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

October 12, 1973 By the Staff Board of Governors of the Federal Reserve System

SUPPLEMENTAL NOTES The Domestic Economy Industrial production.

Industrial production increased 0.7

percent in September, following the slight decline in August.

Both the

July and August indexes were revised up slightly from those previously

The total index at 127.4 percent of the 1967 average was

published.

8.3 percent above a year earlier.

Output in the third quarter rose at

an annual rate of 6.7 percent from the average of the second quarter. The rise in production in September resulted from a substantial recovery in autos, a further increase in business equipment, and a gain in output of construction products and durable goods materials, including steel.

INDUSTRIAL PRODUCTION (1967=100, seasonally adjusted) Percent change from A year ago Month ago

1972 Sept.

July

1973 Aug.

Sept.

Total index

117.6

126.7

126.5

127.4

.7

8.3

Consumer goods

125.2

132.8

130.4

131.7

1.0

5.2

Business equip. Defense equip

109.6 77.6

123.3 81.1

123.7 80.6

124.7 81.5

.8 1.1

Materials steel

120.9 114.7

130.0 120.9

131.3 119.2

132.2 121.5

.7 1.9

9.3 5.9

8.5

10.3

8.0

9.1

13.9

7.9

Autos*

*Seasonally adjusted annual rate, millions of units. Very confidential until release Tuesday, October 16, 1973.

13.8 5.0

- 2-

Retail sales.

Sales in September were off almost 1 percent

from August, largely because of lower sales of durable goods.

Outlays

for the automotive group declined 3.9 percent and expenditures

for furni-

ture and appliances were 1.5 percent lower.

On the average, sales of

the nondurable goods stores were little changed from August levels. A more complete sample count lowered rather substantially the August advance estimate of sales for all stores, and the month is now indicated to be off 1.3 percent instead of unchanged from July. to present data,

the third quarter is

According

2.2 percent above the second and

12.2 percent above a year earlier.

RETAIL SALES (Seasonally adjusted, percentage change from previous quarter)

1973

1973

Total sales

Sept.

Q I

Q II

Q III

July

August

5.7

.1

2.2

3.9

-1.3

- .9

1.0 2.4

4.9 9.0

.0 - .2

-3.0 -3.9 -1.5

-2.0 -3.3

Durable Auto Furniture and appliance

8.2 7.8 9.1

.5

-1.0

-. 3

- .2

Nondurable Food General merchandise

4.4 3.7

1.3 2.2

2.8 4.0

3.4 6.2

-1.9 -2.6

6.3

.4

1.7

1.6

-1.7

- .1

Total, less auto and nonconsumption items

4.7

1.3

2.4

3.0

-1.7

.1

GAF

6.9

- .5

1.4

1.2

-1.8

.1

Real*

3.8

-2.5

n.a.

3.6

-3.7

*Deflated by all commodities CPI, seasonally adjusted.

.2 .1

n.a.

-3New homes sold by merchant builders, already down sharply from the peak in the fourth quarter of 1972, declined further in August--to a seasonally adjusted annual rate of 566,000 units, the lowest in more than 2-1/2 years.

Builders' stocks of homes for sale continued to rise

and by the month's end equaled a record 9.9 months' supply at the reduced The median price of new homes sold declined in

August sales rate.

August; but, at $33,200, it remained above the still advancing median price of homes awaiting sale.

While the median price of existing homes

sold changed little from July--at $30,030, sales of such units in August edged below a year earlier for the first time since the spring of 1970.

SALES, STOCKS AND PRICES OF NEW SINGLE FAMILY HOMES Homes sold 1/

Homes for sale 2/

Months' supply

Median price of: Homes for sale Homes sold (Thousands of dollars)

(Thousands of units) 1972 733 761

386 402

6.3 6.3

28.0 29.1

27.1 28.3

QI QII (r)

733 681

426 432

7.0 7.6

30.4 32.7

29.4 31.2

June (r) July (r) Aug. (p)

664 582 566

432 448 468

7.8 9.2 9.9

33.2 34.2 33.2

31.2 31.4 31.7

QIII QIV 1973

1/ SAAR. 2/

SA, end of period.

-4-

Inventories.

Book value of retail inventories rose at a

$6.6 billion annual rate in August--up sharply from the $2.1 billion rate in July.

