I
I
0.81
0.01
I
0.91
I
11.71
I
I
0.71-22.71
I
I
0.81
I
I
0.91
I
12.31
I
I
I
2.01
9.51
I
I
I
I
23.81
1.1-
I
I
I
4.71
7.71
44.51
1.11
12.11
I
S
I
I
I
I2
2.21
0.91 9.61
I
JUL 73 - NOV 73
I
I
4.31
I
I
6.41
1.01
I
1.51-22.61
NOVEMBER 30
1.11
I
2.1
I
0.l6-22.51
1.01
5.0
I
0.01
I
I
1.11
I
1.81
I
0.01
2.il
I
I
I
I
1.91-13.31
I
I
I
0.51
I
0.81
1.51-24.41
28.51
I
I
I
I
1.71
17.91
0.91
17.61
I
I
25.81
I
I
I
I
1.91 6.91
I
0,91
I
I
) I
1.81 -4.7(
1.71
I
I
0.01
I
I
0.91
I
42.81
I
1.01
I
15.11
I
I
I
0.01
O..,
c.0
-8.21
I
0.81
-8.21
I
I
IN THE MONTHLY LOAN COMMITMENT
-
6.51 -1.1
I
0.81-36.11
5.31-18.2
I
1.01 33.81
I
I
6.31
17.7
I
0.4
(.81e -5.21
0.81-25.71
6.31
1
I
I
0.91 -3.51
1.01 -6.81
6.21 -0.3
SURVEY
SELECTED WEEKLY REPORTING BANKS WITH TOTAL DEPOSITS OF $100 MILLION OR MORE.
** NOTE:
0.0
I
I
I
I
C.71 18.41
NUMBER OF BANKS
BANKS PAFTICIPATING
I
6.61
O.b6-15.0
AVERAGE
1/
I
0.01
0.91I
I
7.71
(.91
I
1.21
1.2|I
MINOR INCONSISTENCIES MAY OCCUR DUE TO ROUNDINC. **
MONTHLY SURVEY OF BANK LOAN COMMITMENTS
AT SELECTED LARGE U.S. BANKS I/
(AS OF NOV. 30, 1973)
NOT FOR
QUOTATION OR
PUBLICATION
TABLE 4 -
UTILIZATION RATIO
I
(4)
I
C
I
I
RE EVOLVING ITERM LOANS 6
IREV. CREDITSI
CRFDITS
L ER CENT
PE
RECSCENT
PER
4P.6
59.3
(2)
CCI
TERM
LOANS
PER CENT
45.6
75.9
45.5
77.3
4L.6
46.5
78.1
50.5
61.2
31
45.2
77.6
50.6
61.0
31.5
NOVEMBER 30
45.5
78.2
5C.8
61.1
45.7
77.4
JULY 31
AUGUST
31
SEPTEMPLR 30
OCTOBER
JUL 73
- NOV 73
I
(3)
ccI
I
498
49.8
I
59.o
60
60.5
I
I
(a)
(9)
I
REAL
TOTAL
I COMMITMENTS
OTHER
FINANCIAL
ESTATE
MORTGAGES
ICOMMITMENTS IINSTITUTIONSI
ICENT
_I PER CENT
I PER CENT
I PER CENT
I PEI
MO
E
I
I
I
62.7
46.8
41.2
61.6
(5)
I
I
C
I
CONFIRMEU)
(1)
I
C
I
I
FIRMS
TOTAL
PER rENTL
I
I
/
LINES
PER
CO
P
CENT
33.1
(6)
C
I
I
(7)
NON-BANK
I
32.8
62.0
39.8
63.5
46.6
3a.5
63.1
40.5
65.6
47.6
2.2
40.0
66.1
46.6
31,6
63.5
39.0
66.9
46.7
32.5
62.5
40.1
64.9
46.9
I
AVERAGE
NUMBER
1/
('F BANKS
BANKS PART.CIPAI ING IN THE MONTHLY LOAN COMMITMENT SURVEY - SELECTED WEEKLY REPORTING BANKS WITH TOTAL DEPOSITS OF $100 MILLION OR MORE.
