greenbooks · September 22, 1986

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.

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

September 19, 1986

SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the Federal Open Market Committee

By the Staff Board of Governors of the Federal Reserve System

SUPPLEMENTAL NOTES

THE DOMESTIC NONFINANCIAL ECONOMY

Personal income Total personal income rose at a $12-3/4 billion annual rate in August, a bit faster than the average advance during the first seven months of the year.

According to the Commerce Department, recent estimates of personal

income have been influenced by three special factors: a large increase in retroactive social security benefit payments in July, changes in subsidy payments to farmers in July and August, and smaller wage and salary disbursements in June owing to the strike at AT&T.

Excluding these special

factors, personal income increased $16 billion in August and $6.9 billion in July.

During August, wages and salaries rose at a $12-1/4 billion

annual rate, fueled by the gains in employment, hours, and wages reported in the establishment survey earlier this month.

Elsewhere, farm income

rose $2.7 billion owing to some additional "advance deficiency payments" made to farmers, while transfer payments declined $4.4 billion reflecting the absence of the retroactive social security payments made in July. Personal consumption spending surged $31.3 billion in August, a 13.6 percent annual rate of increase.

The advance largely reflected strong

outlays for durable goods associated with the elevated pace of new car sales last month, while spending on both nondurables and services was rather sluggish.

The increase in consumption outstripped the rise in income, and

the personal saving rate dropped nearly 1 percentage point to 3.1 percent.

PERSONAL INCOME AND EXPENDITURES (Based on seasonally adjusted data) 1986 1984

1985

June

1986 July

Aug.

Percentage changes at annual rates 1 -

Total Personal Income Nominal Real 2

8.4 4.7

6.1 2.4

6.0 4.9

6.0 7.3

.2 -5.1

3.7 1.6

4.4 -

Disposable Personal Income Nominal Real

8.0 4.2

5.6 1.9

7.6 6.5

6.1 7.1

-2.2 -7.5

3.0 1.9

3.0 -

Expenditures Nominal Real

8.7 3.6

6.0 3.5

4.6 3.6

5.2 6.2

9.7 4.3

5.2 4.1

Total personal income Wages and salaries Private Manufacturing Other income

20.4 12.7 10.7 2.8

8.7

Changes in billions of dollars 3 16.8 10.6 8.1 1.5

9.0 6.9 5.5 -.3

12.3 3.8 2.0 -. 9

.6 4.8 3.0 -1.9

10.7 6.6 4.7 -. 4

12.7 12.2 10.0 3.2

7.6

3.8

8.5

-4.8

4.8

1.3

8.1

-5.4

7.4

7.5

Disposable personal income

16.3

13.5

11.4

Expenditures Durables Nondurables Services

21.9 2.5 4.3 7.6

9.0 1.9 3.6 11.0

.3 -6.2 2.6 3.9

6.3

5.1

5.0

Personal saving rate (percent)

13.6 -

16.0 22.1 7.4 -4.8 .1 9.8 8.5 17.2 5.1

4.2

12.0 1.6 1.3 9.0

31.3 26.9 2.1 2.4

4.0

3.1

1. Changes over periods longer than one quarter are measured from final quarter of preceding period to final quarter of period indicated. Changes for quarterly periods are compounded rates of change; monthly changes are not compounded. 2. Total personal income is deflated by the personal consumption expenditure deflator. 3. Average monthly changes are from the final month of the preceding period to the final month of period indicated; monthly figures are changes from the preceding month.

MONETARY AGGREGATES (Based on seasonally adjusted data unless otherwise noted) 1984:04 to 1985:04 ---1. 2. 3.

M1 M2 M3

11.9 8.7 7.7

1986 June

September 19, 1986

July

Aug

Growth from Q4 1985 to Aug. 198 6 P

Percentage change at annual rates --7.7 4.3 7.6

15.8 10.5 9.0

14.8 9.4 8.6

16.7 12.9 13.0

20.8 10.8 8.6

14.5 8.9 Levels in billions of dollars Aug. 1986P

Selected components 4.

Currency

5. Demand deposits 6.

Other checkable deposits

M2 minus M12

8. 9. 10. 11. 12. 13. 14. 15

Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings deposits, SA, 3 plus MMDAs, NSA Small time deposits Thrift institutions Savings deposits, SA, 3 plus MMDAs, NSA Small time deposits minus M24

17. 18. 19. 20. 21. 22.

