greenbooks · October 1, 1990

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 28, 1990

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

Page THE DOMESTIC NONFINANCIAL ECONOMY

Probability of recession . . . . . . . . Charts Probability of a recession . . . . . . . Unemployment insurance . . . . . . . . . THE FINANCIAL ECONOMY Tables Monetary aggregates . . . . . . . . . . Commercial bank credit and short- and . intermediate-term business credit Selected financial market quotations . THE INTERNATIONAL ECONOMY Prices of imports and exports. .

. . . .

Table Import and export price measures

. .

SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Probability of Recession The latest readings on recession-probability measures based on indexes of leading economic indicators are quite mixed.

The measure based on the

Commerce Department's August index of leading economic indicators puts the probability of a recession starting in the next six months at 38 percent. The sudden deterioration is largely attributable to the substantial declines in the Michigan survey index of consumer expectations, the stock market, and contracts and orders for plant and equipment (1982 dollars). The most recent reading on the NBER measure, which includes July nonfinancial data as well as exchange rates and interest rates through September 25, shows a 3 percent probability that the economy will be in a recession in February 1991.

Researchers at the NBER also have constructed

an alternative version of their experimental leading index that excludes financial variables.

The probability of a recession based on this

alternative index is 24 percent.

-2Probability of a Recession * GENERATED FROM COMMERCE LEADING INDEX

August .38

1 Ql

I. ..I.*l

Ii 1

[1 -

ii :! l^

iIi:i i3

t Iiiiiil

I!iiiiit

MifI1~y1El 1i 1968

" "

1972

Fl ~~~i

1976

iLL-L/lW-

fi!iii 1984

1980

1988

GENERATED FROM NBER LEADING INDEX

1989

:iiii::

1990

It LI

Mt *1

K:;:!::i::]

1: 1

ii14

-0.4

1i 1ii · I-·

1971

· ·I1II · L__LI-.

1975

rI :... 11'.

1 1 1' -

1979

0.6

.. 1--1 . .

Lmi 1983

*Each probability represents the likelihood that a recession will begin during the next six months.

JNAAAJA 1987

0.2

-3-

Unemployment Insurance (Weekly data; seasonally adjusted, FRB basis <1>)

Initial Claims

Thousands

S440 420

400 Sep 15 390.5 380

All regular programs

S360 340 320 300 280 i I 1986

1987

,II 1988

260 1989

1990

Insured Unemployment

Millions

3.0

2.8 All regular programs Sep 8 2.62

2.6

2.4

2.2

2.0

1986

1987

<I> Only the state program components of these series are seasonally adjusted.

1988

1989

1990

1.8

-4MONETARY AGGREGATES (based on seasonally adjusted data unless otherwise noted)

Growth 1989,

------------

1990 Q2

1990 Q3pe

1990 Jul

1990 Aug

1990 Q4 89Sep pe Sep 90pe

Percent change at annual rates--- -----------3.5

4¼

2.9

0.8

1½

-0.3 1.7 0.9

----

10,4 6.6

9 6

4¾ 44

4.6

2 Levels

------------

Percent change at

annual rates------------

bil. S Aug 90

Selected components 4. 5. 6. 7. 8. 9. 10.

MI-A Currency Demand deposits Other checkable deposits MZ minus Ml

11. 12. 13.

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

14. 15.

Thrift institutions 3 Savings deposits plus MMDAs

16.

Small time deposits

4 17. M3 minus M2

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

0.4

1.6

5.4

14.8

524.3

4.8 -2.8

9.2 -4.7

11½ 2½

10.3 1.3

14.8 14.0

16 6

238.3 278.0

1.0

7.1

-½

-10.2

291.9

5.9

2.6

2.4

2485.5

-8.6

-1.5

3½

20.4

-13

82.7

29.7 7.5 -1.7 19.0 -0.2 -9.3 5.8

-0.7

124

10.3

11%

-13¼

11.9 13.0 7.2 18.9 -11.9 -5.4 -15.7

-1.3

-7.4

-44

-2.3

-3.8

4.2 9.9 -7.8

-10.3 -2.8 -30.1

-8½

-5.2

-½

5.4

-31½

-36.5

-14.5 -9.9 -28.4

17.9 -19.5

17.1 -14.7

-21.9

8.6 12.1

-4.6 1.4 -8.0

11,5 5.0 -23.4

7½ 15-10¼

-5¼

5½ -4%

-5.6

5.3 -17.2

333.8 1141.8 570.4 571.4 929.6 351.4 578.2

32.1 7.5 8.3 7.0

-3.5 -2.7 -3.9

56.2 24.7 28.1

-14

786.1 524.0 396.3 127.7

114.0

-27

99.1

65.5

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

24. Managed liabilities at commercial 25. 26. 27.

banks (25+26) Large time deposits, gross Nondeposit funds Net due to related foreign

