greenbooks · May 16, 1988

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

May 13,

SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the Federal Open Market Committee

By the Staff Board of Governors Of the Federal Reserve System

1988

TABLE OF CONTENTS

THE DOMESTIC NONFINANCIAL ECONOMY Page Retail sales ..................................... Business inventories............................. Producer prices .................................. Tables Retail sales ..................................... Changes in manufacturing and trade inventories.... Inventories relative to sales .................... Recent changes in producer prices ................

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

SUPPLEMENTAL NOTES

THE DOMESTIC NONFINANCIAL ECONOMY Retail sales Total retail sales fell 0.6 percent in April, after upward-revised increases of 1 percent in February and 1.7 percent in March.

These

figures suggest an upward revision to first-quarter real consumer spending of around $6 billion. In April, spending at automotive outlets fell 1 percent, as unit sales of autos and light trucks dropped back a bit from the March pace. Declines in spending also occurred in most other categories; apparel was an exception, posting an increase of 0.7 percent over the month. The upward revisions to sales in February and March were widespread across categories of stores.

Sales of apparel are now estimated to have

risen substantially in March, after a small gain in February; other large revisions were in food, furniture, and general merchandise. balance, spending in the retail control category

now shows an

increase of 1.2 percent for the first quarter, up from the 0.6 percent rise reported earlier. Business inventories In current cost terms, retail inventories rose $2.8 billion at an annual rate in March, after declines of $15.3 billion in January and $13.5 billion in February.

As in the first two months of this year, the

March retail inventory change was heavily influenced by sizable 1. The retail control category excludes sales at automotive dealers, building material and supply stores, and gasoline stations.

liquidations in auto dealers' stocks.

Nonauto retail inventories rose

at a $19.7 billion annual rate in March, and, for the first quarter as a whole, were up $13 billion, little changed from the $15.3

billion rate

of accumulation seen in the fourth quarter of last year. In March, there were large buildups in stocks in the general merchandise, furniture and appliances, and miscellaneous categories. For the G.A.F. grouping as a whole, inventories posted a $10.3 billion rise in March.

However, owing to the strong gain in sales in that

month, the inventory-sales ratio for this broad category of stores fell from 2.58 to 2.55. Producer prices The producer price index for finished goods rose 0.4 percent in April, somewhat less than the 0.6 percent increase in March.

Higher

energy prices accounted for about half of the increase in the PPI last month, reflecting particularly large increases for natural gas and home heating oil as well as further advances in gasoline prices.

Food prices

were up 0.4 percent in April, down a bit from March's 0.7 percent rise. Excluding food and energy, the PPI rose 0.1 percent in April, well below its average monthly increase of 0.4 percent in the first quarter. The prices of nonfood nonenergy consumer goods were unchanged last month, held down by falling prices for cars and light trucks.

Lower

motor vehicles prices also caused the rate of increase in capital equipment prices to slow to 0.2 percent in April; excluding motor vehicles, the PPI for capital equipment was up 0.3 percent, reflecting the strength in demand for a wide range of industrial equipment.

At earlier stages of processing, the PPI for intermediate materials (excluding food and energy) rose another 0.7 percent in April; over the last year, these prices have advanced 6.7 percent.

In April, increases

in intermediate materials prices were broad-based, led by metals, chemicals, and paper-related products.

RETAIL SALES (Seasonally adjusted percentage change) 1987 Q3

Total sales Previous estimate1

2.4

Total less auto dealers, nonconsumer stores, and gasoline stations Previous estimate1

Durable Automotive dealers & parts Previous estimate1

1.7 .8

-.6

-2.2

4.9

2.1

-. 6

-3.9

6.1 5.8

2.0 2.0

-1.0

-2.3

Other durable goods Previous estimate

1.7

2.1

2.1 2.9

2.4 -2.0

-. 2

.7 1.5

-. 9

1.8

-. 6

-. 4

1.1

Apparel Previous estimate

2.4

Food Previous estimate1

-. 4

General merchandise 2 Previous estimate

1.6

Other nondurables Previous estimatel

1.0 .6

-. 9

-2.5

3.4

Apr.

.7 .2

1.6

Gasoline stations Previous estimate

Feb.

