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 this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. 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 optimal 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.

CONFIDENTIAL (FR)

April 14, 1978

CLASS II - 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 THE DOMESTIC NONFINANCIAL ECONOMY

Page

Industrial production...........................o......... Sales of new, domestic-model autos............................ Book value of retail trade inventories,..................... Book value of total manufacturing and trade inventories........

I 3 3 3

TABLES: Industrial production: Summary.................. Business inventories,....................... Inventory/sales ratio..,.....................................

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

2 4 4

THE DOMESTIC FINANCIAL ECONOMY Stock prices............

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

5

TABLE: Interest rates...........................................

7

CORRECTION & UPDATES Page IV-T-1................................................. Monetary aggregates..........................................

5 6

SUPPLEMENTAL NOTES The Domestic Nonfinancial Economy Industrial production increased 1.4 per cent in March,

following

a downward-revised 0.3 per cent rise in February and a decline of 0.8 per cent in January (not revised). above that in

March production was 0.9 per cent

December of last year, but in the first three months of

this year industrial production was 0.2 per cent above that in the fourth quarter of 1977. Relatively large increases in industrial production were widespread by market and industry groupings except for steel and utilities. Production of consumer goods rose 2.1 per cent.

Output of automotive

products advanced 10.3 per cent, as auto assemblies rose over 13 per cent to an annual rate of 9.3 million units.

Production of home goods

recorded a very large increase again in March and that of consumer nondurable goods another moderately large gain.

Output of business equip-

ment, construction supplies, and materials increased 1.2 per cent, 1.1 per cent, and 1.2 per cent, respectively, from February.

Production

of durable goods materials and nondurable goods materials in March each rose 1.3 per cent from that in February.

Output of mines increased

4.4 per cent last month, reflecting a 39 per cent increase in coal production, as miners returned to work after their extended strike ended, and about a 7 per cent rise in iron ore production, following of the strike in

that industry.

the end

- 2 -

Output of utilities are indicated to have declined 2.1 per cent in March, following a

1.1 per cent decline in February; these declines

represented reductions from a very high level of output in January because of the return to more normal weather temperatures and because of conservation of coal use in electric power generation.

Output of

steel (raw steel and steel mill and steel foundry products) declined 1.6 per cent further in March, extending the downtrend in this product grouping which began last May. INDUSTRIAL PRODUCTION: SUMMARY (Seasonally Adjusted) 1978 Feb.,.Jr..

Indexes, 1967=100

Per Cent Changes Oct, Nov. Dec. Jan. Feb. Mar. Mar. From preceding Mpnth 1977

(p)

(el

Total

139.0

141.0

.3

.3

.3 -.8

.3

1.4

4.2

Products, Total

139.8

142,0

.1

.4

.6 -1.3

.9 1.6

5.1

Final Products Consumer Goods Durable Nondurable Business Equipment

136.7 143.8 151.4 140.7 154.8

139.1 146.8 159.2 141.8 156.7

-.2 .4 .0 .2 .8 -1.0 -.4 .8 .6 .3

.4 -1.9 .4 -2.9 .4 -6.0 .4 -1.5 .3 -.7

1.8 2.1 5.2 .8 1.2

4.4 2.7 4.5 1.9 8.2

Intermediate Products Construction Supplies

151.4 149.5

152.6 151.2

.9 1.2

137.8

139.5

.7

Materials

i,-

preliminary

e--estimate

.4 1.1

1.3 1.2

.1 -.1

.5 .5

1.3 1.6 3.4 .7 1.2

7.6 .8 1 .3 1.1 10.9

.0 -.7

1.2

3.0

-3 Sales of new,

-

domestic-model autos in the first ten days of

April are estimated to have been at a 10.0 million unit annual rate, after adjustment for usual seasonal movements.

This is

only slightly

above the 9.9 million unit rate for March but up from the 9.0 million unit annual rate in record rate in

the final third of the month following

the near

the middle third of the month.

The book value of retail trade inventories was little

changed

during February, edging up at only a seasonally adjusted annual rate of $0.7 billion.

Revised figures indicate that in

January the value of

these stocks rose at an $11.0 billion rate, following a $2.8 billion rate increase over the preceding three months.

Durable stocks also

only edged up slightly in February-down from the January rise at an $8.5 billion rate as stocks at automotive dealers fell at a $2.1 billion annual rate; modest increases were reported for most other categories.