2/ THE UTILIZATION RATIO IS THE RATIO, EXPRESSED AS A PERCENTAGE, OF LOANS UNDER COMMITMENTS TO THE SUM OF UNUSED COMMITMENTS AND LOANS UNDER COMMITMENTS.
*
NOTE:
MINOR INCONSISTENCIES MAY OCCUR DUE TO ROUNDING.
IL
B SUPPLEMENTAL APPENDIX B
DEAMND DEPOSIT OW0ERSHIP SURVEY*
November 1973
Preliminary Demand Deposit Ownership Survey data indicate
that almost all .of the November increase in gross IPC demand deposits
(not seasonally adjusted) at weekly reporting banks occurred in deposits
of nonfinancial businesses (see Table 1). This recent growth in corporate balances--which was very strong relative to November increases in
previous survey years--was also the largest monthly increase in such
deposits since June. It is possible that in November these balances
were buoyed by funds raised through corporate sales of foreign exchange.
In contrast to the growth in corporate accounts, there was
what appeared to be a contra-seasonal decline in deposits of financial
businesses. This decline, however, followed a substantial increase in
such deposits in October, and for the October-November period, the net
expansion in financial business deposits was close to the average increase in the three earlier years. I/ Consumer deposits in November
showed a very moderate expansion of $200 million at the weekly reporters,
close to the average November increase in 1970-72.
A small rise in foreign held IPC balances in November brought
the total growth in such deposits to $700 million for the first eleven
months of 1973. The growth in foreign balances in 1973 contrasts sharply
with earlier years when there was almost no variation in the level of
these deposits. It should be noted, moreover, that since the DDOS
includes only deposits of individuals, partnerships and corporations,
the foreign ownership category focuses exclusively on nonbank, nongovernment institutions and individuals domiciled outside of the United
States. Hence, movements in deposits held by foreign central banks in
Federal Reserve Banks and by foreign commercial banks in U.S. banks--such
as occurred in November and December and contributed to the'growth of M,
in those months--are not directly reflected in DDOS figures.
I/ Because of the relative volatility of financial business deposits, it
is difficult to interpret closely month-to-month fluctuations in the
series. However, over the last three years, the net increase in such
deposits at large banks has been slower than the growth in other
IPC deposit categories, leading to a reduction in the percentage of
total IPC deposits held by these institutions.
*
Prepared by Martha Scanlon, Economist, Banking Section, Division of
Research and Statistics.
B-
2
Table I
CHANGES IN THE LEVELS OF GROSS IPC DEMAND DEPOSITS
BY OWNERSHIP CATEGORY, WEEKLY REPORTING BANKS
(Billions of dollars, not seasonally adjusted)
Month/
Year
Jan.
Feb.
March
April
May
June
July
August
Sept.
October
Nov.
Dec.
FINANCIAL BUSINESS
1970 1971 1972 1973
.1
-. 9
.7
-. 2
.4
-. 1
.4
0
.3
0
-. 4
.3
.1
-. 8
.5
.1
-. 1
.7
0
-. 7
.3
.3
-. 6
.4
.3
-. 7
.1
.4
.4
.2
.3
-. 7
.1
0
-. 5
.4
.6
-. 5
.2
.5
-. 2
NONFINANCIAL BUSINESS
1970 1971 1972 1973
Jan.
Feb.
March
April
May
June
July
August
Sept.
October
Nov.
Dec.
