greenbooks · March 30, 1992

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

March 27.

SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the Federal Open Market Committee

By the Staff Board of Governors of the Federal Reserve System

1992

TABLE OF CONTENTS

Page THE DOMESTIC NONFINANCIAL ECONOMY Gross domestic product, 1991:Q4 . . . . . . . Personal income and consumption. . . .. . . .

. . . . . . . .

1 2

Tables Real gross domestic product and related items. . . . Personal income. . . . . . . . . . . . . . . . . . . Real personal consumption expenditures .. . . . . ..

. .

3 4 4

. . . . . . . .

5 6

Charts

Consumer attitudes . . . . . . . . . . . . Unemployment insurance . . . . . . . . . .

. . . .

THE FINANCIAL ECONOMY The March 1992 Senior Financial Officer Survey .

Tables

Senior Financial Officer Survey on demand deposits at selected large banks in the U.S.. . . . . . . ...11 16 . . . .. . . . . . . . . .. ... Monetary aggregates 17 Selected financial market quotations . . . . . . . . THE INTERNATIONAL ECONOMY Import and export prices . . ...

. . . . . .

. .

SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY

Gross Domestic Product, 1991:Q4 BEA now estimates that real gross domestic product (GDP) rose at an annual rate of 0.4 percent in the fourth quarter of 1991, about 1/2 percentage point less than the preliminary estimate released last month.

Final sales are still estimated to have edged

lower in the fourth quarter, with a downward revision to net exports offsetting upward adjustments to consumer outlays and business equipment spending; revisions to the other components of final sales were quite small.

The accumulation of nonfarm inventories last

quarter is now estimated to have been slightly smaller than was reported a month ago, but this revision does not alter our view that stocks were undesirably heavy at year-end.

The GDP fixed-weight

price index is estimated to have risen at an annual rate of 2.1 percent in the fourth quarter, 0.1 percentage point below the preliminary estimate. The personal saving rate for the fourth quarter was revised down from 5.3 percent to 5.2 percent in this report, reflecting the lower level of disposable income and the upward revision to consumer spending.

Note that last month BEA erroneously reported the fourth-

quarter saving rate to have been 5.4 percent instead of 5.3 percent; BEA has confirmed that there was a typographical error in last month's release. The BEA report contained the first estimate of corporate profits for the fourth quarter.

On an economic basis, profits rose

nearly 3-1/2 percent (not at an annual rate) last quarter, reaching a level about 7 percent above that of a year earlier.

The fourth-

quarter gain was concentrated in domestic nonfinancial industries. The share of economic profits in nominal GDP edged up last quarter

-2to 5.5 percent, but stood only 0.2 percentage point above the cyclical low registered in the fourth quarter of 1990. Personal Income and Consumption Nominal personal income rebounded strongly in February, after declining somewhat in January; this monthly pattern occurred because both private payrolls and federal subsidy payments to farmers contracted in January and then turned up in February.

After

adjusting for price change and tax payments, real disposable personal income in January and February was, on average, 0.6 percent (not at an annual rate) above the level in the fourth quarter of 1991. The BEA estimates for personal outlays in January and February represent a fairly literal translation of the current estimates of retail sales.

In real terms, average spending for the two months is

reported to have climbed 1.3 percent (not at an annual rate) above the fourth-quarter level.

As we indicated in Part 1, we have

assumed in assembling the staff forecast that retail sales in January and February will be revised down or that March sales will be depressed by a sizable "payback."

In light of this assumption,

the forecast anticipates a saving rate that is appreciably higher than the published BEA average of 4-3/4 percent for January and February. The final March report on consumer sentiment from the University of Michigan was little changed from the preliminary reading; the overall index rose to 76 percent, the first significant increase since the retrenchment in sentiment last fall.

The

improvement relative to the November-February period occurred largely because of more positive responses to questions about business conditions for the coming year and about buying conditions for large household durables.

REAL GROSS DOMESTIC PRODUCT AND RELATED ITEMS (Percent change from previous period at compound annual rates; based on seasonally adjusted data, measured in 1987 dollars) 1990-Q4 to 1991-Q4 1. Gross domestic product

1991-Q3 Final

1991-Q4 Preliminary Final

1.8

-. 5

-. 7

-. 1

-. 2

2.3

-. 2

-7.1 -3.7 -14.7

-3.7 6.7 -23.9

-4.5 -3.7 -6.3

-3.4 -1.6 -7.8

-. 9

10.9

13.1

12.3

-14.6

-13.6

Final sales of domestic product

Consumer spending

4. 5. 6.