Large time deposits At commercial banks, net 5 At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars, NSA -

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 Other 6 27. 28.

7.5

6.2

8.6

3.0

15.2

22.3

15.0

7.7

6.1

5.4

10.1

179.0

14.1

14.3

14.6

291.8

25.8

24.0

29.5

38.8

210.5

3.3

8.7

7.7

11.6

7.5

2035.7

20.0

5.9

-1.8

-48.6

99.5

38.4

74.1

9.3 9.1

10.9 7.2

27.1 5.8

24.8 7.5

13.4 6.1

4.8 5.4

200.2 876.2

19.0 -0.6 5.1

8.7 5.3 4.3

13.2 -3.1 7.3

21.4 -9.7 7.2

15.3 -5.7 7.3

19.3 -12.3 3.5

500.2 376.1 891.3

13.7 -0.4

1.3 6.6

13.8 2.6

24.9 -5.7

17.7 -0.5

16.5 -6.2

390.3 501.1

3.8

20.7

3.4

5.2

13.6

-0.4

676.1

5.7 5.1 6.8

15.6 18.5 10.0

-1.9 -8.8 11.0

-3.2 -4.3 -2.2

0.8 -3.4 8.0

4.6 6.0 2.2

447.1 281.1 166.0

11.1 -4.0 -4.9

26.8 46.3 8.7

39.2 19.3 6.0

-17.3 21.0 9.0

40.0 -9.5 -14.9

80.8 75.5 79.5

Average monthly change in billions of dollars -

2.5 1.0 1.5

7.7 3.4 4.3

-5.4 -2.6 -2.8

-3.7 -0.6 -3.1

1.9 -1.4 3.3

6.0 4.2 1.8

480.4 342.6 137.8

0.4 1.1

2.2 2.2

-1.7 -1.2

-2.3 -0.8

-5.8 9.1

0.0 1.8

-30.2 168.0

U.S. government deposits at commercial banks 7 0.2 -0.6 0.9 -2.8 -3.8 -1.6 13.1 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. Growth rates are for savings deposits, seasonally adjusted, plus money market deposit accounts (MMAs), not seasonally adjusted. Commercial bank savings deposits excluding MMDAs increased during July and August 1986 at rates of 22.9 percent and 30.6 percent, respectively. At thrift institutions, savings deposits excluding MMDAs increased during July and August 1986 at rates of 22.3 percent and 17.0 percent, respectively. 4. The non-M2 component of M3 is seasonally adjusted as a whole. 5. Net of large-denomination time deposits held by money market mutual funds and thrift institutions. 6. ists of borrowings from other than commercial banks in the form of federal funds purchased, securities sold eements to repurchase, and other liabilities for borrowed money (including borrowings from the Federal and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. 7. ists of Treasury demand deposits and note balances at commercial banks. p--preliminary

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

1985 04

Total loans and securities at banks Securities

U.S.

Other securities

government securities

Total loans

July

9.3

3.9

3.8

13.0

13.5

2007.4

19.9

2.0

4.9

6.3

34.3

29.8

483.2

-3.5

-5.3

7.9

3.1

46.3

22.7

290.8

62.5

12.8

0.7

11.2

16.3

40.6

192.4

8.9

11.6

3.6

3.0

6.5

8.6

1524.2

0.0

4.0

510.4

Business loans

6.0

5.3

2.1

4.7

Security loans

4.0

101.7

-62.0

-100.9

64.9

Real estate loans

13.0

13.4

11.6

13.8

Consumer loans

11.0

6.7

5.0

4.3

7.3

-1.6

10.

8.5 10.2

Other loans

Levels in bil. of dollars Aug.AugustP

11.5

12.6

1986

Commercial Bank Credit -

1985 O4

1986 June

September 19,

-0.6

-3.0

-16.1

44.2

14.2

461.3

5.1 18.1

306.9 201.4

Short- and Intermediate-Term Business Credit ------11. 2.

Business loans net of bankers acceptances Loans at foreign branches

6.1

Sum of lines 11 & 12

5.2

-16.5

0.0

5.2

5.1 -14.4

1.0 -21.5 0.2

3.6

0.7

-26.7

34.1

2.5

1.6

13.1

-21.6

3.8 -19.9

505.4 17.8

3.0

523.2

60.1

85.9 609.1

14.