institutions 7

Other 28. 29. U.S. government deposits at commercial 8 banks

6.0 2.6 3.5

-1.3 -1.5 0.2

0 -2 2

12.6 1.3 11.3

-3.6 -3.2 -0,4

733.7 450.8 282.9

-0.9 1.0

-½ 2z

2.0 9.4

0.0 -0.4

-3 -2

0.4

-5.5

18.3

-5

16.8 266.2 33.2

1. Amounts shown are from fourth quarter to fourth quarter. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. Commercial bank savings deposits excluding MMDAs grew during August and September at rates of 1.2 percent and 5 percent, respectively. At thrift institutions, savings deposits excluding MMDAs grew during August and September at rates of -1.6 percent and -5 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. Dollar amounts shown under memoranda are calculated on an end-month-of-quarter basis. 7. Consists of borrowing from other than commercial banks in the form of federal funds purchased, securities sold under agreements to repurchase, and other liabilities for borrowed money fincluding borrowing from the Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. 8. Consists of Treasury demand deposits and note balances at commercial banks.

pe - preliminary estimate

-5COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage changes at annual rates, based on seasonally adjusted data) 1988:Q4

to 1989:Q4

1990 Q1

----------------------1.

Total loans and securities at banks Securities

June

July

Aug. p

Levels bil.$ Aug. p

Commercial Bank Credit ---------------------

7.5

7.4

5.2

7.1

6.9

10.3

2707.8

4.1

17.8

9.3

15.0

3.7

4.3

620.5

U.S. government securities

10.0

27.2

15.2

22.3

5.7

1.9

441.3

Other securities

-6.7

-2.6

-4.7

-2.7

-. 7

9.4

179.2

8.5

4.4

4.0

4.8

7.9

12.1

2087.3

6.9

2.5

4.7

6.1

1.3

3.7

653.1

13.3

10.7

9.4

7,7

10.9

5.0

811.9

Total loans

Business loans

Real estate loans

Consumer loans

6.3

4.5

-. 7

-2.8

5.7

380.1

Security loans

3.8

-26.1

-20.4

17.2

119.0

222.7

46.0

Other loans

1.5

-7.4

-6.5

12.1

41.1

196.2

.0.

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

Business loans net of bankers acceptances

12.

Loans at foreign branches

1.9

-5.0

21.6

6.5

Sum of lines 11 & 12 14.

7.0

2.7

4.1

645.9

-15.9

22.3

3.4

668.2

13.3

145.6

Commercial paper issued by nonfinancial firms

31.2

24.5

9.3

5.0

15.

Sum of lines 13 & 14

10.0

6.2

5.6

5.5

16.

Bankers acceptances: related

-19.8

-9.8

23.0

-26.3

n.a.

9.8

4.9

6.3

-1.3

n. a.

842.1

10.6

15.4

25.9

23.5

n.a.

275.6

10.9

4.7

n.a.

17.

-13.2 -.1

5.2

813.8

U.S. trade 6.1

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)

10.0

5.0

7.4

31.25

1117.75

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. July data. p--preliminary. n.a.--not available Note: Data have been revised to reflect benchmarking to the March 31, 1990 call report.

-6-

1 SELECTED FINANCIAL MARKET QUOTATIONS (percent)

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

1987

1989

1990

Change from: -----------------------------------

March highs

Oct 16

Dec lows

FOMC Aug 21

Sept 27

Mar 89 highs

Dec 89 FOMC Aug 21 lows

Short-term rates 3

7.59

9.85

8.45

8.16

8.25

-1.60

-0.20

0.09

Treasury bills 3-month 6-month 1-year

6.93 7.58 7.74

9.09 9.11 9.05

7,53 7.29 7.11

7.57 7.48 7.37

7.23 7.23 7.20

-1.86 -1.88 -1.85

-0.30 -0.06 0.09

-0.34 -0.25 -0.17

Commercial paper 1-month 3-month

7.94 8.65

10.05 10.15

8.51 8.22

8.06 7.94

8.27 8.15

-1.78 -2.00

-0.24 -0.07

0.21 0.21

7.92

8.90 9.12

10.07 10.32 10.08

8.52 8.22 8.01

8.06 8.07 8.07

8.28 8.27 8.28

-1.79 -2.05 -1.80

-0.24 0.05 0.27

0.22 0.20 0.23

8.00 9.06

10.19 10.50

8.38 8.25

8.06 8.06

8.19 8.25

-2.00 -2.25

-0.19 0.00

0.13 0.19

9.25

11.50

10.50

10.00

-1.50

-0.50

0.00

(constant maturity) 9.52 9.88 9.53 10.23 10.24 9.31

7.69 7.77 7.83

8.32 8.84 8.94

8.28 8.91 9.05

-1.60 -0.62 -0.26

0.59 1.14 1.22

-0.04 0.07 0.11

Federal funds

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

Bank prime rate

Intermediate- and long-term rates U.S. Treasury 3-year 10-year 30-year

Municipal revenue' (Bond Buyer)

