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 III - FOMC November 9, 1989 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS Page THE DOMESTIC NONFINANCIAL ECONOMY Producer prices . . . . . . . . . . . Table Recent changes in producer prices . . THE FINANCIAL ECONOMY Tables Monetary aggregates . . . . . . . . . Commercial bank credit and short- and intermediate-term business credit Selected financial market quotations . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . 4 5 THE INTERNATIONAL ECONOMY U.S. international financial transactions Table Summary of U.S. international transactions 7 SUPPLEMENTAL NOTES DOMESTIC NONFINANCIAL ECONOMY Producer Prices The producer price index for finished goods rose 0.4 percent in October, boosted by a 1.4 percent jump in food prices. The food price increase reflected large price hikes for pork, dairy products, and fresh and dried vegetables. Finished energy prices rose 0.2 percent, as a 2-1/4 percent increase in gasoline prices was partially offset by a 2-1/2 percent decline in natural gas prices. Excluding food and energy, finished goods prices rose just 0.1 percent, held down by a 1.4 percent decline in prices of passenger cars. Excluding the effects of passenger cars, the PPI excluding food and energy rose 0.2 percent. The decline in auto prices comes on the heels of a 3.8 percent increase in September; this recent pattern reflects problems with seasonal adjustment at the end of the model year. Over the past twelve months, car prices have risen 1.6 percent. Intermediate materials prices excluding food and energy rose only 0.1 percent in October and have been about unchanged since March. In October, prices continued to fall for a number of materials, including paper, steel mill products, and plastic resins and materials. prices rose sharply for plywood and softwood lumber. However, RECENT CHANGES IN PRODUCER PRICES (Percentage change; based on seasonally adjusted data)1 Relative importance Dec. 1988 1987 1988 1989 Q2 Q1 Q3 -Annual rate100. ' 25.8 8.8 65.3 39.6 25.8 2.2 -.2 11.2 2.1 2.7 1.3 4.0 5.7 -3.6 4.3 4.8 3.6 10.2 13.1 41.0 5.1 5.4 4.6 Intermediate materials 2 Excluding food and energy 94.8 83.4 5.4 5.2 5.3 7.2 8.7 5.5 Crude food materials Crude energy Other crude materials 43.8 36.9 19.3 1.8 10.7 22.6 14.2 -9.5 7.5 16.9 48.3 10.3 Finished goods Consumer foods Consumer energy Other finished goods Other consumer goods Capital equipment 5.8 -1.3 31.8 5.1 5.7 4.5 2.9 .3 -17.8 23.6 -9.3 Aug. 1989 Sept. Oct. ---Monthly rate--- -.3 -1.3 -16.8 3.3 2.6 4.8 -.4 .3 -7.3 .5 .5 .3 .9 -.6 6.5 .7 .6 1.0 .4 1.4 .2 .1 .2 -.3 -1.1 -.7 -.3 -.1 .4 .1 .1 .1 -2.2 -6.5 -.6 1.7 -6.7 1.2 -.8 3.5 .3 -.6 .5 .3 1. Changes are from final month of preceding period to final month of period indicated. 2. Excludes materials for food manufacturing and animal feeds. RECENT CHANGES IN PRODUCER PRICES - RELATIVE CONTRIBUTION (Percentage change; based on seasonally adjusted data) Relative importance Dec. 1988 1987 1988 1989 Q2 Ql Q3 -Annual rate- Finished goods Consumer foods Consumer energy Other finished goods Other consumer goods Capital equipment Aug. 1989 Sept. Oct. ---Monthly rate--- 100.0 25.8 8.8 65.3 39.6 25.8 2.2 -.1 .9 1.4 1.0 .3 4.0 1.5 -.3 2.8 1.9 .9 10.2 3.3 3.2 3.3 2.1 1.2 5.8 -.3 2.7 3.2 2.2 1.1 -.3 -.3 -1.8 2.1 1.0 1.2 -.4 .1 -.7 .3 .2 .1 .9 -.2 .6 .4 .2 .3 .4 .3 .0 .1 .1 -.1 6.0 .7 -.2 .0 .2 .0 .2 .3 .1 .2 .5 -.8 .0 .0 .2 -.1 -.1 .1 Memorandum: Passenger cars Light trucks 1. Data may not add due to rounding. 