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)

November 13,

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

1981

TABLE OF CONTENTS

Page THE DOMESTIC NONFINANCIAL ECONOMY Industrial production and capacity utilization Retail sales . . . . . . . . . . . . . . . . .

. .

Corrigendum

. . ... 4

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1 3

TABLES: Industrial production . . Capacity utilization rates: and materials . . . . . Retail sales . . . . . . .

.

. . . . . . ... manufacturing . . . . . . . . . . . . . . . .. .

.

.

.

5

. .

. .

. .

5 6

THE DOMESTIC FINANCIAL ECONOMY TABLES: Monetary aggregates . . . . . . . . . . . . . . 7 Commercial bank credit and short- and intermediateterm business credit . . . . . . . . . . . . . . 8 Selected financial market quotations . . . . . .. 9

SUPPLEMENTAL NOTES

Industrial Production and Capacity Utilization Industrial production fell 1.5 percent

in October,

following a revised drop of 1.2 percent in September and a decline of 0.2 percent in August. the overall

Again

in October, most of

reduction in output occurred in durable materials,

construction supplies, and autos;

declines also occurred in

production of most other materials and products. Output of consumer goods declined 0.9 percent in October,

following similar decreases in the two preceding

months.

Auto assemblies were reduced about 11 percent to an

annual rate of 5.5 million units. goods for

Production of durable

the home was cut 1.1 percent further last month.

Output of consumer nondurable goods was reduced 0.4 percent, mainly because of reductions in food and fuel production. Output of business equipment, reflecting large declines in manufacturing, power, and farm equipment, was reduced 0.5 percent--about half of

the large reduction that occurred in

September; this was the third monthly decline in output of business equipment.

Production of defense and space equip-

ment edged up 0.2 percent in October,

following average

monthly increases of 0.5 percent in the preceding six months. Output of construction supplies was reduced an estimated 3.8 percent further,

following a sizable decline last month, and

was 10 percent below its recent peak last March.

Materials output dropped 2.3 percent

in October.

Sharp declines occurred in production of durable materials, particularly metals and parts for consumer durable goods and for equipment, and in production of nondurable materials, as output of textiles, paper, and chemicals was curtailed sharply.

Energy materials output also was reduced consid-

erably for the third consecutive month. Capacity utilization in manufacturing, reflecting the large drop in output, also fell sharply--to 76.9 percent from 78.4 percent in September.

The October operating

rate

for producers of motor vehicles and parts, with auto assemblies declining to a 5.5 million unit annual

rate and truck produc-

tion still at a low rate, dropped to 54.8 percent, only a little above

its 1975 low.

Utilization rates for

several

industries were close to 70 percent in October--iron and steel,

fabricated metal products, and stone,

clay, and glass.

Industries with utilization rates somewhat above the average for all of manufacturing included paper, rubber and plastics, food, electrical machinery, and nonferrous metals. The capacity utilization rate for producers of

indus-

trial materials dropped 2 percentage points in October to 78.2 percent, as in the two preceding months a larger decline than in the rate for manufacturing.

Large declines

in October

also were widespread among producers of the various industrial materials.

Particularly low, besides

iron and steel,

were the operating rates for

basic chemicals and parts for

consumer durable goods. Retail Sales Sales by retail October,

stores declined 1.5 percent in

according to partial-sample estimates;

followed no change in sales rise in August.

this drop

in September and a 1.4 percent

A large falloff occurred in October sales

by stores selling automotive products--8.7 percent, and another

sizable decline was reported for stores handling

building materials and related items.

Sales by stores ex-

cluding these two groupings edged up 0.2 percent. food stores rose

Sales at

1.2 percent to their August level and those

at general merchandise stores rose 0.8 percent

(making up

only about two fifths of their September decline).

In

contrast, sales at eating and drinking places fell 1.4 percent, and sales at furniture, home furnishings, and equipment stores declined 0.6 percent. Sales by all retail stores in the third quarter were 2.2 percent above those in the preceding quarter; they are estimated to have been about unchanged Responding to price rebates and other purchase

however,

in real terms. incentive

programs by auto producers and dealers, nominal sales volume by the automotive grouping of stores in the third quarter was 9.8 percent higher declined

5.6 percent.

than in the second quarter when it Spending

for general merchandise and

for furniture and appliances

in the third quarter was 0.1

percent and 0.2 percent, respectively, above

that in the

second quarter.

