Greenbook/Tealbook

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.

CONFIDENTIAL (FR)

SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the Federal Open Market Committee

By the Staff Board of Governors of the Federal Reserve System

January 8, 1968

SUPPLEMENTAL NOTES

The Domestic Economy New construction put in place advanced further in December to a seasonally adjusted annual rate of $77.9 billion based on confidential preliminary data released by the Census Bureau.

The over-all rate which

was associated with a substantial downward revision in the level of public construction expenditures back through June, was just below the peak in March of 1966.

Within the private sector, the rate of residential

expenditures, which, as anticipated, was revised upward by 2 per cent for November, rose further in December and exceeded the earlier peak in January 1966.

Nonresidential construction changed little in December,

at a level a tenth below its early 1967 high.

Public expenditures--now

estimated for November at about 7 per cent under last February's peak-also showed little change in December. For the year as a whole, total construction outlays were only slightly higher than in 1966, though costs over-all are estimated to have risen 5 per cent.

While the private residential and nonresidential sectors

exhibited quite different expenditure-patterns over the course of the year, both fell somewhat short of their 1966 levels; but public construction expenditures last year were up by 5 per cent.

-2-

NEW CONSTRUCTION PUT IN PLACE (Confidential FRB) December 1967 ($ billions) 1/

Per cent change from November 1967 December 1966

77.9

+ 1

+8

Private Residential Nonresidential

52.7 27.1 25.6

+ 1 + 2 --

+14 +37 - 4

Public

25.2

--

Total

-

2

1/ Seasonally adjusted annual rates; preliminary. Data for the most recent month (December) are available under a confidential arrangement with the Census Bureau. Under no circumstances should public reference be made to them.

Dealer deliveries of new domestic autos in the final ten days of December were slightly below a year earlier.

Sales of Ford Motor

Company cars, which had been recovering steadily through most of December, dropped off 17 per cent in the final period from a year earlier.

For all of December, total new car sales were 6 per cent

below last year.

The seasonally adjusted annual rate for December was

7.5 million units. For the calendar year 1967, sales of new domestic cars totaled about 7.5 million units, down one-tenth from 1966.

The Domestic Financial Situation Yields on Treasury securities declined considerably last week, as shown in the accompanying table.

This rally was initiated by the

announced balance of payments program and gained further strength later in the week as reports of peace feelers by North Vietnam were circulated

-3-

in the press.

Corporate and municipal markets were also firm and on

Friday bankers' acceptance rates were lowered by 1/8 to 1/4 of a percentage point.

- 4 -

KEY INTEREST RATES

1966 High

Nov. 17 1/

1967 Dec.

29

Jan. 5

Short-Term Rates 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issue Secondary market

5.59 5.75 7.06 5.76 5.88

(9/21)

(10/25) (10/4) (9/21) (12/31)

5.50 (12/31) 5.90 (9/21)

4.67 4.88 5.75 5.05 5.13

5.04 5.63 6.25 5.30 5.50

4.96 5.50 6.19

5.25 5.30

5.50 5.70

5.50 5.60

5.13 5.13 5.13 5.40

5.54 5.88 5.63 5.55

5.26 5.63 5.63 5.65

5.35

5.50

6-months Treasury bills (bid) Bankers' acceptances Commercial paper Federal a gencies CD's (prime NYC) Highest quoted new issue Secondary market

5.50 (12/31) 6.30 (9/28)

5.38 5.60

5.50 6.00

5.87

1-year Treasury bills (bid) Federal agencies Prime municipals

5.94 (9/21) 6.13 (9/23) 4.25 (9/21)

5.27 5.75 3.40

5.71 5.95 4.00

5.38 5.95 3.85

Intermediate and Long-Term Treasury coupon issues 5-years 20-years

5.89 (8/29) 5.12 (8/29)

5.72 5.70

5.78 5.56

5.60

5.53 (9/8)

6.13 6.76

6.24 6.95

6.24 6.93

Corporate Seasoned Aaa Baa New Issue Aaa With call protection Without call protection

5.98 6.00 6.00 6.04

(9/19) (9/23) (12/31) (9/21)

6.20 (12/23)

5.98 (9/2) 6.10 (12/2)

6.53 6.68

Municipal Bond Buyer Index Moody's Aaa

4.24 (9/2) 4.04 (8/26)

4.33 3.98

FHA home mortgages 30-years

6.81 (Nov.)

5.50

5.42

6.32

4.44 4.15

4.38 4.15

6.63(Sept.) 6.77(Nov.)

1/ Pre-devaluation yield levels. N.B.

Lows and highs for 1967 may be found in various tables of the latest Greenbook.

-5

-

International Developments There has been very little demand for gold in London since the President's statement on the new balance of payments program on January 1, and the fixing price has been set continuously lower. Today, January 8, the price is $35.1373, nearly six cents below the price at year-end.

The presence of some newly produced gold, as

well as scattered selling on one or two days, has permitted some increase in the Pool's gold holdings. Exchange rates of Continental currencies against the dollar have declined significantly more than usual in the first week of the new year.

A dominant factor around the year-end in these markets is

the repatriation of commercial bank funds before year-end and the subsequent outflow for reinvestment abroad.

Such outflows have tended

often to produce declines in Continental exchange rates in the first week or so of the new year of from 20 to 40 thousandths of a cent. This year the movement has been significantly larger. EXCHANGE RATES VIS A VIS THE U.S. DOLLAR (weekly averages in U.S. cents) D-Mark

Sw.frc.

Gldr.

Fr.frc.

Dec.

4-8 11-15 18-22 26-29

25.112 25.125 25.096 25.060

23.176 23.177 23.152 23.149

27.813 27.799 27.811 27.812

20.383 20.391 20.387 20.373

Jan.

2-5

24.982

23.075

27.778

20.335

-6-

The Bank of Japan discount rate was increased on January 6 from 5.84 per cent to 6.21 per cent.

This action, accompanying the

credit policy measures described on page IV-24, is intended to restrain domestic demand and improve the balance of payments, which has worsened with the rise in Japanese imports in recent months.

Corrections: Section III - page 10 - para. 2 - line 7 Change $13.5 to $9.0 billion.