2. Changes are from final month of preceding period to final month of period indicated. -3MONETARY AGGREGATES (based on seasonally adjusted data unless otherwise noted) 19881' 1989 2 1989 Q3 1989 Aug 1989 Sep Growth 1989 04 88Oct pe Oct 89pe ------------ Percent change at annual rates--------------------1. 2. 3. Ml M2 M3 4.3 5.2 6.3 -5.6 1.2 2.9 1.7 7.3 4.7 0.8 7.2 2.2 5.7 7.5 0.9 10 8 4 0 4N 34 Levels bil. * Sep 89 ------------ Percent change at annual rates-----------Selected components 4. 5. 6. Ml-A 2.5 Currency Demand deposits 7. Other checkable deposits 8. 11. 12. 13. 14. 15. 16. Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, plus MMDAs, NSA, Small time deposits Thrift institutions Savings deposits, SA, plus MMOAs, NSA I Small time deposits 17. M3 minus M24 Large time deposits At commercial banks, net 5 At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA 1.4 2.2 1.7 9 503.9 4.9 -0.9 2 14 219.3 277.4 4.1 -8.7 7.7 -9.8 2.3 5.3 13.1 13 277.5 3.5 9.2 9.4 8.1 7 2374.6 20 72.1 -5.7 -23.7 7.4 6.9 1.4 14.7 4.6 -4.3 11.7 21.0 5.4 -14.9 29.0 -1.1 -24.6 14.0 3.7 -0.3 -1.9 8.1 -1.2 M2 minus M12 9. 10. -3.3 0.5 -5.6 -41.8 -43.3 36.6 7.1 3.7 10.7 3.8 -6.0 9.5 47.6 11.1 9.1 -4.3 -15.4 -23.2 11.0 12.2 8.8 14.0 17.8 5.8 -1.7 1.8 -9.5 -8.2 -2.1 -21.9 -12.4 -5.1 -30.0 -0.8 14.5 11.2 12.2 2.5 -6.7 34.1 -27.0 -14.7 29.3 -51.8 -25.3 -17.9 -32.1 -57.8 10.2 14.0 7.8 3.1 1.4 4.1 39.1 7.6 10.2 5.0 -0.6 4.1 -3.3 294.8 1033.7 523.2 510.5 971.9 350.2 621.7 -9 857.4 563.3 395.3 167.9 -5 -30 -54 99.1 116.5 92.9 ---- Average monthly change in billions of dollars---6 MEMORANDA: 24. Managed liabilities at commercial banks (25+26) 25. Large time deposits, gross 26. Nondeposit funds 27. Net due to related foreign institutions, SA 7 Other 28. 29. U.S. government deposits at commercial 8 banks 9.0 4.0 5.0 3.4 -0.2 3.7 0.5 -1.1 1.6 5.9 -2.4 8.3 -0.1 5.1 0.6 3.1 -1.8 3.4 0.4 8.0 1 10 9.7 228.5 2.4 -1.2 0.2 0.9 -4 23.8 696.2 458.1 238.1 1. Amounts shown are from fourth quarter to fourth quarter. 2. Nontransactions HZ is seasonally adjusted as a whole. 3. Commercial bank savings deposits excluding HNDAs grew during September and October at rates of 7.9 percent and 6 percent, respectively. At thrift institutions, savings deposits excluding MMDAs grew during September and October at rates of 3.8 percent and 3 percent, respectively. 4. The non-MH component of 3 is seasonally adjusted as a whole. 5. Net of large denomination time dposits held by money market mutual funds and thrift institutions. 6. Dollar amounts shown under memoranda are calculated on an and-month-of-quarter basis. 7. Consists of borrowing 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 borrowing from the Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. 8. Consists of Treasury demand deposits and note balances at commercial banks. pe - preliminary estimate -4COMMERCIAL BANK CREDIT AND,SHORT- AND INTERDMEDIATE-TERM BUSINESS CREDIT 1 (Percentage changes at annual rates, based on seasonally adjusted data) 1987:q4 to 19 88:Q4 1989 Q2 Q3 ------------------- Aug. Sept. Oct.p Levels bil.$ Oct.p Commercial Bank Credit - -------------------- 1. Total loans and securities at banks 7.6 5.2 8.0 7.7 6.2 14.5 2574.0 2. 4.8 .7 1.6 1.1 4.7 26.1 573.9 7.3 5.1 5.4 7.1 7.0 39.3 391.2 -8.2 -6.2 -11.7 .7 -1.3 182.7 8.5 6.5 9.9 9.6 6.6 11.1 2000.0 Business loans 6.8 4.6 8.3 9.9 .4 7.7 640.9 Security loans 5.7 -21.1 -6.8 -17.8 21.1 44.3 42.1 1 4.0 11.7 13.7 14.9 12.9 11.4 740.8 Securities 3. U.S. government securities 4. Other securities 5. 