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) CLASS III - FOMC

May 17, 1985

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 Housing starts and permits . .

. . . . ..

Page .

. . . . . . ..

Table Private housing construction . . . . . . . . . ..

.

.. . .

THE DOMESTIC FINANCIAL ECONOMY Tables Monetary aggregates . . . . . . . . . . . . . . . . .. Commercial bank credit and short- and intermediateterm business credit . . . . . . . . . . . . . . . . . Selected financial market quotations . . . . . . . . . ..

SUPPLEMENTAL NOTES

THE DOMESTIC NONFINANCIAL ECONOMY Housing starts and permits Housing construction remained strong in April, with new starts at an annual rate of 1.9 million units for the second consecutive month.

Newly

issued permits for residential building fell 5 percent last month, but, at a 1.66 million unit rate, this indicator remained in the improved range seen in the first quarter.

Activity was most robust once again in the

South and West regions. The advanced level of starts activity reflected continued strength in all types of units.

Single-family starts in April were about unchanged at

an advanced 1.16 million unit annual rate. construction persisted into April.

Surprising strength in multifamily

Multifamily starts last month were at a

745,000 annual rate--the third month in the past four in which such activity topped the 700,000 mark.

For 1984 as a whole, multifamily starts

averaged 665,000, the strongest pace in more than a decade.

PRIVATE HOUSING CONSTRUCTION (Thousands of units, SAAR)

1984 Q4

Q1

1598

1793

1647

1883

1913

1.6

-1.9

1045 553

1122 671

1135 512

1171 712

1159 754

-1.0 5.9

-.3 -4.1

1564

1667

1624

1741

1656

-4.9

-7.4

1-family 2- or more-family

839 725

941 726

927 697

993 748

934 722

-5.9 -3.5

-3.9 -11.5

Mobile home shipments

292

277

276

283

n.a.

Starts 1-family 2- or more-family Permits issued

1. Revised. 2. Preliminary. n.a. Not available.

1

1985 Feb. 1 Mar. 1

Percent change in Apr. from Previous Year Earlier Month

Apr.2

n.a.

n.a.

May 17, 1985 3 MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted)1 ____

_

1983:Q4 to 1984:Q4 -------

5.2 7.7 10.4

1. Ml 2. M2 3. M3

Growth from Q1

Jan.

1985 Feb.

Q4 1984 to

Apr.

Mar.

Apr. 1985

Percentage change at annual rates ----

10.5 12.0 10.7

9.0 13.7 10.2

14.3 11.0 8.3

6.1 -0.8 0.7 Levels in billions of dollars Apr . 1985

Selected components 4.

Currency

5. Demand deposits 6.

Other checkable deposits

7.

M2 minus M12

8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.

3 Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, plus 4 MMDAs, NSA Small time deposits Thrift institutions Savings deposits, SA, plus 4 MMDAs, NSA Small time deposits

3.0

161.7

1.0

2.9

252.5

22.6

14.2

13.3

155.3

15.2

10.0

3.2

-2.8

1852.0

63.3

110.4

125.9

-36.3

-154.9

58.7

17.0 8.1

32.4 13.6

31.5 15.5

21.6 9.3

16.5 6.5

-8.8 8.9

176.1 803.0

5.2 11.1 7.3

29.3 -1.8 7.9

38.2 -7.1 7.1

26.0 -8.4 7.6

10.2 2.5 8.0

3.2 15.0 3.6

415.4 387.6 830.6

-3.6 15.5

17.8 -2.2

24.1 -3.4

25.5 -3.9

19.4 0.5

1.4 5.3

332.7 498.0

5.7

-3.3

-1.9

12.6

6.3

630.5

26.0 16.0 48.8

9.1 2.6 21.0

2.0 -9.5 22.1

12.3 23.1 -5.4

10.2 15.1 1.6

427.3 272.9 154.4

33.6 45.6 -8.0

31.2 -20.0 3.9

6.3

5.3

1.1

7.0

2.4

12.5

10.5

21.1

24.7

8.6

12.5

7.3

M3 minus M25 Large time deposits 6 At commercial banks, net At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA

MEMORANDA: Managed liabilities at commercial 23. banks (24+25) Large time deposits, gross 24. Nondeposit funds 25. Net due to related foreign 26. institutions, NSA 7 Other 27. 28.