Commercial paper issued by 3 nonfinancial firms

55.5

15.

Sums of lines 13 & 14

11.9

2.1

-1.2

4.0

-1.6

10.7

16.

Bankers acceptances: 4 5 related ,

-30.8

-6.2

16.3

25.8

14.5

n.a.

33.6 (July)

9.5

1.8

-0.4

5.1

-0.8

n.a.

637.3 (July)

19.2

16.4

3.8

-2.3

2.3

n.a.

158.8 (July)

11.3

4.5

0.5

3.8

-0.5

n.a.

796.0 (July)

17.

U.S.

-10.3

trade

Line 15 plus bankers acceptances: U.S. trade related

18.

Finance company loans to business

19.

Total short- and intermediateterm business credit (sum of lines 17 & 18)

n.a.-not available. p-preliminary 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. Consists of acceptances that finance U.S. imports, U.S. exports and domestic shipment and storage of goods.

19-Sep-86

SELECTED FINANCIAL MARKET QUOTATIONS 1/

(percent)

1984

1985

1986

Highs

March High

FOMC April Lows Aug 19

11.63

8.58

6.95

6.33

5.83

-1.12

-0.50

10.67 10.77 11.13

8.80 9.13 9.25

5.79 5.81 5.79

5.56 5.57 5.56

5.23 5.42 5.53

-0.54 -0.39 -0.26

-0.33 -0.15 -0.03

11.42 11.35

8.94 9.12

6.42 6.30

6.11 5.96

5.77 5.72

-0.65 -0.58

-0.34 -0.24

11.52 11.79 12.30

8.89 9.29 9.92

6.51 6.39 6.35

6.03 5.93 5.92

5.76 5.74 5.74

-0.75 -0.65 -0.61

-0.27

Eurodollar deposits 4/ 1-month 3-month

11.89 12.20

8.89 9.58

6.59 6.55

6.33 6.26

6.01 5.96

-0.58 -0.59

-0.32 -0.30

Bak prime rate

13.00

10.50

8.50

8.00

7.50

-1.00

-0.50

13.49 13.9 13.4

11.22 12.02 11.97

6.49 6.98 7.14

6.38 7.02 7.19

6.75

7.62

7.74

0.26 0.64 0.60

0.37 0.60 0.55

Muanicipal reverue 5/ (Bond Buyer index)

11.44

10.25

7.55

7.43

7.57

0.02

0.14

Corpoate-A utility 6/ Recently offered

15.30

13.23

9.15

9.42

9.57

0.42

0.15

Home iDrtgage rates 6/ S&L fixed-rate S&L ARM, 1-yr.

14.68 12.31

132 11.14

9.86 8.41

10.23 8.42

9.96 8.18

0.10 -0.23

-0.27 -024

1986

Change from:

Sept 18

April Lows

FOMC

Aug 19

Short-term rates Federal funds 2/ Treasury bills 3/

3-month 6-month 1-year

Commercial paper 1-month

3-month

Large negotiable CD's 3/

-0.19

-0.18

termediate- and long-tem rates

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

1984 Laus

1985

1986

March

Record Highs

1986 Aug 19 Aug 19

Sept 18 Sept 18

Percent charge ftrm: Record FMC Highs Aug 19

Stock prices Dow-Jones Industrial NYSE Cceposite AMEX Capsite NASDAQ (OC)

1086.57 1247.5 1919.71 85.13 102.A 145.75 222.28 285.19 187.16 225.30 276.18 411.16

1862.91 1774.18 141.91 133.65 270.59 2.5;7

378.82

' One-day quotes except as noted. ' Averages for two-week reserve maintenance period closest to date shown. Last observation is the average for the maintenance period ending Sept. 10, 1986.

Secacdary market.

3w8.60

-7.58 -8.30 -9.71 -15.22 4/ Averages for statement week closest to date shown. S hursday quotes. Friday quotes. e-estimate

Cite this document

APA

Federal Reserve (1986, September 22). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19860923_part3

BibTeX

@misc{wtfs_greenbook_19860923_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1986},
  month = {Sep},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19860923_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}