6. .5 Total loans 8. Real estate loans 9. Consumer loans 8.5 6.1 6.1 7.5 9.1 6.8 374.2 Other loans -.4 1.2 11.6 -1.2 -4.2 21.8 202.0 10. --- 11. 12. Business loans net of bankers acceptances Sum of lines 11 & 12 Commercial paper issued by nonfinancial firms Bankers acceptances: related 17. 4.6 7.9 9.2 -76.7 -.2 -192.8 6.3 636.6 30.3 32.8 -83.3 5.6 4.1 5.7 15.5 38.2 10.3 -9.7 10.5 5.1 3.4 .0 3.4 -3.4 n.a. -. 1 n.a. 817.1 n.a. 256.3' n.a. 1073.4' 8.6 Sum of lines 13 & 14 16. 6.9 7.6 Loans at foreign branches 15. ------ Short- and Intermediate-Term Business Credit ---------- -7.5 41.0 -51.7 20.0 4.4 656.6 -4.7 126.7 2.9 783.3 U.S. trade Line 15 plus bankers acceptances: U.S. trade related 18. Finance company loans to business 3 19. Total short- and intermediateterm business credit (sum of lines 17 & 18) -6.8 7.8 12.3 8.9 8.0 .0 10.4 4.9 3.2 14.7 14.1 11.0 11.4 7.1 5.1 18.1 4.3 35.65 1. Average of Wednesdays. 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Based on average of data for current and preceding ends of month. 4. Consists of acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage of goods. 5. September data. p--preliminary. n.a.--not available SELECTED FINANCIAL MARKET QUOTATIONS 1/ (percent) 1987 1989 Ctge from: ch Jul-Aug FOC laws Oct 3 His 2/ Oct 16 Nov 8 mr 89 Jul-Aug FC Higs lows Oct 3 Short-term rates Federal fl ds 3/ 7.59 1-year 9.10 8.69 -1.16 -0.28 -0.41 9.09 9.11 9.05 7.63 7.34 7.10 7.78 7.88 7.81 7.69 7.51 7.27 -1.40 -1.60 -1.78 0.06 0.17 0.17 -0.09 -0.37 -0.51 4 10.05 8.52 8.92 8.50 -1.55 -0.02 8.24 8.84 8.39 -1.76 0.15 6-nth 8.97 6. 7A Treasury bills 4/ 3-nth 9.85 -0.42 -0.45 7.74 CcEmrcial paper 1-mnth 3-~Dnth 8.65 10.15 Largenetiable CD's 4/ 8.45 8.26 8.12 8.89 8.91 8.5 8.46 8.42 8.25 -1.61 9.12 10.07 10.32 10.08 Erodollar deposits 5/ 1-conth 3-month 8.00 9.06 10.19 10.50 8.44 8.31 8.94 9.00 Bark prime rate 9.25 11.50 10.50 U.S. Treasury (constant maturity) 9.52 3-year 10-year 10.23 30-year 10.24 9.88 9.53 9.31 Mmnicipal reverue 6/ (Bond Buyer index) 9.59 Corporate-A utility Recently offeed -0.43 -1.83 0.01 0.16 0.13 8.50 8.50 -1.69 -2.00 0.06 0.19 -0.44 -0.50 10.50 10.50 -1.00 0.00 0.00 7.51 7.74 7.83 8.38 8.23 8.19 7.83 7.8 -2.05 -1.66 -1.43 0.32 0.13 0.05 -0.55 -0.36 -0.31 7.95 7.17 7.59 7.45 -0.50 0.28 -0.14 11.50 10.47 9.45 9.48 9.31 -1.16 -0.14 -0.17 11.58 8.45 11.22 9.31 68 8.60 10.16 8.70 -1.90 0.52 -0.60 Intermediate- and 1ong-term rates 3FBmxrtgae rates 7/ Fie, 1-year AIR, -ear Higs Lows FOC Oct 3 -0.34 0.15 Percent change from: 1989 1987 0.14 :982 -1.40 -0.76 -0.05 8.55 Nov 8 1987 MHi 1987 Lows -3.64 . 1.56 -0.27 50.8 FOC Oct 3 Stock prices Da-4Jones Irhustrial 2722.42 SE Copoite 187.99 SC ite 01 NASDAQ (OI) 55.26 173.74 54.56 2623.36 125.91 196.84 1848 231.9 393.02 370.72 291.88 477.28 454.05 1/ One-day quotes eoept as noted. 4/ 2/ Last business day prior to stock market decline on Monday 5/ Oct. 19, 1987. 