1988 Mar.

1.2 .6

Furniture and appliances Previous estimate

Nondurable

1988 Ql

-.1 -.6

-1.4

-1.5

.4 .4 -1.0

2.5 .3

1.7 .6

1.5 1.1

-. 3

-2.0 -2.6

2.1 1.6

-. 5

-. 4 -1.2

3.7 1.4

-1.3

1.5 2.2

-1.6

Memo: GAF 3 Previous estimate

1. 2. also 3. --

1.3

1.2 .3

-. 2

Based on incomplete sample counts approximately one month ago. General merchandise excludes mail order nonstores; mail order sales are excluded in the GAF grouping. General merchandise, apparel, furniture, and appliance stores. Data are unavailable because of a future release date.

CHANGES IN MANUFACTURING AND TRADE INVENTORIES (Billions of dollars at annual rates; based on seasonally adjusted data) 1987

1988 Ql

Jan.

1988 Feb.

Mar.

81.4 27.9 23.8 29.6 14.2 15.3

40.4 22.9 26.2 -8.7 -21.6 13.0

62.1 37.9 39.5 -15.3 -21.7 6.4

34.3 20.8 26.9 -13.5 -26.3 12.8

25.0 9.9 12.3 2.8 -16.9 19.7

42.9 9.4 13.3 20.2 14.1 6.2

-------

65.9 33.3 39.1 -6.5 -10.5 4.0

12.6 15.2 13.7 -16.3 -16.4 .1

34.5 20.2 1.2 13.1 4.5 8.6

5.3 12.1 1.2 -8.0 -11.9 3.9

Current cost basis: Total Manufacturing Wholesale Retail Automotive Ex. auto Constant dollar basis: Total Manufacturing Wholesale Retail Automotive Ex. auto

INVENTORIES RELATIVE TO SALES 1 (Months supply; based on seasonally adjusted data) 1987 Q3

1988 Q1

Jan.

1988 Feb.

Mar.

1.50 1.58 1.29 1.58 1.73 1.53

Range in 2 Preceding 12 months: Current cost basis: low high Total Manufacturing Wholesale Retail Automotive Ex. auto

1.48 1.58 1.21 1.56 1.77 1.47

1.54 1.64 1.30 1.64 2.06 1.55

1.50 1.62 1.23 1.59 1.86 1,51

1.53 1.60 1.27 1.65 2.06 1.54

1.53 1.61 1.31 1.60 1.76 1.56

1.54 1.63 1.30 1.63 1.92 1.55

1.53 1.62 1.30 1.60 1.81 1.54

Total Manufacturing Wholesale Retail Automotive

1.48 1.60 1.23 1.50 1.70

1.53 1.65 1.33 1.60 1.89

1.49 1.63 1.24 1.54 1.68

1.52 1.61 1.29 1.61 1.90

------

1.53 1.62 1.33 1.59 1.79

1.53 1.62 1.34 1.56 1.70

Ex. auto

1.42

1.53

1.50

1.53

1.52

Constant dollar basis:

1. Ratio of end-of period inventories to average monthly sales for the period. 2. Highs and lows are specific to each series and are not necessarily coincidental.

RECENT CHANGES IN PRODUCER PRICES (Percentage change; based on seasonally adjusted data) Relative Importance Dec. 1987

1987 1987

1988 Q1

-Annual rate-

1988 Mar.

Apr.

-Monthly rate-

Finished goods Consumer foods Consumer energy Other consumer goods Capital equipment

100.0 25.9 9.6 40.1 24.4

2.2 -.2 11.2 2.7 1.3

3.8 -1.8 16.5 4.6 4.0

-1.9 -5.7 -9.6 1.7 -.7

2.3 5.6 -19.6 5.3 3.2

.6 .7 .9 .4 .4

.4 .4 3.1 .0 .2

Intermediate materials 2 Excluding energy

95.0 82.5

5.5 5.2

5.6 5.3

4.3 7.2

3.9 7.8

.6 .7

.8 .7

Crude food materials Crude energy Other crude materials

39.5 41.9 18.6

1.8 10.7 22.6

-4.8 5.9 39.4

-4.8 -15.2 18.0

16.7 -23.6 13.8

.8 -2.4 1.4

.4 2.5 .2

1. Changes are from final month of preceding period to final month of period adicated. 2. Excludes materials for food manufacturing and animal feeds.

MONETARY AGGREGATES (based on seasonally adjusted data unless otherwise noted)

19871

--------------1. 2. 3.

1987 Q4

1988 Q1

1988 Feb

May 12,

1988 Mar

Growth Q4 87Apr 88

Percent change at annual rates--------------------

Ml M2 M3

1.1 8.7 10.4 ---------------

1988 Apr

1988

11.2 9.9 6.8

Percent change at annual rates---------------

Levels bil. $ Apr 88

Selected components 4. 5. 6.

