Greenbook/Tealbook
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Content last modified 6/05/2009.
CONFIDENTIAL (FR) CLASS II - FOMC
September 16, 1977
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 THE DOMESTIC NONFINANCIAL ECONOMY
Page
Industrial production............... ......
..........
.
1........ 1
Capacity utilization in manufacturing.........................
2
Personal income..... ..... ... .... .. ........... ... .. .... ..... Retail trade inventories................. ...... ....... ...... .
3 3
TABLE: Industrial production. ................
...............
..
2
THE DOMESTIC FINANCIAL ECONOMY TABLE: Interest rates..
.....
..
.
.. ......
....
......
..
..............
5
ERRATA Part I... . .......... ............ . .. . ...... .. ........ Part II........ . ..... ......... ................. .... . ....
4 4
APPENDIX Changes in bank lending practices..............................
A-i
SUPPLEMENTAL NOTES
The Domestic Nonfinancial Economy Industrial production declined 0.5 per cent in August to 138.2 per cent of the 1967 average.
This reduction in output was
concentrated in auto production and electric utility power generation-both of which had increased very sharply in July, but declines in output were widespread among other products and materials. production,
The drop in
the first since the weather-related reduction in January
1977, was largely associated with the declines in employment and a generally shortened workweek
in manufacturing industries in August and,
to a limited extent, with effects of increased strike activity. Output of consumer goods declined markedly last month. Production of durable goods fell 1.7 per cent,
as auto assemblies
seasonally adjusted, dropped to a 9.4 million unit annual rate after allowance for model changeover; this drop followed the very high 10.0 million unit annual rate of assemblies in
July.
Production of home
goods such as appliances and furniture decreased slightly in August. Output of consumer nondurables declined 0.7 per cent, following a large rise in
the preceding month.
Production of business equipment
last month was reduced 0.4 per cent, after several months of relatively large advances. Output of durable goods materials declined slightly in August,
as small increases in raw steel and equipment parts were more
than offset by strike-reduced iron ore production. materials production was almost unchanged.
Nondurable
- 2 -
INDUSTRIAL PRODUCTION (seasonally adjusted)
May
1977 June July (p)
Aug. (e)
Per cent changes Month Year QI to Oil ago ago
Total
137.0
137.9
138.9
138.2
- .5
5.3
2.5
Products, total
136.5
137.5
138.8
137.9
- .7
6.0
2.0
Final products Consumer goods Durable goods Nondurable goods Business equipment
134.7 143.1 152.2 139.5 148.9
135.5 143.7 155.5 139.0 150.3
136.9 145.5 158.1 140.5 151.6
135.7 144.1 155.5 139.5 151.0
- .9 -1.0 -1.7 - .7 - .4
6.0 5.2 7.8 3.9 9.7
2,2 1.5 3.4 .7 3.7
Intermediate products Construction supplies
143.5 138.7
144.5 139.2
145.9 140.4
145.8 140.6
- .1 .1
5.3 4.2
1.1 1.7
137.8
138.5
138.9
138.7
- .2
4.3
3.4
Indexes, 1967=100
Materials p --
e --
preliminary
estimated
Capacity utilization in manufacturing declined in August to 82.7 per cent from a revised 83.2 per cent in July, the first monthly reduction since January.
Most of the decline reflects curtailments
of production in the advance processing sector, particularly in nonelectrical machinery and transportation equipment.
Slowdowns in primary
processing industries producing nondurable goods also contributed to the over-all decline. The materials capacity utilization rate decreased marginally in August to 82.7 per cent.
This rate now stands about I percentage
point above its level one year earlier and remains about 10 percentage points below its 1973 peak.
- 3-
Personal income rose $8.0 billion, or at a 6-1/4 per cent annual rate, in August to a seasonally adjusted annual rate of $1,547.2 billion.
Wage and salary disbursements rose at a 2.6 per cent annual
rate last month; this was a considerably smaller rise than in recent months and reflects the smaller increase in employment and the generally shortened workweek in August.
Payrolls in manufacturing declined
because of the cutbacks in employment and workweek.
