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) CLASS II

July 15, 1977

- 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 Pas THE DOMESTIC NONFINANCIAL ECONOMY Industrial production......................................... Retail trade inventories......................................

1 2

TABLE: ........................... 2

Industrial production........... 0

THE DOMESTIC FINANCIAL ECONOMY TABLE: .......

Interest rates....................................................

6

ERRATA Part I......................................................... 3 Part II............#.*

.

........... , .....

..................

3

INTERNATIONAL DEVELOPMENTS Addendum to monetary and financial developments in major foreign countries .......

0

...........................

7

SUPPLEMENTAL NOTES

The Domestic Nonfinancial Economy Industrial production increased 0.7 per cent in June, following gains of 1.0 per cent in May and 0.7 per cent in April.

Automotive

products, business equipment, and durable goods materials contributed substantially to the June advance, while output of nondurable consumer goods and consumer goods materials was little changed over the month. Industrial production rose at a 12-1/2 per cent annual rate between the first and second quarters, after a weather-damped 5.3 per cent annual rate of increase for the first quarter. Products.

Auto assemblies rose about 5-1/2 per cent from May

to a 9.7 million unit annual rate in June, contributing significantly to the sharp rise in output of durable consumer goods.

Production of

business equipment continued to advance strongly, rising 1.5 per cent in June and at about an 18 per cent annual rate for the second quarter as a whole.

Output of home goods and nondurable consumer goods rose

slightly in June. Materials.

Production of nondurable goods materials was about

unchanged in June but durable goods materials continued to increase rapidly.

Iron and steel output rose further but at a slower rate than

that of the previous three months.

- 2 -

INDUSTRIAL PRODUCTION (seasonally adjusted)

1977 Indexes, 1967=100

Mar.

Apr.

May

June

(p)

(e)

Per cent changes Month Year QI to ago

ago

QII

Total

135.2

136.2

137.6

138.6

.7

6.5

3.0

Products, total

134.9

136.2

137.2

138.3

.8

6.8

2.4

Final products Consumer goods Durable goods Nondurable goods Business equipment

133.0 142.8 152.4 139.0 144.5

134.4 143.6 152.0 140.3 147.0

135.3 143.9 152.6 140.4 149.3

136.3 144.7 155.2 140.7 151.6

.7 .6 1.7 .2 1.5

6.8 5.0 7.6 4.1 12.3

2.6 2.0 3.7 1.3 4.3

Intermediate products Construction supplies

141.9 136.4

142.8 137.4

144.6 139.6

145.8 141.1

.8 1.1

7.3 7.1

1.8 2.4

135.5

136.4

137.9

138.9

.7

5.9

3.6

Materials p -- preliminary

e -- estimated

Book value of retail trade inventories increased at a $12.9 billion annual rate in May, following increases of $7.6 billion in April and $12.0 billion in the first quarter.

Stocks at durable goods outlets

rose at a $7.0 billion annual rate, following a slight decline in April; excluding automotive dealers and stores, durable inventories were up $1.9 billion in May.

Nondurable inventories rose at a $5.8 billion

annual rate in May, following an $8.0 billion April increase. For manufacturing and trade as a whole, book value of inventories rose at a $39.2 billion rate in May, well above the $32.8 billion first quarter annual rate of rise.

In contrast to the preceding

- 3 -

two months, the increase in total durable goods inventories ($24.6 billion, annual rate) was more rapid than that in nondurable goods

($14.6 billion).

The total manufacturing and trade inventory-sales

ratio edged up to 1.46 from 1.45 in April--still fairly low by historical standards.

The Domestic Financial Economy No textual addendums to the Greenbook were required, but the usual updating of interest rate developments is contained in the table on page 6. ERRATA Part I:

Page I-13,

line 5 should read:

"deficit in the last half

of calendar 1976, Page I-15, last line:

Part II:

change "7.6" to "7.3"

Page I-16, first line:

change "27.6" to "23.5"

Page I-20, first line:

change $14.6 million to $14.6 billion

Page II-11:

See revised tables "Business Inventories" and "Inventory Ratios" on page 4.

Page III-4:

See revised table "Monetary Aggregates" on

page 5.

-4REVISED JULY 15, 1977 BUSINESS INVENTORIES (Change at annual rates in seasonally adjusted book value; billions of dollars)

1975 QIV Manufacturing and trade Manufacturing Durable Nondurable Trade, total Wholesale Retail Auto

1976 QI

QII

QIII

QIV

QI

1977 Apr.

May

-. 4 .6 -4.4 5.0

23.1 7.5 1.7 5.8

31.5 14.2 6.8 7.5

29.6 15.4 6.8 8.6

10.3 6.5 6.4 .0

32.8 11.2 7.8 3.3

32.8 16.4 6.1 10.4

39.2 24.7 12.4 12.3

-1.0 -2.0 1.0 -.9

15.6 5.1 10.5 1.1

17.3 9.0 8.3 .1

14.2 4.3 9.9 4.8

3.9 1.6 2.2 1.3

21.6 9.7 12.0 2.2

13.8 6.2 7.6 -.9

14.4 1.5 12.9 5.1

1975 QI

1976 QIII QIV

QI

1977 Apr.

May

1.50 1.65 2.04 1.22

1.66 1.91 2.43 1.36

1.53 1.67 2.04 1.27

1.51 1.65 2.03 1.25

1.47 1.58 1.93 1.20

1.45 1.56 1.91 1.18

1.46 1.58 1.91 1.21

1.35 1.12 1.53

1.42 1.25 1.56

1.38 1.22 1.51

1.36 1.22 1.47

1.36 1.22 1.47

1:. 1.19 1.44

1.34 1.18 1.47

.518

.591

.640

.632

.635

.630

.628

INVENTORY RATIOS

1974 QI Inventory to sales: Manufacturing and trade Manufacturing Durable Nondurable Trade, total Wholesale Retail Inventories to unfilled orders: Durable manufacturing