Corrigendum: The November

following change should be made in the

10 Greenbook, Part II: On page 11-24,

which

the sentence beginning "Services,

... " beginning on line 13

sentence:

"The rate of

should be replaced with this

increase in prices of services

[excluding energy and homeownership],

which did not slow in

the first half of this year--in fact it accelerated, accounted for much of this recent acceleration remaining half of

the CPI]."

[in the pace

for the

-5-

INDUSTRIAL PRODUCTION (Percentage change from preceding period; based on seasonally adjusted data) _

__~_II__~

~______I______

1981 Q1 Q2

______

______ -

___

1981 Q3

Aug.

-- - ------

__

--- annual rate--Total

8.4

Final products Consumer goods Durable Nondurable Business equipment Defense and space eq.

__I

Sep.

___

Oct.

__

--- monthly rate---

1.9

1.6

-. 2

-1.2

-1.5

7.1 6.3 14.5 3.4 9.4 4.1

1.1 -1.1

-. 4

-. 7

-. 7

-. 7

-. 9

-. 9

-8.8 2.0 4.0 5.1

-2.7 .1

-1.4

-2.5

-. 6

-. 4

-. 2

-1.0 .9

-. 5

-. 2

Construction supplies

17.8

-7.4

-8.9

Materials Durable goods Nondurable goods Energy materials

13.4 19.6 6.7 8.6

-1.9 3.7 -1.7 -16.6

2.7 1.2 -5.7 23.9

.1

.2

-3.3

-3.8

-1.5 -. 2

-2.3 -3.3 -1.6

-1.3

-. 8

-2.4

CAPACITY UTILIZATION RATES: MANUFACTURING AND MATERIALS (Percent, seasonally adjusted)

Manufacturing industries Primary processing Advanced processing Motor vehicles & pts.

Materials producers Durable goods mats. Raw steel Nondurable goods mats. Energy materials

1978-80 High

1980 Low

Q2

Q3

1981 Sep. Oct.

87.2

74.9

79.8

79.3

78.4

76.9

90.1 86.2 94.5

71.0 77.2 51.0

80.3 79.6 65.5

79.4 79.2 60.3

78.2 78.4 58.1

76.1 77.4 54.8

88.8

73.8

81.2

81.2

80.2

78.2

88.4 100.7 90.9 88.8

68.2 55.3 77.5 82.7

79.0 83.7 85.3 81.1

78.8 81.4 83.3 85.2

77.4 80.8 82.8 84.1

74.8 74.9 81.3 83.3

1981

RETAIL SALES (Percent change from preceding period; based on seasonally adjusted data) 1981

Total sales (Real)

1

Q1

Q2

Q3

4.9

-. 4

2.2

2.9

-1.7

July

Aug.

Sept.

.0

1.4

-. 1

.1

-1.0

.6

-. 9

Total, less autos and nonconsumption items

3.5

1.0

1.0

-.5

.9

.0

Total, exc. auto group, gasoline, and nonconsumption items

3.3

1.1

1.2

-.4

1.2

-.3

GAF 2

3.1

1.1

.6

-2.2

2.8

-.9

8.5 10.0 4.4

-4.1 -5.6 -2.6

5.2 9.8 .2

.8 2.5 -4.0

2.5 4.6 4.4

-. 1 -. 4 .8

.9 2.5 2.3 .1 -. 3

-. 4 .3 .4 -2.5 -1.1

Durable goods Automotive Furniture & appliances Nondurable goods Apparel Food General merchandise 3 Gasoline

Oct. -1.5

.2

-5.5 -8.7 -. 6

.0 .7 -1.1 -2.1 2.0

1. BCD series 59. Data are available approximately 3 weeks following the retail sales release. 2. General merchandise, apparel, and furniture and appliance stores. 3. General merchandise excludes mail-order nonstores; mail-order sales are also excluded in the GAF composite sales summary.

-7MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted) 1 9 81i

Q4 '80 to

Q1

Q2 ----

Money stock measures 1. M1-A 2 2. (Adjusted) 3. M1-B 2 4. (Adjusted) 5. M2 6. M3 Selected components 7. Currency

-20.8 (-1.7) 4.9 (-0.8) 8.3 12.4

5.5

Q3

10.6

7.9

-3.7

(-1.5)

Oct.

'81

0.2 (-0.7) 7.1 10.2

5.0

-7.6 (-5.2) -2.8 (-4.0) 6.3 8.2

2.7 (3.1) 3.9 (3.7) 9.3 6.6

-8.1 (0.6) 4.2 (1.4) 8.9 10.9

4.0

-1.0

3.0

5.5

Demand deposits

-32.9

-11.8

-8.0

9.