A sizeable
increase in government payrolls reflected a rise in public service employment at the State and local level. Rental income increased sharply last month, following the decline in July because of losses from flood damage.
Income of farm
proprietors declined sharply because of lower prices for farm products. The book value of retail trade inventories rose at a $14.7 billion annual rate in
July (p)--fractionally above the June rate and
up a bit from the almost $12 billion rate of increase in the first half of the year.
Durable goods stocks increased at a $13.3 billion
annual rate in July--triple the June pace and considerably above the $4.9 billion January-June rate.
Automotive store inventories rose
$8.7 billion in July--the most rapid gain since last August; excluding automotive, durables were up at a $4.6 billion annual rate--about double the pace of the first half.
The rate of accumulation at nondurable
goods stores slowed sharply in July ($1.4 billion) following the very rapid rates of increase in the spring.
-4-
The book value of all manufacturing and trade inventories rose at a $23.0 billion annual rate in July, appreciably less than the $32.7 billion rate in the first half of the year.
Nondurable goods
stocks which had been growing quite rapidly in the February-May period declined at a $3.0 billion annual rate in July; this decline was mainly in the wholesale farm products for which prices have been dropping for the last four months.
The ratio of inventories to sales
increased to 1.49 in July from 1.47 in June, largely reflecting a decline in total business sales.
This ratio remains well below the
1966-76 average of 1.55 and the very high levels seen in 1974-75, although it has been rising steadily since reaching an eleven year low point in March. 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 5. ERRATA
Part I:
Page I-1, line 10:
Part II:
Page II-3:
"two-fifths" should read "one-fifth."
The following should follow the last line on the page--"further declines in farm proprietors' income.
However, gains in wage and"
-5INTEREST RATES (One day quotes--in per cent)
1977
1977 Aug.
15
Sept. 15
Highs
Lows
6.05(9/14)
4.47(1/5)
5.94(8/17)
6.05(9/14)
5.90(9/13) 6.20(9/15) 6.20(9/14) 6.75(9/14)
4.39(4/28) 4.63(1/10) 4.66(1/3) 4.88(1/5)
5.54 5.88 5.99 6.50
5.87 6.20 6.20(9/14) 6.63
6.00(9/14)
4.50(1/5)
5.65(8/10)
6.00(9/14)
6.10(9/13) 6.25(9/15)
4.54(1/3) 4.63(1/7)
5.93 5.90
6.05 6.25
6.40(9/14)
4.65(1/5)
5.98(8/10)
6.40(9/14)
6.20(9/12)
4.66(1/3)
6.09
6.13
6.45(9/14) 3.30(8/19)
5.00(1/5)
6.10(8/10)
2.65(1/7)
3.20(8/12)
6.45(9/14) 3.10(9/16)
6.89(8/16) 7.35(5/11)
5.73(1/3) 6.50(1/3) 7.20(1/3)
6.88 7.33 7.72
6.82 7.20 7.56
8.13(3/14) 9.18(2/25) 8.34(5/18) 8.33(5/4)
7.87(1/5) 8.77(9/9) 7.90(1/5)
8.00 8.81 8.07(8/12)
7.95(1/5)
8.05(8/12)
7.89(9/14) 8.79(9/14) 8.0 9 p(9/1 6 ) 8.07p(9/16)
5.93(2/2
5.55(6/16)
5.63(8/11)
5.51
8.79(5/31)
8.46(1/12)
8.75(8/8)
8.74(9/5)
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 (NYC) 180 days Most often quoted new 1-year Treasury bills (bid) CD's (NYC) Most often quoted new Prime municipals Intermediate-
and Long-Term
Treasury (constant maturity) 3-year 7-year 20-year Corporate Seasoned Aaa Baa Aaa Utility New Issue Recently Offered
7.80(5/11)
Municipal Bond Buyer Index Mortgage--average yield in FNMA auction
A-1
APPENDIX A* CHANGES III BANK LENDING PRACTICES According to nearly half of the 121 senior lending officers of large banks that responded on the Lending Practices Survey taken in August, business loan demand had strengthened over the three months ending in August, fulfilling the expectations expressed on the previous survey taken in May. A majority of respondents (55 per cent) anticipated that business loan demand would strengthen further in the coming months, somewhat lower than the two-thirds of respondents expecting stronger loan demand in the spring survey. Changes in price and nonprice terms of lending were mixed, but on balance the survey suggests a continuation of the easing in nonprice terms which began