0
-. 2
0
0
-. 1
0
0
0
0
0
0
0
0
-. 1
0
0
0
.1
-. 1
0
.1
0
.1
0
0
0
0
0
0
0
1
1973
0
.2
0
.2
.1
0
.1
0
0
.0
.1
.4
-. 6
.8
1.4
-1.2
.4
.4
-. 5
.3
0
.1
0
.7
-1.0
.6
2.0
-1.6
.4
.4
-. 2
.3
0
.4
.5
.6
-1.5
.2
2.1
-1.7
.2
.2
0
-. 1
.1
.2
-. 1
0
1.0
-. 1
.2
2.2
1970
1971
1972
1973
1970 1971
1972
1973
0
-. 5
.6
.3
-. 4
.1
0
0
.2
0
-. 2
.5
-. 6
-. 4
.5
-. 1
.1
.5
0
0
.1
-.1
-. 2
.3
.0
-. 2
.4
0
.1
.4
.2
-. 2
-. 2
0
0
-. 1
.3
-. 4
.4
.1
.1
-1.0
-2.8
1.6
2.4
-2.4
2.5
.4
-3.0
2.4
.8
.3
4.1
-1.2
-3.1
1.6
3.2
-3.2
2.2
2.0
-2.2
2.3
1.4
1.4
5.1
-. 2
-5.1
-1.1
2.6
-2.4
2.1
1.5
-2.6
1.7
1.7
1.4
.3
0
.6
-. 3
.2
2 .2
TOTAL
ALL OTHER
1972
1971
-1.3
-2.8
-1.2
.3
-. 2
1.6
.3
-1.6
1.1
1.0
1.3
1973
-1.7
-2.2
.2
.9
-. 5
1.3
.5
-1.3
1.2
.9
.3
2.8
FOREIGN
1970
1.8
-1.4
.5
1.0
-. 8
1.1
1.3
-1.1
1.5
1.0
.5
3.9
CONSUMER
1970 1971 1972
.3
-1.5
2.9
-. 3
.3
4.5
, ,,
C - 1
SUPPLEMENTAL APPENDIX C *
THE PROPOSED WINDFALL TAX ON OIL
The 'windfall profits" tax on oil recently proposed by the
Administration (but not yet presented to Congress) is a progressive rate
excise tax to be paid by the producer on the sale of domestic crude oil.
The excise would be applied to all domestic crude oil sold above the controlled posted base price of December 1, 1973, at marginal rates ranging
from 0 to 85 per cent, depending on the amount of price rise above the
base level, as shown in Table 1. The same tax treatment applies whether or
TABLE I
Proposed Tax Schedule for Crude Oil
Segments of market
price
Average
tax rate 1/
After
Tax rate applicable
Initial
3-yrs.
to seament
tr
In per cent
1.
Up to posted base price,
as of December 1, 1973 2/
2.
Next $0.50 initially, but gradually
increasing to next $3.00 over a
36-month period 3/
3.
Next $0.25 above segment 2
4.
Next $0.35
5.
Next $0.60
4.8
6.
Next $0.80
10.4
7.
All portions of price above segment 6
36.5
36.5-
7.5
/
1.2 4 /
15.2--
1/ Measured at top of the brackets and assuming a price of $10 for top
bracket rate.
2/ Approximately $4.00, with some variation according to location of well
and quality.
3/ The width of this zero rate bracket rises monthly from the initial
$0.50 to $3.00 after 36 months. At six month intervals the width is
$0.64, $0.88, $1.20, $1.62, $2.21, and $3.00. All other bracket
widths remain the same over time.
4/ Assumes a price of $10.00 for illustrative purposes.
*
Prepared by David Reaume and Helmut Wendel, Government Finance Section,
Division of Research and Statistics.
C-
2
not the oil produced is now subject to price control. Posted base prices
vary somewhat according to field location and oil quality but they
averaged about $4.02 per barrel on December 1, 1973. For purposes of calculating percentage depletion and income taxes, the excise is deducted
from the sales price. All calculations presented in this memorandum
assumes a posted base price of $4.00 per barrel.
The tax bite is designed to decline over a period of three years
and the tax is proposed to terminate completely after five years. The
five-year termination feature, however, is particularly conjectural,
since excise taxes in the past have frequently been extended beyond their
termination dates. The three-year tax reduction schedule is accomplished
by increasing the width of the initial tax bracket (the bracket with a
zero marginal tax rate) from $.50 initially to $3.00 after 36 months.