9.59

7.95

7.28

7.53

7.81

-0.14

0.53

0.28

Corporate--A utility recently offered

11.50

10.47

9.29

10.36

10.27

-0.20

0.98

-0.09

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

11.58 8.45

11.22 9.31

9.69 8.34

10.05 8.31

10.16 8.30

-1.06 -1.01

0.47 -0.04

0.11 -0.01

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

1989 Record highs

Date

Lows Jan 3

1990 FOMC Aug 21 Sept 27

Percent change from: Record highs

1989 lows

FOMC Aug 21

13.19 6.70 0.06 -9.87 4.48

-6.78 -6.54 -6.69 -10.14 -6.95

Stock prices Dow-Jones Industrial 2999.75 201.13 NYSE Composite 397.03 AMEX Composite 485.73 NASDAQ (OTC) 3523.47 Wilshire

7/16/90 2144.64 2603.96 2427.48 154.98 176.94 165.36 7/16/90 305.43 10/10/89 305.24 327.34 378.56 379.68 341.19 10/9/89 10/9/89 2718.59 3052.54 2840.36

I/ One-day quotes except as noted. 2/ Last business day prior to stock market decline on Monday Oct. 19, 1987. 3/ Average for two-week reserve maintenance period closest to date shown. Last observation is average to date for the maintenance period ending October 3, 1990.

-19.08 -17.78 -23.07 -29.76 -19.39

4/ Secondary market. 5/ Bid rates for Eurodollar deposits at 11 a.m. London time. 6/ Based on one-day Thursday quotes and futures market index changes 7/ Quotes for week ending Friday closest to date shown.

-7THE INTERNATIONAL ECONOMY Prices of Imports and Exports Prices of imports rose 3.9 percent in August, following a 2.1 percent decline between January and July.

This increase was primarily the result of

a 39.6 percent rise (monthly rate) in the price of imported petroleum.

August, the price of imported oil reached its highest level since December 1985. Prices of non-oil imports also rose in August by 0.5 percent, marking the first monthly increase since March.

The rise in prices of imported

automotive products was the largest since last October, and the increase in prices of imported capital goods was the largest since March; prices of imported consumer goods also moved up following several months of declines. The dollar's depreciation against the yen and European currencies contributed some of the upward pressure on prices for these types of imported manufactured goods; a significant proportion of prices of these goods are reported in foreign currencies. Export prices declined slightly in August, largely a result of a drop in prices of agricultural commodities.

Of the increase in prices of

exported nonagricultural items, most of the rise was attributable to higher prices of fuel.

1. Prices are sampled during the first week of the month. Foreign currency prices are translated into dollars using the average exchange rate of the preceding full month. Thus, the exchange rate used to translate August foreign currency prices was the average for July.

-8IMPORT AND EXPORT PRICE MEASURES (percentage change from previous period, annual rate) Year 1990-02 1989-02

1989 04

Quarters 1990 01 02

(annual rates)

Months 1990 July Aug (monthly rates)

BLS Prices - 3.7 -6.4 7.3 11.5 2.2 -0.4 8.6 -18.1 -3.8 -2.2 -2.2 2.8 9.1 -0.9 -5.4 5.7 -0.3 4.1 6.9 0.3

0.1 -0.3 0.2 -0.3* -0.1 0.2 -0.3

3.9 0.9 12.0 0.1* 0.8 0.8 0.4

-14.3 0.4

35.8 2.9

3.3 3.8

-42.8 -2.1

1.4 -0.2

39.6 0.5

Exports, Total Foods, Feeds, Bev. Industrial Supplies Capital Goods Automotive Products Consumer Goods

0.1 -7.2 -2.2 2.9 2.8 3.5

0.0 -7.4 -2.7 2.2 4.8 2.1

1.8 3.3 0.0 4.1 1.8 6.3

1.4 5.7 -1.7 2.2 1.4 2.4

0.3 0.6 0.0 0.3 0.1 0.2

-0.1 -4.5 1.3 0.3 0.0 0.0

Memo: Agricultural Nonagricultural

-4.0 0.6

-4.9 0.4

-1.1 2.1

7.1 0.4

0.3 0.2

-4.2 0.7

Imports, Total Foods, Feeds, Bev. Industrial Supplies Ind Supp Ex Oil Capital Goods Automotive Products Consumer Goods Memo: Oil Non-oil

-1.0 0.8 -7.2 -3.9 2.4 0.0 3.1

Fixed-Weight Imports, Total Oil Non-oil

5.2

- -

Prices in the GNP Accounts -

-2.4 -13.7 -0.6

3.2 20.9 0.7

10.1 48.2 4.9

-12.3 -56.7 -2.3

Exports, Total Ag. Nonag.

0.0 -3.0 0.6

-2.2 -15.2 0.6

3.8 2.7 4.1

1.5 10.7 -0.2

Deflators Imports, Total Oil Non-oil

-4.0 -13.7 -2.8

0.4 20.9 -3.7

Exports, Total Ag. Nonag.

-1.0 -3.0 -0.7

-2.7 -15.2 -1.1

*Not for publication.

5.4 48.2 2.8 -0.6 2.7 -1.2

-8.7 -56.6 -1.1 4.7 10.7 4.4

Cite this document

APA

Federal Reserve (1990, October 1). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19901002_part2

BibTeX

@misc{wtfs_greenbook_19901002_part2,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1990},
  month = {Oct},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19901002_part2},
  note = {Retrieved via When the Fed Speaks corpus}
}