Ml-A Currency Demand deposits

Other checkable deposits

M2 minus M12

9. 10. 11. 12. 13. 14. 15. 16.

t24

Large time deposits At commercial banks, net5 At thrift institutions Institution-only money market mutual fund shares, NSA Term RPs, NSA Term Eurodollars. NSA

MEMORANDA:

24. Managed liabilities at commercial banks (25+26) 25. Large time deposits, gross 26. Nondeposit funds 27. Net due to related foreign institutions, NSA 7 Other 28. 29. U.S. government deposits at commercial banksa

4. 5. 6. 7.

9.2

499.9

9.4 -4.4

5.4 -8.7

9.6 9.2

202.5 290.1

13.6

8.5

8.2

14.4

270.3

3.2

7.8

11.4

9.5

2222.0

8.7 -1.0

Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares, NSA Commercial banks Savings Deposits, SA, plus MIDAs, NSA3 Small time deposits Thrift institutions Savings Deposits* SA, plus MMDAs, NSA3 Small time deposits

17. M3 minus

1. 2. 3.

-2.7

8.6

7.5

-12.3

-66.7

-49.2

40.1

77.4

12.0 3.5 -4.2 14.8 3.4 -11.6 16.0

19.5 7.2 2.7 13.7 8.7 -7.4 21.3

32.5 10.1 4.9 17.6 12.2 -5.1 25.0

20.3 9.9 8.7 11.6 5.1 18.0

6.1 6.5 0.4 14.8 9.2 3.3 13.8

236.2 946.5 544.1 402.4 963.8 401.5 562.4

10.7

11.3

6.7

16.7

1.6

-5.0

769.5

8.5 11.2 3.4

14.4 10.5 22.2

7.3 3.4 15.7

17.1 17.2 16.2

4.4 5.9 1.5

2.9 -3.3 15.3

492.7 325.5 167.2

3.0 29.9 12.9

20.2 -4.1 11.1

44.0 -0.4 -28.2

-15.8 -34.2 44.0

-67.8 4.5 -21.9

91.9 106.1 86.0

54.7 37.5 -8.5

12.7

-------- Average monthly change in billions of dollars-----

6.1 3.5 2.6 2.9 -0.3 0.3

5.3 5.4 -0.1

0.5 2.3 -1.8

2.5 5.3 -2.8

-1.2 1.7 -2.9

0.9 -1.0

-6.6 4.8

-6.4 3.5

0.4

-0.4

4.0

2.3

1.3 -2.0 3.3

569.1 394.1 175.0

2.1 1.3

-2.5 177.5

-3.0

21.9

Amounts shown are from fourth quarter to fourth quarter. Nontransactions MH is seasonally adjusted as a whole. Commercial bank savings deposits excluding MMDAs grew during March and April at rates of 14.6 percent and 5.9 percent, respectively. At thrift institutions, savings deposits excluding MMDAs grew during March and April at rates of 7.1 percent and 9.6 percent, respectively. The non-MZ component of M3 is seasonally adjusted as a whole. Net of large denomination time deposits held by money market mutual funds and thrift institutions. Dollar amounts shown under memoranda are calculated on an end-month-of-quarter basis. Consists of borrowing from other than commercial banks in the form of federal funds purchased, securitites sold under agreements to repurchase, and other liabilities for borrowed money (including borrowing from the Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. Consists of Treasury demand deposits and note balances at commercial banks.

COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT1 (Percentage changes at annual rates, based on seasonally adjusted data) 1986:Q4 to 1987:Q4

1987 Q4

Feb.

1988 Mar.

Apr.

Levels bil.$ p April

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

Total loans and securities at banks Securities

U.S. government securities

Other securities

7.9 7.9

2.5 2.5

7.5

8.3

8.2

11.9

2297.0

5.0

3.1

5.4

3.6

14.9

11.2

541.3

9.1

2.2

6.8

-0.4

17.6

14.2

342.9

4.7

2.7

10.5

10.4

6.1

198.4

8.8

2.3

8.2

9.8

6.2

12.2

1755.7

4.7

1.8

3.0

-3.8

20.0

578.8

76.6

165.3

-43.6

-51.3

38.1

10.6

11.2

11.1

11.4

603.6

9.9

8.8

14.5

11.1

337.3

5.1

-1.8

16.7

6.6

197.9

-1.3

Total loans

Business loans

7.5

Security loans

1.0

Real estate loans

Consumer loans

LO.

