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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 June 25, SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System 1982 TABLE OF CONTENTS THE DOMESTIC NONFINANCIAL ECONOMY New Car Sales . . . . . . . . . . . . . Recent Housing Market Developments . . . . . . . . . . . . . . . . . . . . . . THE DOMESTIC FINANCIAL ECONOMY Federal Government Debt Ceiling . . . . . . . . . . . . . . TABLES: Monetary Aggregates . . . . . . . . . . . . . . . . . Commercial Bank Credit and Short- and IntermediateTerm Business Credit . . . . . . . . . . . . . . . . Selected Financial Market Quotations . . . . . . . . . SUPPLEMENTAL NOTES New Car Sales Sales of new cars assembled in North America in the mid-June ten-day period dropped sharply to a 4.0 million unit annual rate from the 6.1 million unit rate in the first third of June and the 6.4 million unit rate in May. The sales rate for the first two thirds of June, at 5.1 million units a year, was about a fifth below the rate in May and 7 percent below the 5.5 million unit rate in April. The sharp drop in sales in the mid-June period probably reflects the impact of the ending of a number of major purchase-incentive programs that had stimulated purchases in May--including the termination on June 6 of Ford Motor Company's cash rebates and extended warranties on several models, the termination on May 31 of a rebate program on one model by Chrysler Motors Corporation,and the ending at the end of May of General Motors' reduction of interest rates on credit-financed purchases. (Although the latter program ended May 31, the program reportedly was extended for some purchases that were not completed by the end of the month because of delivery delays.) Recent Housing Market Developments Sales of existing houses in May were at about a 1.91 million unit annual rate, the same rate as in April. The April-May rate was slightly below the 1.92 million rate in the fourth quarter of 1981--the lowest rate in any quarter since the fourth quarter of 1970. New mortgage lending commitments at insured savings and loan associations edged down further in May and were 8-1/2 percent below their recent peak in February, but still above their depressed level last fall. -1- Outstanding commitments (including loans in process) at all operating S&Ls also edged down further in May and were at their lowest level since last November. Federal Government Debt Ceiling The Senate, following adoption by the Congress of the first concurrent resolution on the budget for fiscal year 1983, passed legislation to implement the provisions contained in that resolution to increase the temporary ceiling on debt subject to limit. The House, under its procedure, took this action earlier when it passed the budget resolution containing that provision. These actions increase the debt ceiling by $63.3 billion to $1,143 billion through September 30, 1982. -2a- Corrigendum In part II, page IV-24, line 9, change 2.8 to read 0.4. (Based MONETARY AGGREGATES on seasonally adjusted data unless otherwise noted) 1981 1 1982 QIV. '81 to 03 04 01 Mar. Apr. May May '82 --Percentage change at annual rates-Money stock measures 1. Ml 2. M2 3. M3 10.4 9.8 8.7 Selected components 4. Currency 2.7 11.2 11.3 10.7 10.0 11.9 -2.1 10.5 10.7 4.7 4.3 7.9 4.8 11.5 