6.0

7.2

44.0 -80.9 -30.3

8.3

7.2 9.6 : 2.3 -51.7 12.9 11.8

-52.1 53.0 55.6

2.0 68.2 -57.3

59.6 72.5 81.7

Average monthly change in billions of dollars -

4.7 3.2 1.5

4.1 1.4 2.7

-7.4 -1.0 -6.4

12.1 0.6 11.5

7.4 4.5 2.9

0.9 0.5

0.5 2.2

-4.5 -1.8

3.4 8.0

2.5 0.5

-8.9 2.7 -11.6 -3.2 -8.5

437.6 332.6 105.0 -33.8 138.7

U.S. government deposits at commercial

14.6 -1.2 2.8 -1.4 -1.7 banks8 0.2 -1.4 1. Quarterly growth rates are computed on a quarterly average basis. Dollar amounts shown under memoranda for quarterly changes are calculated on an end-month-of-quarter basis. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. Overnight and continuing contract RPs issued to the nonbank public by commercial banks plus overnight Eurodollar deposits issued by branches of U.S. banks to U.S. nonbank customers, both net of amounts held by money market mutual funds. Excludes retail RPs, which are in the small time deposit component. 4. Growth rates are for savings deposits, seasonally adjusted, plus money market deposit accounts (MMDAs), not seasonally adjusted. Commercial bank savings deposits excluding MMDAs declined during March and April 1985 at rates of 10.9 and 8.0 percent respectively. At thrift institutions, savings deposits excluding MMDAs increased in March 1985 at a rate of 2.9 percent and declined during April at a rate of 1.4 percent. 5. The non-M2 component of M3 is seasonally adjusted as a whole. 6. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 7. 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 and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. 8. Consists of Treasury demand deposits at commercial banks and Treasury note balances.

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

~

~

______

1984 Q3

1985 Q4

Q1

Feb.

Mar.

Apr.

Levels in bil. of dollars April

-----Commercial Bank Credit --------------------1.

2.

Total loans and securities at banks Securities

9.5

9.8

10.2

12.7

11.4

6.6

4.4

1.8

5.2

12.2

2.7

-13.0

401.2

5.0

-26.2

261.0

1765.4

3.

U.S. government securities

6.8

3.4

10.3

26.3

4.

Other securities

6.3

-5.6

-3.4

-13.5

-17.9

13.0

140.2

10.5

12.8

11.7

12.8

15.9

9.8

1364.3

5.

Total loans

6.

Business loans

7.5

7.8

10.2

12.8

17.7

1.5

481.0

7.

Security loans

2.8

37.5

16.5

-15.3

-7.8

19.5

31.2

8.

Real estate loans

11.4

12.1

10.9

13.3

11.6

12.4

389.8

9.

Consumer loans

14.2

16.1

17.4

14.6

19.6

16.5

265.5

-------------10.

Business loans net of bankers acceptances 2

7.9

7.9

8.2

26.0

7.8

8.7

Short- and Intermediate-Term Business Credit -----------

9.3

17.4

3.8

-76.0

-104.3

-25.4

6.9

5.9

12.3

2.7

495.8

-6.0

37.3

41.6

74.6

-45.1

11.

Loans at foreign branches

12.

Sum of lines 10 & 11

13.

Commercial paper issued by 3 nonfinancial firms

46.8

51.2

14.

Sums of lines 12 & 13

12.2

13.8

15.

Bankers acceptances: related4,5

-3.2

-6.5

11.2

12.5

4.4

9.8

23.2

21.1

10.9

14.4

16.

5.1

9.9

-13.2

9.0

7.6

18.5

570.4

U.S. trade

Line 14 plus bankers acceptances: U.S. trade related

17.