Business fixed investment Producers' durable equipment Nonresidential structures

Residential structures

Federal purchases

State and local purchases

-. 5

-. 1

1.4

10.

Exports of goods and services

6.8

7.3

13.1

9.7

11.

Imports of goods and services

4.6

22.3

2.5

2.1

-2.8

12.5

9.2

-3.1

-8.1

ADDNBDA:

12.

Nonfarm inventory investment

-13.9

13.

Net exports of goods and services'

-20.92

-31.1

-17.6

3.3

4.1

2.7

2.2

3.4

2.6

2.2

2.1

16. GDP mplicit price deflator

3.0

2.1

1.7

Personal saving rate

5.22

5.0

5.3

5.2

14. Nominal GDP 15.

17.

GDP fixed-weight price Index

Leve, bllown of 197 dollars.

Annual average.

-21.3

-4PERSONAL INCOME (Average monthly change at an annual rate; billions of dollars)

1991 1991

11.3

Wages and salaries Private

1991

1992

Dec.

9.0

17.6

48.4

-7.5

54.3

4.7 3.1

4.4 4.8

5.6 3.9

17.7 15.9

-16.9 -21.9

36.1 33.2

Other labor income

1.4

1.3

1.4

Proprietors' income Farm

2.1 -. 5

2.0 -1.0

3.7 2.0

14.9 11.8

-8.5 -12.1

11.4 5.4

.1 .1 -3.1

-1.3 .5 -1.4

2.3 .1 -4.9

2.9 -. 1 -4.9

-. 8 -. 3 -3.5

.2 .3 -2.0

Transfer payments

7.1

4.0

9.9

18.0

23.3

9.7

Less: Personal contributions for social insurance

1.0

1.3

2.4

2.6

-. 8

1.0

2.2

-1.1

9.2

12.2

8.0

17.1

46.2

-6.4

45.1

1.7

-2.2

7.1

31.7

-8.2

24.4

Total personal income

Rent Dividend Interest

Less: Personal tax and nontax payments Equals: Disposable personal income Memo: Real disposable income

Jan.

Feb.

REAL PERSONAL CONSUMPTION EXPENDITURES (Percent change from the preceding period)

1991 1991

1991 Q4

-Annual ratePersonal consumption expenditures

2.3

-2.8 -. 7

9.5 4.5

Nondurable goods Excluding gasoline

-. 9 -. 9

Services Excluding energy Memo: Personal saving rate (percent)

Durable goods Excluding motor vehicles

Dec.

1992 Jan.

Feb.

---- Monthly rate----. 1

-5.7 -7.7

.3 -. 4

2.4 4.6

2.6 1.2

.0 -. 3

-3.9 -4.2

-. 4 -. 7

1.3 1.5

.3 .5

2.2 2.2

2.2 2.4

3.7 3.4

.0 .7

.3 .4

5.2

5.0

5.2

5.6

4.6

4.7

-5Consumer Attitudes March 27, 1992 Index

Conference Board Index of Consumer Confidence 11 i4

41 '

I I1 II 'I

l l,

'I 'l f

*"' ,

I 'II

'l!

' I

II'

1 \1

801

4 ,_ \ ..-

14411/

14'*

Michigan Survey Research Center Index of Consumer Sentiment

1981

1982

1983

1984

1985

1987

The base of the Michigan Index is February 1966; the base of the Conference Board Index is the annual average for 1985. Both indexes are an average of five equally-weighted questions that relate to current and expected economic conditions. However, the questions in the two surveys are different and the timing of the surveys in the field varies.

1988

1989

1990

-6-

Unemployment Insurance

(Weekly data; seasonally adjusted, BLS basis <1>) Initial Claims

Thousands

750 700 650 600

Mr 14

550

453.4

All regular programs

S 500 450 400 350 300

Lj± ,

1985

1987

1986

1988

1989

1990

1991

Insured Unemployment

1992 Milion

250

I 5.0

All regular programs Mw 7 338

I . II

1981

1982

1983

I .

, I ., ., *.

1984

<1> Only the stae progam cmonapva seasonally djuted.

1985

-I

1986

of dss serie anr

1987

. .

1988

..-

1989

I , I .

1990

1991

. 1 1 .5

1992

-7THE FINANCIAL ECONOMY The March 1992 Senior Financial Officer Survey Summary

In view of the unusual strength in demand deposits since the beginning of the year, the System conducted a Senior Financial Officer Survey in mid-March to obtain information about the behavior of these deposits.

Nearly half of the reporting banks characterized

their demand deposit growth as stronger than normal in recent months.

Most banks experiencing stronger growth attributed it to

business customers, who had increased compensating balances in response to lower market interest rates.