10.5 -2.1 -2.8 5. Demand deposits -7.5 -0.2 -0.5 -8.2 0.0 6. Other checkable deposits 21.2 27.6 48.9 27.2 40.6 -21.7 33.9 7. M2 minus M1 (8+9+10+13) 10.9 9.9 9.5 13.9 9.7 14.4 10.9 14.9 -44.1 63.6 2.8 -72.6 68.3 30.2 91.5 7.8 -22.7 24.3 1.2 -22.9 11.4 74.2 10.3 -11.9 20.8 1.5 -11.7 6.6 33.8 9.4 8.7 9.7 1.6 10.2 -1.5 24.6 21.4 13.6 25.1 5.8 1.9 7.3 20.4 20.1 -0.7 28.8 4.7 0.0 6.5 17.8 13.5 -1.5 19.9 10.9 3.2 13.9 27.4 13.6 5.5 17.1 4.3 5.7 3.8 26.1 11.2 3.3 11.8 21.4 12.1 30.6 32.4 22.2 3.5 0.2 19.5 8.9 6.1 21.6 17.5 14.8 29.7 17.3 17.9 14.5 15.5 20.0 -4.1 13.4 12.5 17.4 69.0 -30.8 132.8 0.0 -2.5 -29.9 39.3 -36.9 0.0 102.9 49.5 -63.2 6.9 -13.8 2 Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares,NSA Commercial banks savings deposits small time deposits Thrift institutions savings deposits small time deposits 16. 20. 21. M3 minus M2 (17+20+21) Large time deposits 3 at commercial banks, net at thrift institutions Institutions-only money market mutual fund shares, NSA Term RPs, NSA -- Average monthly change in billions of dollars-MEMORANDA: 22. Managed liabilities at commercial 4 banks (23+24) 4 23. Large time deposits, gross 4 Nondeposit funds 24. 25. Net due to related foreign 4 institutions, NSA 4 Other ,5 26. 27. U.S. government deposits at commercial 6 banks 6.0 7.4 -1.4 0.2 -0.2 0.4 0.4 2.7 -2.3 1.0 4.8 -3.8 1.0 -2.4 -2.2 2.7 -2.2 -0.1 0.8 1.9 -0.7 2.7 2.4 0.3 4.8 6.7 -1.9 -3.6 -0.2 0.9 -0.4 -1.8 -0.1 -4.6 -4.0 1.8 -3.3 2.8 -6.1 0.6 Dollar amounts shown under memoranda for 1. Quarterly growth rates are computed on a quarterly average basis. quarterly changes are calculated on an end-month-of-quarter basis. 2. Overnight and continuing contract RPs issued to the nonbank public by commercial banks, net of amounts held by money market mutual funds, plus overnight Eurodollar deposits issued by Caribbean branches of U.S. member banks to U.S. nonbank customers. Excludes retail RPs, which are in the small time deposit components. 3. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 4. Adjusted for shifts of assets and liabilities to International Banking Facilities (IBFs) which affected flows from December 1981 to April 1982. 5. Consists of borrowings from other than commercial banks in the form of federal funds purchased, securities sold under agreements to repurchase and other liabilities for borrowed money (including borrowings from the Federal Reserve and unaffiliated foreign banks), loans sold to affiliates, loan RPs and other minor items. Data are partially estimated. Consists of Treasury demand deposits at commercial banks and Treasury note balances. -4COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)1 1981 Q3 1982 Q4 Q1 Mar. Apr. May QIV '81 to May '82 -- Commercial Bank Credit-1. 2. Total loans and investments 2 3 at banks , 3. Treasury securities 4. Other securities 2 , 6.4 10.1 8.5 9.3 8.6 9.54 .5 Investments 6.8 4.8 5.7 -. 3 10.7 2.1 5.6 -3.1 8.6 -7.8 11.5 -9.4 23.1 7.2 11.2 2.8 4.1 4.6 4.6 4.1 9.1 3 -12.0 6.9 11.6 11.1 8.9 11.0 10.8 17.9 9.2 16.8 14.8 10.9 18.8 15.6 -36.2 58.6 -18.3 5.8 .0 -17.2 -1.9 5. Total loans 6. Business 7. Security loans 8. Real estate loans 8.0 7.3 7.8 7.4 5.7 6.5 7.7 9. Consumer loans 4.4 4.1 2.8 4.5 3.2 3.2 3.6 loans 2 , 3 -- Short10. Total short- and intermediateterm business credit (sum of lines 14, 15 and 16) Business loans net of bankers 3 acceptances Commercial paper issued by non- and Intermediate-Term Business Credit-- 23.3 13.8 15.3 15.6 9.6 n.a. n.a. 19.7 9.3 16.5 12.9 8.9 19.9 15.4 financial firms 5 57.9 21.3 30.0 38.9 14.7 33.1 29.2 13. Sum of line 11 & 12 24.1 10.8 18.2 16.2 9.7 21.7 17.0 14. Line 25.9 14.0 18.5 18.2 10.2 22.8 18.0 11. 