-5

-

REVISED JULY 15, 1977 MONETARY AGGREGATES (Seasonally adjusted)/

1976

19 7 7

QIV

QI

QII

May

June

HI

Net changes at annual rates, per cent

Major monetary aggregates 1. M 1 (Currency plus demand deposits) 2. M 2 (Ml plus time and savings deposits at commercial banks other than large CDs) 3. M3 (M2 plus all deposits at thrift institutions) 4. Adjusted bank credit proxy

6.5

4.2

8.5

0.7

4.9

6.4

12.5

9.9

9.2

4.7

8.1

9.7

14.4 8.2

11.3 5.4

10.0 5.2

7.3 -1.5

9.4 16.1

10.8 5.3

Bank time and savings deposits 5. Total 6. Other than large negotiable CDs 7. Savings deposits

12.2

12.5

8.3

8.3

13.2

10.5

17.1 24.7

14.0 21.9

9.8 7.9

7.6 4.5

10.5 -2.3

12.1 15.1

8. Individuals 2/ 9. Other 3/ 10. Time depositsSmall time;11. 12. Large time_/

18.8 136.5 10.6 27.5 -21.2

16.0 103.0 7.1 7.9 5.5

8.3 2.8 11.4 14.2 5.5

6.1 -10.9 10.9 12.1 8.2

0.6 38.2 22.5 10.5 49.0

12.4 53.2 9.4 11.2 5.5

6/

Deposits at nonbank thrift institutions13. Total 14. Savings and loan associations 15. Mutual savings banks 16. Credit unions

17.3

13.4

11.0

11.1

11.3

12.4

18.8 12.8 18.8

14.7 9.2 16.2

12.3 6.6 14.1

12.5 6.9 11.0

12.4 7.6 14.1

13.1 7.5 14.7

Average monthly changes, $ billions Memoranda: 17. Total US Govt. deposits -0.3 18. Negotiable CDs 0.1 19. Nondeposit sources of funds 0.3

0.0 -0.4 -0.5

-0.4 0.6 0.2

-0.2 0.7 0.1

-0.5 1.7 0.6

-0.2 0.1 -0.1

1/ Quarterly growth rates are computed on a quarterly average basis. Savings deposits held by individuals and nonprofit organizations. 2/ 3/ Not seasonally adjusted. 4/ Excluding negotiable CDs at weekly reporting banks. Small time deposits are total time deposits (excluding savings deposits) 5/ less large time deposits, negotiable and nonnegotiable, at all commercial banks. 6/ Growth rates computed from monthly levels based on averages of current and preceding end-of-month data.

-6INTEREST RATES (One day quotes--in per cent)

1977

1977 June 20

July 13

Highs

Lows

5.45(5/25)

4.47(1/5)

5.43(6/22)

5.33

5.17(5/20) 5.50(6/10) 5.63(5/23) 6.19(5/24)

4.39(1/3) 4.63(1/10)

5.16 5.38

4.88(1/5)

5.01 5.40 5.40 5.81

5.44(5/25)

4.50(1/5)

5.35(6/15)

5.25

5.40(5/19) 5.63(6/1)

4.54(1/3) 4.63(1/7)

5.22 5.50

5.36 5.40

5.72(6/1)

4.65(1/5)

5.63(6/15)

5.60

5.62(5/19)

4.66(1/3)

5.42

5.49

6.00(5/25) 3.10(5/27)

5.00(1/5) 2.65(1/7)

5.88(6/15) 2.90(6/17)

5.75 2.95(7/8)

6.68(5/20) 7.35(5/11) 7.80(5/11)

5.73(1/3) 6.50(1/3) 7.20(1/3)

6.36 7.04 7.65

6.42 7.05 7.58

8.13(3/14) 9.18(2/25) 8.34(5/18) 8.33(5/4)

7.87(1/5) 8.87(6/17) 7.90(1/5) 7.95(1/5)

7.94 8.87 8.01(6/17) 8.06(6/17)

7.94 8.88 8.14p(7/15) 8.12p(7/15)

Municipal Bond Buyer Index

5.93(2/2)

5.55(6/16)

5.55(6/16)

5.64(7/15)

Mortgage-average yield in FNMIA auction

8.79(5/31)

8.46(1/12)

8.77(6/15)

8.72(7/11)

Short-Term Rates Federal funds (wkly. avg.) 3-month Treasury bills (bid) Comm. paper (90-119 days) Bankers'

acceptances

Euro-dollars CD's (NYC) 90 days Most often quoted new 6-month Treasury bills (bid) Comm. paper (4-6 mos.) CD's (IYC) 180 days Most often quoted new 1-year Treasury bills (bid) CD's (NYC) Host often quoted new Prime municipals

4.66(1/3)

5.43

5.69

Intermediate- and Long-Term Treasury (constant maturity) 3-year 7-year 20-year Corporate Seasoned Aaa Baa Aaa Utility New Issue Recently Offered

-7-

International Developments Addendum to Monetary and Financial Developments in Major Foreign Countries.

On July 14, the Bundesbank announced a 1/2 per-

centage point reduction in its Lombard rate to 4 per cent. bank rate and reserve requirements were left unchanged.

The German

The Swiss

National Bank reduced the Swiss Bank rate from 2 per cent to 1-1/2 per cent, and also lowered the Swiss Lombard rate by 1/2 percentage point.