Inventories of nondurable goods were about unchanged follow-

ing a modest increase in January and- only a slight rise in the fourth quarter.

The ratio of inventories to sales at all retail stores declined

from the January level of 1.48 to 1.44 in February, remaining at a level above its

average over the past eight years.

The book value of total manufacturing and trade inventories (manufacturers' inventories, shipments, and orders for the years 1958 to the present have been revised) rose at an annual rate of $28.4 billion in February, substantially less than the revised January rate of $38.1 billion.

The inventory to sales ratio for total manufacturing and trade

declined to the relatively low level of 1.44 in February from the January level of 1.47.

-4-

Business Inventories

(Change at annual rates in seasonally adjusted book value; billions of dollars)

1976 Manufacturing andTrade Manufacturing Trade, total Wholesale Retail Durable

Auto Nondurable

1977 QIl(r) QICr) qI(r)

1978 Jan.(rl) F ,()

SQIV(r)

QI(r)

14.8 9.8 4.9 3.5 1.5 1.7

33.6 10.6 23.0 12.0 11.1 4.3

30.1 15.7 14.3 2.6 11.8 3.8

27.2 10.2 17.1 4-7 12.4 5.6

13.1 2.8 10.3 7.5 2.8 -2.3

38.1 15.2 22.9 11.9 11.0 8.5

28.4 17.6 10.8 10.1 .7 .8

1.3

2.2

2.4

1.3

1.8

6.5

-2.1

-.3

6.7

7.9

6.7

.4

2.4

-.1

Inventory/Sales Ratio

1976 QIV(r)

Manufacturing and Trade Manufacturing Trade, total Wholesale Retail p - preliminary r - revised

1.50 1.66 1.34 1.24 1.42

QI(r)

1.47 1.60 1.34 1.24 1.43

1977 QII(r) QIII(r)

1.47 1.60 1.34 1.21 1.45

1.49 1.61 1.37 1.24 1.48

QIV(r)

1.44 1.56 1.33 1.23 1.43

197f Jan.(r) Feb.(p)

1.47 1.58 1.36 1.23 1.48

1.44 1.54 1.33 1.21 1.44

-5The Domestic Financial Economy Stock prices now have climbed, on average, about 2.5 per cent since the March FOMC meeting.

N.Y.S.E.-listed issues have advanced

approximately 1.5 per cent, while A.S.E.-listed and O-T-C stocks have risen about 5 per cent.

Market observers have attributed these in-

creases in part to data indicating that the economy is rebounding from the first quarter's slowdown in economic activity and to the recent less-than-expected growth in the monetary aggregates. CORRECTION & UPDATES Page III-4:

Monetary aggregates table (see attached page 6).

Page IV-T-1: U.S. International Transactions Line 15 Feb. 1977 should read -691 instead of 691.

-7INTEREST RATES (One day quotes--in per cent) Highs Highs

Lows Lows

8

Mar.197 Mar. 20

Apr. 13

Short-Term Rates Federal funds (wkly avg.) 3-month Treasury bills (bid) Comm. paper (90-119 days) Bankers' acceptances Euro-dollars CDs (NYC) 90 days Most often quoted new 6-month Treasury bills (bid) Comm. paper (4-6 mos.)

6.86 (4/5)

6.58 (1/11)

6.77 (3/22)

6.74 (4/12)

6.68 (1/11) 6.84 (1/18) 7.03 (1/11) 7.44 (3/29)

6.16 6.63 6.70 7.00

6.16 6.75 6.76 7.25

6.29 6.80 6.85 7.38

6.88 (1/25)

6.65 (1/4)

6.73 (3/15)

6.83 (4/12)

6.90 (1/11)

6.87 (4/12)

6.43 ( 4) 6.66 (1/5)

6.53 6.79

6.70 6.84

7.23 (4/12)

6.85 (1/4)

7.13 (3/15)

7.23 (4/12)

7.00 (1/11)

6.53 (1/4)

6.72

6.92

7.40 (4/12) 3.90 (4/14)

7.05 (1/4) 3.55 (3/3)

7.25 (3/15) 3.60 (3/17)

7.40 (4/12)

7.83 (4/12) 8.06 (4/11) 8.34 (4/13)

7.38 (1/4) 7.71 (1/5) 8.00 (1/5)