For total manufacturing and trade, the August rate of

increase was $22.5 billion and the July-August average rate of increase was $20.6 billion compared with the second quarter average rate of $22.9 billion. The manufacturing and trade inventory-sales ratio rose slightly to 1.43 in August from 1.41 in July--still low by historical standards.

On a quarterly average sales basis, the ratio went from

1.46 in the first quarter to 1.45 in the second.

- 5 The Domestic Financial Situation Consumer credit.

Though still at a relatively advanced level,

the delinquency rate on consumer instalment loans at commercial banks

edged down further in August according to the American Bankers Association series covering about 600 banks.

The seasonally adjusted rate for loans

delinquent 30-89 days declined to 1.70 percent in August from 1.75 percent in June and 1.81 percent in April (a 20-year high) but was still marginally above the 1.66 percent rate of August a year ago.

DELINQUENCY RATES ON CONSUMER INSTALMENT LOANS AT COMMERCIAL BANKS (Seasonally adjusted by Federal Reserve) (Percent)

1967

1968

1969

1970

1971

1972

1973

February April June

1.54 1.57 1.44

1.25 1.30 1.32

1.31 1.38 1.41

1.56 1.55 1.57

1.54 1.49 1.53

1.51 1.55 1.63

1.72 1.81 1.75

August

1.37

1.33

1.46

1.61

1.53

1.66

1.70

October December

1.43 1.39

1.27 1.35

1.46 1.52

1.60 1.60

1.61 1.51

1.76 1.71

Average

1.46

1.30

1.42

1.58

1.54

1.64

NOTE:

Delinquency rates are number of contracts delinquent 30-89 days as a percentage of number of accounts outstanding. CONFIDENTIAL UNTIL RELEASED BY ABA

-6INTEREST RATES

1973 Highs

Lows

Sept.

17

Oct. 11

Short-Term Rates Federal funds (wkly.

avg.)

3-month Treasury bills (bid) Comm. paper (90-119 day_ Bankers' acceptances Euro-dollars CD's (prime NYC) 60-89 day Most often quoted new

10.79(9/5)

5.61(1/3)

10.74(9/12) 9.87(10/10)

9,05(8/14) 10.50(9/13) 11.00(9/13) 11.88(9/17)

5.12(1/4) 5.63(1/12) 5.75(1/11) 5.81(1/5)

8.70 10.50 11.00 11,88

7,15

9,63 9.50 10.44

10.50(9/12) 5.38(1/3)

10.75(9/12) 9.38(10/10)

9.00(9/13) 5.38(1/4) 10.50(9/13) 5.63(1/12) 9.83(9112) 5.64(1/3)

8.79

7.42

10.50 9.61

9.13 8,26

6-month

Treasury bills (bid) Comm. paper (4-6 mo.) Federal agencies

CD's (prime NYC) 180-269 day Most often quoted new 1-year Treasury bills (bid) Federal agencies CD's (prime NYC) Most often quoted new Prime municipals

9.38(8/15) 5.63(1/3)

9.25(9/12) 7.50(10/10)

8.50(9/13) 5.40(1/4) 9.49(8/13) 5.86(1/2)

8.27

7.32

9.05

7.83

8.50(9/12) 5.75(1/3) 3.20(1/3) 6.00(8/8)

8.50(9/12) 7.50(10/10) 5.25(9/12) 4.20(10/10)

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

8.13(8/7) 7.83(8/7)

Corporate Seasoned Aaa Baa New Issue Aaa Utility Municipal Bond Buyer Index

7.11 7.35

6.74 7.12

7.77(8/24) 7.10(1/2) 8.68(8/30) 7.88(1/12)

7.65 8.65

7.56 8.41

8.52(8/8)

7.29(1/10)

7.74(9/12) 7.96(10/10)

5.59(8/1)

4.99(10/10)

5,18(9/12) 4.99(10/10)

9.27(9/4)

7.69(1/8)

9.27(9/4)

6.23(1/4) 6.04(1/3)

Mortgage--implicit yield in FNMA auction 1/

9.11(10/1)

1/ Yield on short-term 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.

- 7-

As a result of data problems,

the August bank loan commitments

survey--referred to in the Greenbook--is not available.