18.1 4.9

Other loans

-2.3

-110.2 13.2 4.5 -12.2

Short- and Intermediate-Term Business Credit 11.

Business loans net of bankers acceptances

12.

Loans at foreign branches 2

13.

Sum of lines 11 & 12

14.

Commercial paper issued by nonfinancial firms

15.

Sum of lines 13 & 14

16.

Bankers acceptances: related '

17.

7.6 -4.1 7.2

-1.6 6.0

1.4

3.2

113.2

92.3

4.3

5.8

8.8

6.7

4.9

7.1

-11.6

6.7

4.0

5.0

5.4 -35.9 4.1

23.9

-4.4

20.4

575.1

- 6.2

19.4

-1.4

19.3

594.5

11.3

40.6

16.2

89.9

6.5

3.9

18.9

684.4

85.7

U.S. trade

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

13.3

6.3

-24.6

n.a.

33.65

3.9

n.a.

706.25

18.

Finance company loans to business 3 16.6

24.1

8.4

3.8

9.5

n.a.

214.75

19.

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

10.5

5.0

4.8

5.0

n.a.

920.95

8.4

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

SELECTED FINANCIAL MARKET QUOTATIONS 1 (Percent) 1987 Jan.-Feb. Oct. 16 lows

Feb lows

1988 FOMC Mar 29

Change from: FOMC Oct. 16 Mar 29

May 12

Short-term rates Federal funds 3 Treasury bills 3-month 6-month 1-year

5.95

7.59

6.38

6.56

7.03

-.56

5.30 5.31

5.35

6.93 7.58 7.74

5.59 5.77 6.10

5.74 6.04 6.36

6.21 6.43 6.83

-1.15 -.91

Commercial paper 1-month 3-month

5.81 5.73

7.94 8.65

6.41 6.45

6.62 6.68

7.10 7.20

-.84 -1.45

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

5.85 5.80 5.78

7.92 8.90 9.12

6.44 6.49 6.55

6.60 6.67 6.88

7.06 7.25 7.56

-.86 -1.65 -1.56

Eurodollar deposits 5 1-month 3-month

6.00 6.00

7.79 8.69

6.60 6.69

6.70 6.75

7.09 7.34

-1.35

Bank prime rate

7.50

9.25

8.50

9.00

-.25

6.34 7.01 7.29

9.52 10.23 10.24

7.28 8.11 8.32

7.66 8.56 8.81

8.18

-1.34

9.04 9.17

-1.19 -1.07

Municipal revenue(Bond Buyer)

6.92

9.59

7.76

8.27

8.26

-1.33

Corporate A utility (recently offered)

8.78

11.50

9.63

10.07e

10.58e

9.10 7.52

11.58 8.45

9.84 7.59

9.99 7.52

-.72

-.70

Intermediate- and long-term rates U.S. Treasury (constant maturity) 3-year 10-year 30-year

-. 01

-.92

Home mortgage rates 7 S&L fixed-rate S&L ARM, 1-yr. 1986

Year-end

Lows

FOMC Mar 29

May

-1.26 -.82

.33 .11

Percent change from:

1988

1987 Record highs

10.32 7.63

Record highs Lows

FOMC Mar 29

Stock prices 1968.00 -27.71 13.19 -1.02 2722.42 1738.74 1988.34 Dow-Jones Industrial 1895.95 143.78 -23.52 14.19 -2.34 147.22 187.99 125.91 138.58 NYSE Composite .89 296.96 -18.64 28.06 294.33 365.01 231.90 263.27 AMEX Composite 372.96 370.23 -18.68 26.84 -.73 291.88 455.26 348.83 NASDAQ (OTC) 4. Secondary market. 1. One-day quotes except as noted. 5. Average for statement week closest 2. Last business day prior to stock market to date shown. decline on Monday, October 19, 1987. 6. One-day quotes for Thursday. 3. Average for two-week maintenance period 7. Quotes for week ending Friday closest closest to date shown except lows shown which are one-week average ending Feb.25 and Feb.10, to date shown. e--estimate. respectively. Last observation is average to date for maintenance period ending 5/18/88.

Cite this document

APA

Federal Reserve (1988, May 16). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19880517_part2

BibTeX

@misc{wtfs_greenbook_19880517_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1988},
  month = {May},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19880517_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}