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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 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. November 14, 1975 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 TABLE OF CONTENTS Page THE DOMESTIC NONFINANCIAL ECONOMY Industrial production..................................... Inventories.............................................. Merchant builder sales ................................... Energy legislation.......... ........................... TABLES: Industrial production.................................... Home sales............................................. THE DOMESTIC FINANCIAL ECONOMY TABLE: Interest rates......................................... CORRECTIONS........................ . .................. SUPPLEMENTAL NOTES The Domestic Nonfinancial Economy Industrial production is estimated to have risen 0.4 per cent in October, following increases of 1.8 per cent in September and 1.6 per cent in August. At 116.5 per cent of the 1967 average in October, total production was 6 per cent above the April low. Increases in output were fairly widespread among consumer goods and nondurable industrial materials, but were generally smaller than in the two preceding months. Production of business equipment was off slightly after having increased in the two previous months. Products. Output of final products increased slightly further in October as auto assemblies were again raised, by 2.7 per cent, to an annual rate of 7.7 million units. Production of household appliances, other home goods, and nondurable consumer goods continued to advance. The decline in production of business equipment reflected reduced output of trucks and commercial and farm equipment. Output of construction products was unchanged, but that of other intermediate products rose further. Materials. unchanged in October. Production of durable goods materials was about Output of iron and steel was off about 1 per cent, following a decline of about half a per cent now indicated for September. Output of other metals edged up last month. Production of textiles, paper, and chemical materials continued to increase at a rapid pace, although slower than in the previous few months. -2- INDUSTRIAL PRODUCTION (Seasonally adjusted) Per cent changes QII to Year Month QII ago ago July Aug. Sept. (p) Oct. (e) Total 112.2 114.0 116.0 116.5 .4 - 6.7 3.4 Products, total 115.3 115.8 116.8 117.1 .3 - 4.7 2.2 115.7 125.5 115.9 129.0 113.9 116.0 125.5 116.1 129.2 114.8 116.9 126.6 117.8 130.0 115.9 117.1 127.4 119.2 130.6 115.6 .2 .6 1.2 .5 - .3 - 4.3 - .6 - 5.8 1.3 -12.4 2.3 3.7 5.5 3.1 .1 Intermediate products 114.3 Construction products 108.0 115.2 109.1 116.7 111.5 117.3 111.5 .5 -- - 6.4 -13.0 2.2 1.2 111.2 114.6 115.2 .5 -10.1 5.2 Final products Consumer goods Durable goods Nondurable goods Business equipment Materials 106.8 Inventories. Book value of retail inventories rose at an annual rate of $4.4 billion in September slower than both the A August rate of $12.9 billion and the third quarter average annual rate of $8.4 billion. The slowing was due to auto inventories which fell at a $.7 billion rate in September following a rise $14.3 billion in August and a third quarter average rate of increase of $5.5 billion. For manufacturing and trade the rate of increase was $5.6 billion slower than the $15.8 billion August increase but slightly faster than the third quarter average rate of $5.5 billion. The manufacturing and trade inventories sales ratio moved to 1.53 in September from 1.54 in August. -3- Merchant builder sales of new single-family homes edged down 3 per cent in September to a seasonally adjusted annual rate of 565,000 units. For the third quarter as a whole, new home sales averaged slightly less than the advanced pace in the second quarter, when the impact of the 5 per cent tax credit enacted in late March was apparently strongest. The stock of unsold new homes edged up in September and represented about 8 months' supply at the current sales rate. Sales of existing homes were at a record rate in September. The seasonally adjusted