7.62 7.88 8.15

7.81 8.05 8.34

8.57 9.31 8.88 8.86

8.28 9.09 8.61 8.48

8.45 9.22 8.70 (3/10) 8.64 (3/17)

8.57 (4/12) 9.31 (4/12) 8.88p (4/14) 8.86p (4/14)

(1/4) (1/6) (1/6)

(2/8)

CDs (NYC) 180 days Most often quoted new -year Treasury bills (bid)

CDs (NYC) Most often quoted new

Prime municipal note

3.90 p (4/14)

Intermediate- and Long-Term Treasury (constant maturity) 3-year 7-year 20-year

Corporate Seasoned Aaa Baa Aaa Utility New Issue Recently offered

Municipal Bond Buyer index

(4/12) (4/12) (4/14) (4/14)

(1/3) (1/3) (3/24)

(1/6)

5.76 (4/6)

5.58 (3/16)

5.58 (3/16)

5.74

9.44 (4/3)

9.13 (1/9)

9.33

9.44 (4/3)

Mortgage--average yields in FNMA auction

CONFIDENTIAL (FR)

April 17,

1978

CLASS II - FOMC

The attached Monetary Aggregates table was inadvertently left out of Current Economic and Financial Conditions Supplement sent to you on Friday, April 14, 1978.

-6MONETARY AGGREGATES (Seasonally adjusted)1977 QIII

QIV

197877QI

Jan

Feb

QI 77-

Marchp QI 78

p

Net changes at annual rates, per cent Major monetary aggregates 1. M1 (currency plus demand deposits

8.1

7.2

5.0

9.6

-1.1

3.5

7.3

9.9

8.0

6.4

8.9

4.4

5.1

8.6

3. M 3 (M2 + all deposits at thrift institutions) 11.9

10.6

7.4

8.7

5.5

5.9

10.4

Bank time & savings deposits 4. Total 10.3

13.0

13.1

12.3

13.7

11.4

11.6

11.2

8.5

7.4

8.4

8.4

6.3

9.5

7.3

5.4

2.2

6.0

0.5

0.5

6.1

9.6

7.0

3.1

6.4

1.2

1.2

7.2

-17.1

-17.8

-8.0

-8.1

8.2

-16.2

-7.5

14.6

11.4

12.0

10.5

14.7

12.2

12.7 7.4

2. M2 (M1 + time & savings deposits at CBs other than large CDs)

5. Other than large negotiable CDs at weekly reporting banks 6.

8.

Savings deposits 2/ Individuals2/ 3/ Other3/

9.

Time deposits

7.

10.

Small time4/

8.3

1.0

2.7

5.1

1.5

11.0

11.

Large time4/

28.1

32.4

29.9

20.4

38.8

14.3

26.1

Deposits at nonbank thrift institutions 5 / 12. Total 15.0 14.4

8.7

8.5

7.2

6.7

13.1

13.

Savings and loans

14.

Mutual savings banks

15.

Credit unions

MEMORANDA: 16. Total US Govt deposits 17.

16.2

15.4

8.9

8.4

6.8

6.7

14.1

9.5

9.9

5.2

5.4

5.4

3.6

8.3

20.1

20.0

17.4

17.9

15.2

15.0

0.2

Total large time deposits 6 / 1.7

18. Nondeposit sources of funds 7/

1.4

19.4

Average monthly changes, $ billions 0.2 -1.2 -1.7 -2.2 0.4 -0.3 6.2

4.5

3.8

6.0

3.7

3.2

1.3

1.9

2.2

2.5

1.1

1.3

Quarterly growth rates are computed on a quarterly average basis. Savings deposits held by individuals and nonprofit organizations. Savings deposits of business, government and others, not seasonally adjusted. Small time deposits are time deposits in denominations less than $100,000. Large time deposits are time deposits in denominations of $100,000 and above excluding negotiable CDs at weekly reporting banks. 5/ Growth rates computed from monthly levels based on averages of current and preceding end-of-month data. 6/ All large time certificates, negotiable and nonnegotiable, at all CBs. 7/ Nondeposit borrowings of commercial banks from nonbank sources include Federal funds purchased and security RPs plus other liabilities for borrowed money, Euro-dollar borrowings and loans sold, less interbank loans. p--preliminary. 1/ 2/ 3/ 4/