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

July 11, 1969

SUPPLEMENTAL NOTES

The Domestic Economy Retail sales in June, according to the advance report, declined

almost 1 per cent from May, which in turn had been down about the same amount from April.

Losses occurred in most major categories, but the

durable goods stores, which declined 1.1 per cent from May, were generally weaker than the nondurable goods stores, off 0.7 per cent. Second quarter sales were less than 1/2 per cent above the first quarter, and only 3.9 per cent above a year ago.

Since prices

have probably risen more than 4 per cent, the second quarter level of real takings is below a year ago. For the second quarter as a whole, as in June, sales of durable goods stores were slower than those of nondurable goods stores.

Durable goods sales were up only 0.1 per cent as reasonably

good sales of furniture and appliances and "all other durables" were

offset by declines of I per cent in the automotive group and the 2.1 per cent in the lumber, building, hardware, and farm equipment group.

Among nondurables, increases in the general merchandising,

apparel, and restaurants categories more than offset lower sales of

the food and gasoline groups and sales in the second quarter rose a little more than 1/2 per cent.

Department stores sales in the second quarter were up 3.4 per cent from the first quarter, but both May and June were off substantially

from the high April level.

On a year-over-year basis, the 7 per cent

rise in June was the smallest since December 1967.

RETAIL SALES (Percentage Change)

From Previous Month

From Previous Quarter

1969

1969

April

May

June

IQ

IIQ

1.6

0.4

1.8

-0.9

-0.8

Durable goods Nondurable goods

1.9 1.4

0.1 0.6

2.1 1.7

-1.0 -0.9

-1.1 -0.7

Total, ex. auto Department stores

1.7

0.7

2.0

-0.9

-0.8

0.8

3.4

6.4

-3.4

-1.5

0.8

n.a.

1.3

-1.2

n.a.

Total

I

Total real, deflated by all commodities

CPI

Inventories.

Distributors' inventories declined slightly in

May following a fairly substantial rise in April.

For the two months,

the increase in book value of inventories averaged only half the average monthly increase in the three preceding months.

The ratio of distributors'

inventories to sales declined further in April and May from the relatively high rate at the beginning of the year. At retail, inventories were reduced by almost $100 million book value in May--almost as much as the April increase.

Reductions

occurred at all major groupings of durable goods stores, but mainly at the automotive group where dealers' stocks of new domestic-type autos

were drawn down by about 100,000 units (seasonally adjusted).

In

contrast, book value increased at most types of nondurable goods stores and the total increase was quite large, raising the stocks-sales ratio to the high level which prevailed throughout 1967. Merchant wholesalers increased their stocks modestly in May, following the large increase now shown for April.

The average April-

May increase was about the same as the average rise in the preceding six months.

With the large accumulation at manufacturers (see

Greenbook) total nonfarm business inventories increased $937 million in book value in May, a bit less than in April but somewhat more than the monthly average in the first three months of the year.

Altogether,

these April-May-June inventory figures are not inconsistent with the Greenbook second quarter estimate of accumulation on a GNP basis. CHANGE IN BOOK VALUE OF BUSINESS INVENTORIES (Millions of dollars, seasonally adjusted) 1968 - IV

1969 - I

Monthly

Monthly

Average

Average

1,045 731 314

Manufacturing Durable Nondurable

April

May

April-May Average

877 621 256

1,075 652 421

937 310 627

1,006 481 524

490 321 169

579 519 61

701 448 253

980 743 237

840 596 245

Retail Durable Nondurable

411 280 131

116 27 89

114 25 89

- 93 - 523 430

11 -249

Wholesale Durable Nondurable

144 130 14

182 76 107

259 180 80 __

50 90

156 135

- 40

20

Manufacturing & Trade Durable Nondurable

_

260

Bank time and savings deposits.

Consumer-type time and

savings deposits at weekly reporting banks fell contra-seasonally in the first reporting week of July, following quarterly interest crediting.

This decline represented mainly a reduction in time

certificates and open accounts at banks outside New York City.

In

the following week, however, New York City banks also experienced large outflows of these types of deposits.

Outflows of regular

savings deposits at large banks have been relatively small so far in July in comparison with the comparable periods of other recent years.

In addition, inflows of time and savings deposits of country

banks were much less than usual during the first week of July.

-5NET CHANGE IN SELECTED TIME AND SAVINGS DEPOSITS (Millions of dollars, not seasonally adjusted) Change in week ending July 6 1966

July 5 1967

July 3 1968

July 2 1969

223

165

215

- 42

-365

109

- 60

- 25

56

275

- 17

238 130 109

294 162 131

77 28 51

Weekly Reporting Banks Consumer-type deposits Savings deposits

Time deposits, IPC (other than CD's, IPC)

588

Country Banks Total time and savings deposits Savings deposits Other time deposits

n.a. n.a. n.a.

----------------------------------------------------------July 13 1966

Change in week ending July 9 July 10 July 12 1969 1968 1967

New York and Chicago Banks Consumer-type deposits Savings deposits Time deposits, IPC

(other than CD's, IPC)

27 - 75

82 - 21

- 25 - 61

-158 - 40

102

103

36

-118

Nonbank depositary intermediaries.

Savings inflows to both

savings and loan associations and mutual savings banks declined significantly in June, and for the second quarter as a whole their combined growth rate was sharply reduced from the 6 to 6.5 per cent range of the previous five quarters.