early in 1976. The prime rate charged by major banks was raised shortly after both the May and August surveys and in a climate of rising rates, almost one-fifth of the panel in August reported firmer policies on interest rates charged. However, some of the bankers (10 per cent) reported easier rate policies, presumably meaning that the spread between the prime rate and loan rates to nonprime borrowers was lowered. Some firming of rates on loans to finance companies was also reported. On nonprice terms, 13 per cent of the respondents reported less stringent compensating balance requirements for their business customers, continuing the trend toward ease which became quite pronounced in the fourth quarter of last year when business demand for bank loans began to turn up. However, the most recent survey of lending practices shows that 5 per cent of the major banks are pressing business borrowers and finance companies a little harder for compensating balances. A similar pattern is apparent in bank policies regarding the maturity of term loans; most of the changes in policy in the August survey were in the direction of easing but a noticable minority of the lending officers reported that their banks were becoming more restrictive on the maturity of term loans. For established customers in the respondents' market area, almost all the respondents indicated that policies toward commitments and loan applications were either unchanged or were changed toward increased accommodation. Same easing was also reported toward new customers and borrowers located out of the banks' usual service area, but an appreciable minority of banks--more than those reporting easing--indicated that they had tightened approval standards for loans and commitments from new or nonlocal customers. Consumer instalment and single family mortgage lending remain very popular uses of funds at the survey banks, and some 15 per cent of the respondents reported that their banks had allocated more funds toward such lending. Participation loans with correspondents were also cited by 10 per cent of the respondents as loans toward which their banks had become more favorably disposed.
*Prepared by Paul W. Boltz, Economist, Banking Section, Division of Research and Statistics.
The results of the August Lending Practices Survey were, then, in broad outline similar to those taken over the preceding year, except that in previous surveys there were few, if any, signs of tightening of nonprice terms of lending. The most recent survey confirms a continuation of unchanged or easier lending policies at the large majority of banks, but a few banks took some moves toward firming of lending practices.
TABLE
NOT FOR QUOTATION OR PUBLICATION
(STATUS OF
PAGE 01
1
QUARTERLY SURVEY OF CHANGES IN BANK LENDING PRACTICES AT SELECTED LARGE BANKS IN THE U.S. 1/ COMPARED TO THREE MONTHS EARLIER) AUGUST 15, 1977 POLICY ON (NUMBER OF BANKS & PERCENT OF TOTAL BANKS REPORTING) MUCH
STRONGER
TOTAL BANKS
PCT
BANKS
PCT
MODERATELY STRONGER
ESSENTIALLY UNCHANGED
MODERATELY WEAKER
BANKS
BANKS
BANKS
PCT
PCT
PCT
MUCH WEAKER BANKS
PCT
STRENGTH OF DEMAND FOR COMMERCIAL AND INDUSTRIAL LOANS (AFTER ALLOWANCE FOR BANK'S USUAL SEASONAL VARIATION) COMPARED TO THREE
MONTHS AGO
ANTICIPATED DEMAND
IN NEXT 3 MONTHS
121
100.0
54
44.6
59
46.8
7
5.6
0
0.0
121
100.0
66
54.5
54
44.7
0
0.0
0
0.0
MUCH FIRMER POLICY
ANSWERING QUESTION BANKS
PCT
BANKS
PCT
MODERATELY FIRMER POLICY
ESSENTIALLY UNCHANGED POLICY
MODERATELY EASIER POLICY
BANKS
BANKS
BANKS
PCT
PCT
PCT
LENDING TO NONFINANCIAL BUSINESSES TERMS AND CONDITIONS:
100.0
17.4
71.9
100.0
5.0
81.0
STANDARDS OF CREUIT WORTHINESS
100.0
2.5
95.0
MATURITY OF TERM LOANS
100.0
5.0
81.0
ESTABLISHED CUSTOMERS
100.0
0.8
95.1
4.1
NEW CUSTOMERS
100.0
6.6
89.3
4.1
100.0
0.0
93.4
5.6
100.0
9.1
83.5
6.6
INTEREST RATES CHARGED COMPENSATING OR SUPPORTING
BALANCES
9.9 13.2 1.7 1i.4
REVIEWING CREDIT LINES OR LOAN APPLICATIONS
LOCAL
SERVICE AREA CUSTOMERS
NONLOCAL SERVICE AREA CUSTOMERS
1/ SURVEY OF LENDING PRACTICES AS OF AUGUST 15, 1977.