3/ Avere fbr two-week reserve mainteace period closest to 6/ date m except Feb. low vich is the average to the statsoemt week ended Feb. 10, 1988. Last observation is average to date 7/ for maintenance period ending November 15, 1989. -4.76 -4.6 59. .7 55.56 87 Secondary market. Bid rates fbr Bwodollar deposits at 11 a.m. Loron time. Based on coe-day ahulrday quotes ari ftturesearicet index dhages. Qiotes fbr week eandirg Friday closest to date saown. U.S. International Financial Transactions Recently released data on U.S. international capital transactions for September are shown in the Summary of U.S. International Transactions Table. Private capital flows through banking and private securities transactions were broadly similar to those for August discussed in the Greenbook. Private foreign net purchases of Treasury obligations in September (line 3) were roughly half those recorded in August, a decline consistent with the pattern of Treasury offerings. Foreign official reserve assets in the United States (line 4) declined $3-1/2 billion in September as the G-10 countries as a group made little change to their holdings in the United States, while other countries, particularly Taiwan, reduced their reserve positions in the United States. -7SUMMARY OF U.S. INTERNATIONAL TRANSACTIONS (Billions of dollars) 1088 July 1989 Aus. Sept, -0.9 8.3 .8 1989 17 year 03 0a 01 47.5 21.3 -0.4 9.6 -1.4 36.4 15.5 5.8 3.4 26.4 26.9 6.4 9.0 16.8 0.4 1.3 -6.9 -11.8 -1.9 -7.3 20.6 3.5 47.7 Private Capital Banks 1. Change in net foreign positions of banking offices in the U.S. (+ - inflow) 19 Year 40.2 -2.0 10.7 8.0 38.8 15.5 -6.8 5.3 0.3 -9.5 -8.9 -3.4 -0.8 0.7 6.8 0.3 17.8 28.0 5.7 4.6 0.9 43.2 4.5 41.7 -1.6 -3.8 1.8 11.9 -1.3 4.6 3.4 - -7.4 .3 -4.9 -8.9 -5.5 -2.7 n.a. 11.9 23.0 19.2 12.3 n.a. 02 0.3 03 1 Securities 2. Private securities transactions, net a) foreign net purchases (+) of U.S. corporate bonds b) foreign net purchases (+) of U.S. corporate stocks c) U.S. net purchases (-) of foreign securities 3. Foreign net purchases (+) of U.S. Treasury obligations .8 3.7 62 2.3 2.o 2.0 8.8 6.2 6.3 2.7 1.6 2.0 -2.0 0.1 3.7 5.0 1.7 0.9 2.4 -3.5 -3.0 -6.2 -5.2 -2.2 -0.5 -2.5 24 132 -4 2 11.7 5.6 5.3 10.0 -3,6 5.7 0.8 5.5 4.5 0.7 3.3 0.5 3.6 1.6 3.8 1.2 -3.5 -9.7 4.1 12.1 -0.3 3.4 2.0 10.6 -0.6 -1.9 -1.7 -1.2 n.a. 87 Official Capital 4. Changes in foreign official reserves assets in U.S. (+ * increase) a) By area G-10 countries (incl. Switz.) OPEC All other countries By type U.S. Treasury securities 3 Other Changes in U.S. official reserve -0.6 b) J91 assets (+ - decrease) 6 -4.0 -2. n.. -0 4 Other transactions (Quarterly data) 6. U.S. direct investment (-) abroad 7. Foreign direct investment (+) in U.S. 8. Other capital flows (+ - inflow) 9. U.S. current account balance 10. Statistical discrepancy -44.2 -17.5 46.9 58.4 5.7 2.2 -143.7 1.9 1.8 2.5 2.1 -126.5 -32.3 -28.7 -30.4 -10.6 24.0 -19.4 1.7 -127.2 -30.3 -32.0 6.1 n.a. -31.0 n.a. 28.6 n.a. MEMO: U.S. merchandise trade balance -- part of line 9 (Balance of payments basis, seaaonally adjusted) -159.5 -28.4 -27.7 n.a. n.a. n.a. n.a. 1. These data have not been adjusted to exclude commissions on securities transactions and, therefore, do not match exactly the data on U.S. international transactions aa published by the Department of Commerce. 2. Includes all U.S. bonds other than Treasury obligations. 3. Includes deposits in banks, commercial paper, acceptances, borrowing under repurchase agreements, and other securities. 4. Seasonally adjusted. 5. Includes U.S. government assets other than official reserves, transactions by nonbanking concerns, and other banking and offi transactions not shown elsewhere. In addition, it includes amounts resulting from adjustments to the data made by Department of Comnerce and revisions to the data in lines 1 through 5 since publication of the quarterly data in the ey of Current Business. 'ess than $50 million. .J)TE: Details may not add to total because of rounding.
@FedFRASER