Other checkable deposits

372.3

107.4

21.5

31.3

9.4 0.0 84.5 6.0 -30.5 30.2 3.5 -29.6 19.0

11.3 58.9 113.7 4.2 -11.9 13.4 - 0.3 -12.6 4.7

9.4 12.8 87.8 6.8 -19.6 21.0 -2.9 -23.0 5.1

13.0 27.6 99.2 10.8 -29.9 30.9 -3.9 -28.0 5.7

Large time deposits 4 at commercial banks, net at thrift institutions

39.6 40.6 34.7

10.3 10.1 11.2

24.7 26.6 15.1

Term RPs, NSA

18.1

12.2

41.6

22.

Oct.

3.0 (6.5) 7.3 (6.9) 11.6 13.4

8.

.0. M2 minus M1-B (11+12+13+16) 3 .1. Overnight RPs and Eurodollars, NSA .2. Money market mutual fund shares, NSA .3. Commercial banks .4. savings deposits .5. small time deposits .6. Thrift institutions .7. savings deposits .8. small time deposits

Sept.

Percentage change at annual rates ----

-5.3 (5.1) 8.7 (5.3) 10.6

Aug.

1.5

-11.7

3.6

-14.1

23.7

8.3

180.4

9.3 -110.7 94.9 6.3 -21.7 20.1 0.0 -23.3 8.4

11.0 -105.5 72.7 10.4 -19.0 24.0 4.0 -17.0 11.5

10.5 2.0 127.6 6.4 -19.5 23.6 0.3 -20.1 9.9

26.0 26.3 22.3

8.1 5.3 24.3

-4.4 -9.2 21.4

22.5 22.6 22.3

5.5

82.4

-25.7

23.9

--Average monthly change in billions of dollars-MEMORANDA: 23. Managed liabilities at commercial banks (24+25) 24. Large time deposits, gross 25. Nondeposit funds 26. Net due to related foreign institutions, NSA 5 Other 27. 28. U.S. government deposits at 6 commercial banks

4.3 5.1 -0.8

8.8 7.5 1.3

6.4 7.0 -0.6

11.3 9.5 1.8

0.4 2.8 -2.4

-5.2 -1.5 -3.7

6.0 6.1 -0.1

-1.6 0.7

0.5 0.8

0.9 -1.5

4.2 -2.4

-1.3 -1.1

-4.6 0.8

-0.6 0.5

1.1

-0.3

-0.7

-2.7

-0.3

3.5

0.3

1. Quarterly growth rates are computed on a quarterly average basis. 2. Figures in parentheses have been adjusted to remove the distorting effects since the beginning of 1981 of shifts of funds out of demand deposits and other accounts into NOW accounts. Based on a variety of evidence, it is estimated that 77-1/2 percent of inflows into other checkable deposits--in excess of "trend"-was from demand deposits in January, and 72-1/2 percent in subsequent months. 3. Overnight and continuing contract RPs issued to the nonbank public by commercial banks, net of amounts held by money market mutual funds, plus overnight Eurodollar deposits issued by Caribbean branches of U.S. member banks to U.S. nonbank customers. Excludes retail RPs. 4. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 5. Consists of borrowings from other than commercial banks in the form of federal funds purchased, securities sold under agreements to repurchase and other liabilities for borrowed money (including borrowings from the Federal Reserve), loans sold to affiliates, loan RPs, and other minor items. Changes since October 1980 are partially estimated. 6. Consists of Treasury demand deposits at commercial banks and Treasury note balances.

-8COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data)1 1980 Q3

4

Q

----

1. Total loans and investments 2 at banks

12.9

14.5

2.

20.7

Investments

1981 Q1

Q2

Q3

Aug.

Sept.

Oct.e

Oct. 80 to Oct. 8 1 e

-- Commercial Bank Credit -----7.8

8.2

9.0

10.1

10.6

8.6

9.8

11.8

10.5

6.5

3.9

4.9

0.7

8.4

7.9

0.0

7.8

3.

Treasury securities

39.1

11.1

14.8

15.7

4.

Other securities

11.5

12.3

8.0

1.7

9.1

13.1

10.8

14.5

8.1

10.2

15.5

6.8

8.9

10.8

12.0

14.0

8.5

10.5

15.5

21.0

6.5

11.9

20.2

22.1

18.3

13.3

15.0

-10.2

60.1

27.3

53.2

-54.5

-132.7

47.5

26.1

19.0

4.6

11.0

9.4

7.3

8.5

10.1

9.2

6.9

9.0

-7.6

-0.2

-1.4

-1.4

0.0

-1.4

1.4

n.a.

n.a.