4 Finance company loans to business

18.

Total short- and intermediateterm business credit (sum of lines 16 & 17) --

477.3

9.8

-5.5

7.5

36.1 (Mar.)

-13.2

n.a.

9.3

7.4

n.a.

602.8

(Mar.)

22.0

7.8

n.a.

139.9

(Mar.)

11.8

7.5

n.a.

742.7 (Mar.)

0.0

--- n.a.--not available. 1. Average of Wednesdays for domestically chartered banks and average of current and preceding ends of months for foreign-related institutions. 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Average of Wednesdays. 4. Based on average of current and preceding ends of month. 5. Includes acceptances financing U.S. imports, U.S. exports and domestic shipment and storage of goods.

SELECTED FINANCIAL MARKET QUOTATIONS 1 (Percent) 1982/1983 Cyclical low Federal funds 2

Highs

1985 Previous lows

FOM: Feb. 13

1985 FOMC Mar. 26

8.46

11.63

8.25

8.52

8.57

8.27

-.30

Treasury bills 3 3-month 6-month 1-year

7.08 7.62 7.73

10.67 10.77 11.13

7.62 7.86 8.20

8.24 8.30 8.49

8.34 8.80 8.98

7.37 7.56 7.78

-.97 -1.24 -1.20

Commercial paper 1-month 3-month

8.00 7.97

11.42 11.35

7.86 7.90

8.47 8.56

8.63 8.75

7.90 7.93

-.73

Large negotiable CDs3 1-month 3-month 6-month

8.08 8.12 8.20

11.52 11.79 12.30

7.95 8.06 8.32

8.51 8.70 9.05

8.60 8.79 9.35

7.95 8.00 8.08

-.65

8.68 8.71

11.89 12.20

8.09 8.28

8.60 9.04

8.78 9.19

8.05 8.20

10.50.

13.00

10.50

10.50

10.50

10.50

10.11 10.86

12.82 13.20

8.22 9.13

8.77 9.64

8.86 9.74

7.42 8.21

-1.44 -1.53

U.S. Treasury (constant maturity) 13.49 3-year 9.33 13.99 10-year 10.12 10.27 13.94 30-year

10.18 11.06 11.16

10.44 11.39 11.31

10.97 11.77 11.72

9.62 10.81 11.02

-1.35

1984

Change from: FOMC May 16 Mar. 26

ort-term rates

Eurodollar deposits 4 1-month

3-month Bank prime rate Treasury bill futures June 1985 contract Dec. 1985 contract

-.82

-.79

-1.27 -. 73 -. 99

Intermediate- and long-term rates

-.96 -.70

Municipal revenue (Bond Buyer index)

9.21

11.44

9.60

9.965

10.245

9.34

-.90

Corporate--A utility Recently offered

11.64

15.30

12.51

12.65e

13.11e

12.24e

-.87

12.55

14.68 12.31 1984

12.90 10.59 1985 Previous Highs

13.246 10.976 1985 FOMC Mar. 26

13.026 10.616

-. 22

Home mortgage rates S&L fixed-rate S&L ARM, 1-vr.

n.a.

1983 Highs Stock prices Dow-Jones Industrial TYSE Composite EX Composite

Lows

1287.20 1086.57 1297.92 106.08 99.63 85.13 187.16 249.03 231.22 225.30 288.35 328.91 ASDAQ (OTC) as noted. i. One-day quotes except 2. Averages for two-week reserve maintenance period closest to date shown. Last observation is for maintenance period ended May 8, 1985. 3. Secondary market.

12.90 10.59 FOMC Feb. 13

-. 36

% change from: FDMC Mar. 26 May 16

1278.05 107.50 229.43 289.75 4. Averages for statement week

1297.92 106.08 231.22 288.32

1259.72 103.28 224.41 276.18

1.5 4.1 2.2 4.9 closest

to date shown. 5. One-day quotes for preceding Thursday. 6. One-day quotes for preceding Friday. e--estimated.