index of unit sales rose to 119 (1972=100)-7 per cent above August and 6 per cent above the previous high in early 1973. Existing home sales in the third quarter averaged 4 per cent above sales in the second quarter. -4HOME SALES Median Prices New Home Sales and Stocks Sales Indexes of Unit Volume of Homes Sold Homes Homes Months' (1972=100, seasonally adjusted) New Existing sold 1/ for sale 2/ supply New Existing homes homes (thousands of units) homes 3/ homes (thous. of dol.) 1974 QI 523 452 10.4 73 106 35.2 30.9 QII 550 436 9.5 77 105 35.6 32.2 QIII 490 414 10.1 68 99 36.2 32.8 QIV 417 400 11.5 58 93 37.3 32.2 (r) (p) 426 571 566 396 378 382 11.2 7.9 8.1 59 80 79 95 108 112 38.1 39.0 38.8 33.8 35.4 36.1 (r) (r) (r) (p) 556 549 583 565 378 382 378 382 8.2 8.3 7.8 8.1 77 76 81 79 109 105 111 119 37.9 38.8 38.3 39.4 36.2 35.9 36.8 35.8 1975 QI QII QII June July Aug. Sept. I/ 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. - 5 Energy legislation. On Wednesday of this week House and Senate conferees passed an omnibus energy bill which decontrols all oil prices over a 40-month period. The bill provides that the composite price of domestic crude oil would be rolled back to $7.66 a barrel from the current $8.75 and then allowed to increase at a 10 per cent per year rate. The bill also requires the President to remove the $2 fee on imported crude oil. These provisions would result in an average decrease of 3-1/2 cents per gallon in the prices of gasoline and other refined petroleum products. Gasoline prices would subsequently regain their current levels within two years and would be higher by about 3-1/2 cents at the end of the 40-month period. Other provisions of the bill allow the President to retain or modify the two tier price structure of present controls and to include or partially to exclude from controls Alaskan oil when it comes into production in 1977. The Domestic Financial Situation No textual addendums to the Greenbook were required, but the usual updating of interest rate developments is contained in the table on page 7. CORRECTIONS: Part I, p. I - 8: GROSS NATIONAL PRODUCT AND RELATED ITEMS Housing starts, private (millions, A.R.) 1976 - III 1.60 -6Part I, p. I - 9: CHANGES IN GROSS NATIONAL PRODUCT AND RELATED ITEMS Top bank of figures are: Billions of Dollars, based on seasonally adjusted annual rate figures. Housing starts, private 1976 - III IV Part I, p. I - 10: 13.5 per cent per year .0 per cent per year GROSS NATIONAL PRODUCT AND RELATED ITEMS Housing starts, private (millions, A.R.) 1976 1.56 Part I, P. I - 11: CHANGES IN GROSS NATIONAL PRODUCT AND RELATED ITEMS Housing starts, private 1976 32.4 per cent -7- INTEREST RATES (One day quotes - in per cent) 1975 Highs Lows Oct. 20 Nov. 13 Short-Term Rates 5.13(5/21) 5.73(19/22) 5.24(11/12) 4.88(6/16) 5.39(6/2) 5.40(5/30) 5.69(5/21) 5.90 6.13 6.60 5.37 5.75 5.70 6.56 5.38(6/11) 6.38(10/15) 6.00(11/12) 7.05(8/25) 5.18(6/11) 8.75(1/2) 5.38(5/23) 7.67(1/2) 5.65(6/12) 6.20 5.66 6.25 5.53 6.72 6.11(11/7) 8.38(1/1) 7.13(10/15) 6.50(11/12) 7.35(3/21) 5.37(2/5) 3.00(8/25) 6.03(2/20) 6.40 7.1n 5.97 6.51(11/7) 3.00(1/1) 6.00(3/12) 4.35(/15) 3.40(2/7) 7.59(10/15) 3.70(10/17) 7.00(11/12) 3.75(11/14) 3.56(0/16) 6.93(2/19) . 71(9/16) 7.58(2/21) 7.02 7.6S 8.22 9.02(4/30) 8.57(2/26) 13.63(1/20)10.27(4/3) 8.83 10.35 Federal funds (wkly. avg.) 7.70(1/8) 3-Month Treasury bills (bid) 6.90(1/2) Comm. paper (90-119 day) 9.00(1/2) Bankers' acceptances 9.00(1/1) Euro-dollars 10.25(1/3) CD's (NYC) 90-119 day Most often quoted now 9.00(1/1) 6-month Treasury bills (bid) Comm. paper (4-6 mo.) Federal agencies CD's (NYC) 100-269 day Most often quoted new 1-year Treasury bills (bid) Federal agencies CD's (INYC) Aost often quoted new Prime municipals 5.75(6/18) 6.25 Intermediate and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa iew Issue Aaa Utility 9.80(4/3) 8.39(2/6) 3.33 8.74(11/12) 10.35(11/12) 9.53(10/16) 9.0 8p Yunicipal Bond Buyer Index 7.67(10/2) 6.27(2/13) 7.29(10/16) 7.43 Mortgage--average yield in FNAiA auction 9.95(10/6) 3.73(3/10) 9.95(10/6) 9.32(11/3)
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