5.

Total loans

2

2

6.

Business loans

7.

Security loans

8.

Real estate loans

9.

Consumer loans

-10.

11.

12.

Total short- and intermediateterm business credit (sum of lines 14, 15 and 16) Business loans net of bankers acceptances Commercial paper issued by 3 nonfinancial firms

13.

Sum of lines 11 & 12

14.

Line 13 plus loans at 4 foreign branches

15.

-10.0

-18.1

Short- and Intermediate-Term Business Credit edit --

9.0

14.2

13.7

15.8

26.6

29.6

26.9

n.a.

n.a.

14.5

24.2

5.6

10.5

22.2

26.0

20.6

12.7

15.4

-6.2

29.5

42.2

59.4

76.7

87.0

6.9

38.6

20.7

8.2

14.1

26.6

32.0

28.7

11.9

17.9

9.8

19.3

11.3

14.0

28.4

33.8

30.2

15.7

19.5

-4.6

14.6

8.5

19.3

14.7

15.4

1.5

n.a.

n.a.

21.0

-15.7

35.6

23.1

28.9

22.6

33.3

n.a.

n.a.

-19.7 10.3

Finance company loans to

business 16.

-5.7

5

Total bankers acceptances 5 outstanding

1. Average of Wednesdays for domestic-chartered banks and average of current and preceding ends of months for foreign-related institutions. 2. Loans include outstanding amounts of loans reported as sold outright to a bank's own foreign branches, unconsolidated nonbank affiliates of the bank, the bank's holding company (if not a bank), and unconsolidated nonbank subsidiaries of the holding company. 3. Average of Wednesdays. 4. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestic-chartered banks. 5. Based on average of current and preceding ends of months. n.a.--not available. e--estimated.

-9SELECTED FINANCIAL MARKET QUOTATIONS

1

(Percent) 1981

Change from: July FOMC High Oct. 6

July

FOMC Aug. 18

FOMC Oct. 6

Nov. 12

Federal funds 2

19.93

18.19

15.46

14.01

-5.92

-1.45

Treasury bills 3-month 6-month 1-year

15.72 15.42

15.72

13.90

10.60

15.62 14.74

14.12

13.83

11.25 11.11

-5.12 -4.17 -3.41

-3.30 -2.87 -2.72

18.02 17.63

14.84 15.07

12.64

17.68

16.86

17.09

14.97

12.19

-5.59 -5.22 -4.67

-2.20 -2.61 -2.78

Large negotiable CDs 3 1-month 3-month 6-month

18.55 18.38 18.16

18.14 18.08 18.20

15.14 15.57 15.81

12.67 12.58 12.69

-5.88 -5.80 -5.47

-2.47 -2.99 -3.12

Eurodollar deposits 2 1-month 3-month

19.49 18.91

18.66 18.73

16.00 17.03

14.05 14.25

-5.44 -4.66

-1.95 -2.78

20.50

20.50

19.00

17.00

-3.50

-2.00

U.S. Treasury (constant maturity) 3-year 10-year 30-year

15.75 14.71 13.96

15.99 14.79 13.95

15.78 15.14 14.60

12.85 13.19 13.21

-2.90 -1.52 -. 75

-1.95 -1.39

Municipal (Bond Buyer)

11.44

11.94 4

12.93 4

12.44 4

1.00

-. 49

Corporate Aaa New issue Recently offered

16.73 16.55

16.63 6

-17.72 6

17.17p 5 16.80p 5

.44 .27

-.92

17.11

17.276

18.286

18.376

1981 FOMC.

Nov.

Oct. 6

12

1981 High

963.99 1,024.05 79.14 77.86 380.36 348.99

856.26 69.03 308.69

223.47

185.87

860.54 71.69 325.05 200.99

-163.51 -7.45 -55.31 -22.48

___High

Short-term rates

Commercial paper 1-month 3-month 6-month

Bank prime rate

14.52 18.23

12.46

Intermediate- and longterm rates

Primary conventional mortgages

1980

Dec. 31 Stock Prices Dow-Jones Industrial NYSE Composite AMEX Composite

NASDAQ (OTC)

202.34

High

-2.93

.09 1.26 Pe rcent change from: FOMC. Oct. 6 4.28 2.66 16.36 15.12

4. One-day quotes for preceding Thursday. One-day quotes except as noted. 2. Averages for statement week closest to date shown. 5. Average for preceding week. 6. One-day quotes for preceding Friday. 3. Secondary market. p-Preliminary.