AT
121 LARGE BANKS REPORTING IN
THE FEDERAL RESERVE QUARTERLY INTEREST
RATE SURVEY
MUCH EASIER POLICY BANKS
PCT
NOT
1
TABLE
FOR QUOTATION OR PUBLICATION
ANSWERING QUESTION BANKS
PCT
MUCH FIRMER POLICY BANKS
PAGE 02
(CONTINUED)
PCT
MODERATELY FIRMER POLICY BANKS
PCT
ESSENTIALLY UNCHANGED POLICY
MODERATELY EASIER POLICY
BANKS
BANKS
PCT
PCT
MUCH EASIER POLICY BANKS
PCT
FACTORS RELATING TO APPLICANT 2/ VALUE AS DEPOSITOR OR SOURCE OF COLLATERAL BUSINESS
121
100.0
105
86.6
INTENDED USE OF THE LOAN
121
100.0
120
99.2
100.0
110
90.9
COMPENSATING OR SUPPORTING BALANCES
100.0
115
95.0
ENFORCEMENT OF BALANCE REQUIREMENTS
100.0
110
90.9
ESTABLISHING NEW OR LARGER CREDIT LINES
100.0
115
95.0
LENDING TO "NONCAPTIVE" FINANCE COMPANIES TERMS AND CONDITIONS: INTEREST
4
RATES CHARGED
ANSWERING QUESTION BANKS
PCT
CONSIDERABLY LESS WILLING BANKS
PCT
MODERATELY LESS WILLING BANKS
PCT
ESSENTIALLY UNCHANGED BANKS
PCT
MODERATELY MORE WILLING PCT
BANKS
CONSIDERABLY MORE WILLING BANKS
PCT
WILLINGNESS TO MAKE OTHER TYPES OF LOANS TERM LOANS TO BUSINESSES
121
100.0
0
0.0
3
2.5
96
79.3
22
18.2
0
0.0
CONSUMER INSTALMENT LOANS
120
100.0
0
0.0
1
0.8
101
84.2
1d
15.0
0
0.0
120
100.0
0
0.0
5
4.2
96
80.0
16
13.3
3
2.5
119
100.0
0
0.0
5
4.2
110
92.5
3
2.5
1
0.8
ALL OTHER MORTGAGE LOANS
120
100.0
0
0.0
4
3.3
105
87.6
10
8.3
1
0.8
PARTICIPATION LOANS WITH CORRESPONDENT BANKS
121
100.0
1
0.8
0
0.0
106
87.7
13
10.7
1
0.8
LOANS TO BROKERS
121
100.0
1
0.8
7
5.8
102
84.3
10
8.3
1
0.8
SINGLE
FAMILY MORTGAGE LOANS
MULTI-FAMILY MORTGAGE
2/
LOANS
FOR THESE FACTORS, FIRMER MEANS THE FACTORS WERE CONSIDERED MORE IMPORTANT CREDIT REQUESTS, AND EASIER MEANS THEY WERE LESS IMPORTANT.
IN MAKING DECISIONS
FOR APPROVING
Cite this document
Federal Reserve (1977, September 19). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19770920_part2
@misc{wtfs_greenbook_19770920_part2,
author = {Federal Reserve},
title = {Greenbook/Tealbook},
year = {1977},
month = {Sep},
howpublished = {Greenbooks, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/greenbook_19770920_part2},
note = {Retrieved via When the Fed Speaks corpus}
}