The record yields available in

-6the money and capital markets have no doubt taken their toll in savings

receipts, as the reinvestment period also attests. GROWTH IN SAVINGS AT NONBANK THRIFT INSTITUTIONS (Seasonally adjusted annual rate in per cent) Mutual Savings Banks 1968 - I II III IV

Savings & Loan Associations

Both

7.1 6.7 6.5 7.1

5.6 5.7 5.9 6.2

6.1 6.0 6.1 6.5

6.2 4.3

6.1 3.2

6.1 3.6

2.9 6.7 3.3

1.7 4.5 3.4

2.1 5.2 3.4

1968 - First half Second half

7.0 6.9

5.7 6.1

6.2 6.4

1969 - First half s/

5.3

4.7

4.9

1969 - I II

2/

April May June p/

a/ Preliminary and partially estimated.

Outflows through early July have been very large from New York savings banks.

Savings and loan associations, which also have lost a

sizable amount during that portion of the reinvestment period for which we currently have data,

appear,

however,

to be faring better

in relation

to 1966--allowing for lack of conformity in the available data.

REINVESTMENT PERIOD SAVINGS FLOW ($ millions, not seasonally adjusted) SAVINGS AND LOAN ASSOCIATIONS

All U.S. 1966 - Grace Period July - 6 days*

San Francisco

n.a.

n.a.

U.S. Except San Francisco n.a.

-1,221

-264

-957

-568

- 61

-507

- 25

45

- 70

1968 - Grace Period July - 4 days

-610 -660

- 73 -119

-537 -541

1969 - Grace Period July - 3 days

-721 -780

-116 -199

-605 -581

1967 - Grace Period

July - 7 days*

15 LARGEST NEW YORK CITY MSB's ! First 5 Days - July

Entire Period /

As Per Cent of Deposits

1966 1967 1968

- 31 56 - 18

-153 - 11 -105

- .99 - .07 - .58

1969

-103

-269

-1.42

* This basically covers the entire and is thus not directly comparable 1968 and 1969. The typical pattern inflows--as the reinvestment period

July portion of the reinvestment period, to the 3- and 4-day periods shown for is for outflows to taper off--or become wears on.

1/ Savings flow excluding interest and passbook loans. 2/ Includes the grace period of the last three days in June.

-8Government and Federal Agency securities markets.

An average

issuing rate of about 6.78 per cent was set in the auction of $1.75 billion of December tax anticipation bills on Wednesday.

Most recently,

this bill has been quoted at around 7.30--7.24 per cent on a whenissued basis in secondary market trading.

Early ideas in the market

this morning indicated that the average in today's sale of $1.75 billion of March tax bills might be around 7.10 to 7.25 per cent. The Federal Home Loan Banks will raise $500 million of new money from the public on July 15, for settlement on July 25.

The $900

million financing will consist of $500 million of 10-month notes and $400 million of 19-month bonds, and will replace a $400 million maturing issue.

-9KEY INTEREST RATES 1969

Lows

Highs

June 23

July 10

Short-Term Rates

Federal funds (weekly averages)

5.95 (1/1)

9.20 (6/4)

8.54 (6/18)

9.07

3-months

Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issue Secondary market 6-months Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies CD's (prime NYC) Highest quoted new issue Secondary market 1-year Treasury bills (bid) Prime municipals

5.91 6.38 7.14 6.08 6.25

(3/24) (2/17) (1/2) (3/26) (2/6)

7.04 8.50 12.50 7.47 7.50

(7/9) (7/10) (6/10) (7/2) (7/10)

6.37 8.25 11.01 7.36 7.50

6.00 6.45 (2/13)

6.00 8.70 (7/9)

6.00 8.25

6.04 6.50 6.25 6.32

(3/25) (2/17)

7.28 (7/10) 8.62 (7/10)

(1/7)

8.75 (7/9) 8.02 (7/2)

6.87 8.38 8.50 7.78

(1/16)

7.00

8.50 11.20 7.44

7.50 6.00 8.70 7.28

8.62 8.75 7.98

6.25 8.25

6.25 9.00

5.40 (6/11)

6.94 5.25

5.30

6.11 (1/20) 5.91 (4/14)

7.08 (7/9) 6.46 (5/28)

6.78 6.27

7.04 6.33

6.56 (1/2) 7.26 (2/3)

7.08 (7/10) 7.84 (7/10)

7.03 7.77

7.08 7.84

7.05 (1/9) 6.90 (2/20)

7.80 (6/18) 7.76 (6/23)

7.80 7.76

7.68

4.82 (1/23) 4.57 (1/2)

5.82 (6/11) 5.60 (6/18)

5.79 5.60

5.65

7.66 (1/9)

8.47 (7/7)

8.40

8.47

6.25

6.25

6.50 (1/30)

9.00 (7/9)

5.86 (1/16) 3.90 (1/2)

7.47 (7/1)

7.06

Intermediate and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa New Issue Aaa No call protection

Call protection Municipal Bond Buyer Index

Moody's Aaa Mortgage--implicit yield in FNMA weekly auction 1/

5.52

1/ Yield on 6-month forward commitment after allowance for commitment fee and required purchase and holding of FNMA stock. Assumes discount on 30-year loan amortized over 15 years.

-10-

International Developments The Bank of Sweden raised its discount rate from 6 to 7 per cent effective July ll--the second increase this year--because of continuing reserve losses caused by the disparity between Swedish interest rates and levels in major financial centers.

The Bank of

Sweden has also asked for authority to impose commercial bank cash reserve requirements and to prescribe limits on commercial bank borrowing from the central bank.

These further restrictive measures are ex-

pected to be adopted shortly.