All other brackets maintain their initial width so that, for example,
after three years the initial bracket above the base price will run from
$0 to $3 and the second bracket from $3.00 to $3.25. During the final
24 months of the five-year period the schedule will remain unchanged.
YIELD
Table 2 presents a representative sample of prices to the buyer
and prices obtained by the producer net of excise tax.
prices)
(market
TABLE 2
Dollar Effect of Proposed Tax At
Different Market Prices*
Market price
(1)
*
Uindfall tax
in 1974
(2)
After tax price obtained by producer
in 1979
in 1977
in 1974
(3)
(4)
(5)
$12.00
11.00
10.00
9.00
$5.35
4.50
3.65
2.80
$6.65
6.50
6.35
6.20
$8.78
8.63
8.4G
8.32
$12.00
11.00
10.00
9.00
8.00
1.95
6.05
7.78
8.00
7.00
6.00
1.10
.43
5.90
5.57
7.00
6.00
7.00
6.00
Assumes posted base price of $4.00 per barrel.
Because of the steep initial marginal tax rate (85%) on market prices over
$6.50 per barrel, after tax prices rise relatively little in the shortrun even with a market price rise from $6.00 to $12.00. Given current
levels of production of crude oil, one can estimate the revenue yield of
the proposed tax in the first year. At a market price of $7.00 per
.f the
barrel, the tax would initially yield roughly $4.0 billion.
price were $10.00 per barrel--a price now frequently quoted for oil not
subject to price control--the first year yield would approach $14.0 billion. These estimates apply only to the excise tax yield and they need
C-3
to be reduced by about 38 per cent (after allowance for depletion) to
obtain the net tax yield after deducting foregone corporate profits taxes.
INCENTIVES
The timed fade out of the excise tax generates an increasing
price to the producer over the fade-out period. Under certain assumptions
this could discourage the marketing of crude oil while the tax is high,
but under other assumptions there would be no serious disincentives to
oil production in the short run.
For instance, if the longer run equili-
brium price of oil is expected to be $7.00 per barrel, but if the market
price for all oil is allowed to rise to $10 in the short run, producers
would be obtaining $6.35 initially after the excise tax is imposed and
they would expect to obtain $7.00 after three years. Assuming constant
production costs of $2.50 a barrel, and allowing for depletion allowances
and income taxes, the rate of return on holding oil in the ground, with
these price assumptions, would amount to 4.5 per cent per year. This
relatively low yield should not be enough to cause producers to keep oil
off the market in the short run, especially since some holding costs are
involved and also since profit margins are quite large at a net price of
$6.35.
Incentives to exploit oil sources involving high costs of
exploration and extraction are also of concern. It is frequently assumed
that a two to three year development period is needed before production
gets underway. If this assumption is valid, a temporary excise tax need
not delay or discourage the development of new high cost reserves. As
for oil wells that are now being readied for production, one can assume
that the decision to activate them was based on a much lower price outlook of around $4.00.
The rate-of-return analysis presented above was based on the
assumption that the per barrel market price of crude oil will fall from
$10.00 to $7.00 over the three-year tax reduction period. If instead
the price does not fall, but remains at $10.00 per barrel, a producer
who holds back his oil now for sale in three years and thus foregoes
profit today, will find that the foregone profit yields him an attractive
annual rate of return of 14 per cent per year over the three-year period
that the-oil,is'held (assuming there are no storage costs attached to
holding oil in the ground, and also that extraction costs remain constant).
Alternatively, if the price were to be established at $7.00 in the near
term as a result of controls and were expected to remain at this level
in the long run as supply and demand adjust to higher average prices,
the annual yield on holding back oil over the three-year period would be
8.4 per cent.
Clearly, the incentive effects of this proposal are heavily
dependent upon one's assumptions as to the behavior of prices over the
fade-out period. Under some assumptions the proposed tax plan*would'ivolve
severe disincentives to the short run marketing of crude oil.
@FedFRASER