12. 13 plus loans at foreign branches 6 15. Finance company loans to business 7 14.7 7.6 1.0 .0 -4.5 n.a. n.a. 16. Total bankers acceptances outstanding 7 16.6 20.9 11.7 15.5 25.5 n.a. n.a. 1. Average of Wednesdays for domestically chartered banks and average of current and preceding ends of months for foreign-related institutions. 2. Loans include outstanding amounts of loans reported as sold outright to a bank's own foreign branches, unconsolidated nonbank affiliates of the bank, the bank's holding company (if not a bank), and unconsolidated nonbank subsidiaries of the holding company. 3. Adjusted for shifts of assets and liabilities to International Banking Facilities (IBFs) which affected flows from December 1981 to April 1982. 4. Growth of bank credit from the FOMC's December-January base through May 1982, not adjusted for shifts of assets from domestic offices to IBFs, was at an annual rate of 8.5 percent. Adjusted for such shifts after January, growth over this period was 9.7 percent. 5. Average of Wednesdays. 6. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 7. Based on average of current and preceding ends of month. n.a.--not available. -5SELECTED FINANCIAL MARKET QUOTATIONS 1 (Percent) - 1981 Highs 1982 Feb. Highs FOMC May 18 June 24 Change from: Feb. FOMC Highs May 18 Short-term rates Federal funds 2 20.06 15.61 14.67 14.17 -1.44 -.50 Treasury bills 3-month 6-month 1-year 17.01 15.93 15.21 14.57 14.36 13.55 12.23 12.25 12.04 12.99 13.30 13.03 -1.58 -1.06 -.52 .76 1.05 .99 Commercial paper 1-month 3-month 18.63 18.29 15.73 15.61 13.95 13.52 14.32 14.46 -1.41 -1.15 .37 .94 Large negotiable CDs 3 1-month 3-month 6-month 18.90 19.01 18.50 15.94 16.14 16.18 14.16 14.00 13.87 14.57 15.12 15.46 -1.37 -1.02 -. 72 .41 1.12 1.59 Eurodollar deposits 2 1-month 3-month 19.80 19.56 16.36 16.53 14.89 14.58 15.36 16.09 -1.00 -.44 .47 1.51 21.50 17.00 16.50 16.50 -.50 14.46 14.20 14.18 14.02 11.86 12.26 13.48 13.60 -.70 -.42 1.62 1.34 U.S. Treasury (constant maturity) 16.59 3-year 10-year 15.84 30-year 15.20 15.16 14.95 14.80 13.79 13.60 13.26 14.98 14.71 14.20 -.18 -.24 -.60 1.19 1.11 .94 Municipal (Bond Buyer) 13.30 13.44 11.824 12.624 -.82 .80 Corporate--Aaa utility Recently offered 17.72 16.34 16.20p 5 -.14 .96 18.63 1981 17.66 Bank prime rate asury bill futures June 1982 contract Dec. 1982 contract Intermediate- and longterm rates S&L fixed-rate mortgage commitment -Stock Prices Dow-Jones Industrial NYSE Composite 'EX Composite Highs 1,024.05 79.14 380.36 16.631. 1982 FOMC May 18 840.85 66.84 273.81 185.81 I 16.71 June 24 .08 -.95 Percent change from: FOMC 1981 Mar 18 Highs 810.41 -20.9 63.12 -20.2 253.82 -33.3 -23.4 171.12 4. One-day quotes for preceding -3.6 -5.6 -7.3 -7.9 Thursday. SDAQ (OTC) 223.47 ._-vne-day quotes except as noted. 2. Averages for statement week closest to date shown. 5. One-day quotes for preceding Friday. e--estimated. p--preliminary, 3. Secondary market.
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