A number of banks pointed

to increased activity in financial markets and to higher balances held by mortgage servicers. To provide an overview of demand deposits, several questions were repeated from a 1988 Senior Financial Officer Survey, the last one conducted on this topic.

Businesses continue to hold the bulk

of demand deposits, and roughly half of these deposits are held under formal compensating-balance arrangements.

While the share of

compensating balances in total demand deposits is lower than in 1988, respondents answered that it had increased somewhat over the past two years.

The current survey also found that few business

customers currently hold sweep accounts, which are arrangements to move balances automatically at the end of the day from demand deposits to interest-earning accounts. The remainder of the survey asked specific questions regarding compensating balances.

Even though the share of demand deposits

held as compensating balances is lower than in 1988, a significant portion of firms' service charges are paid with earnings credits on these accounts.

Banks still use the three-month Treasury rate

almost exclusively to calculate earnings credits, and the rate

-8typically is averaged over a month, as are compensating balance requirements.

For the most part, banks continue to adjust deposit

balances for the cost of reserve requirements in calculating credits.

However, in contrast to the results from the 1988 survey,

banks are less likely to allow customers to carry over surpluses or deficiencies to the following period. Demand Deposit Growth Slightly less than one-half of the reporting banks experienced stronger-than-normal demand deposit growth so far this year, while only three characterized growth as weaker than normal.

Nearly all

banks with stronger-than-normal growth attributed that strength to nonfinancial or financial business depositors; a third of those banks with stronger growth also cited the household sector. In general, lower market interest rates require customers to increase their compensating balances to generate the same amount of earnings credits.

In the survey, three-quarters of the banks with

stronger growth cited such an adjustment of compensating balances to the lower level of market rates as a reason.

Over two-fifths of the

banks experiencing stronger-than-normal inflows included lower interest rates on other types of deposits as a contributing factor. Twenty percent of all banks and one-third of the smaller banks cited that compensating balances increased owing to higher use of credit or operational services. Other factors playing a role included increased demand deposit holdings resulting from increased activity in financial markets and higher balances of mortgage servicers.

Consistent with this latter

explanation, most banks reported that mortgage servicers typically place their mortgage payments in demand deposits prior to disbursement.

However, one bank noted that these funds were held in

-9savings deposits and then transferred to demand deposits just before disbursements were made. Demand Deposits and Compensating Balance Arrangements The share of demand deposits held by businesses appears to have remained steady over the past several years.

The median bank

estimated that between 61 and 80 percent of its demand deposits were held by businesses, similar to the proportion estimated from Deposit Ownership Surveys in 1988.

However, a smaller share of business

demand deposits are held under compensating balance arrangements, with the median respondent on the current survey placing in the 41 to 60 percent quintile versus in the 61 to 80 percent quintile in the 1988 Senior Financial Officer Survey.

However, banks reported

that this share had increased slightly over the past two years, with over two-fifths of the banks experiencing an increase while onefifth saw a decline.

And while some banks have encouraged the

payment of services with explicit fees, most have not. Earnings credits from compensating balances cover a significant The

portion of the service charges incurred by business customers.

median bank responded that from 21 to 40 percent of service charges to large firms were met by earnings credits.

For

their middle

market and small business customers, the median-bank response was higher, in the 41 to 60 percent range.

Most banks reported that

they did not encourage the payment of services with fees by favorable pricing arrangements. The current survey included a set of questions about sweep accounts that were not on the earlier survey.

In general, sweep

accounts are not common, and some banks do not offer such accounts. The small number of customers holding sweep accounts is consistent with recent conversations that the Board staff has had with cash managers across the country; those cash managers noted that they

-10directly manage their demand deposits rather than delegate the task to a bank, as under a sweep arrangement. Most banks again indicated that earnings credits are computed using the three-month Treasury bill rate.

Nearly all of the banks

use a monthly average of either the auction or secondary market yield.

A smaller number of banks use a managed rate, set by their

rate committee and based on a variety of money market rates.

The

survey indicated that many banks use a lagged rather than a current rate in calculating earnings credits. Roughly two-thirds of the banks allow at least some of their customers to carry account surpluses or deficiencies into the next period.

However, over eighty-five percent of the banks place limits

on these carryovers for some or all of their customers, and only a third of them allow some or all of their customers to carry surpluses over into the next calendar year.

Finally, customers

appear to be most likely to make up for the shortfall in earnings credits with additional fee payments rather than to adjust balances within current or subsequent accounting periods.

-11Table 1 SENIOR FINANCIAL OFFICER SURVEY ON DEMAND DEPOSITS AT SELECTED LARGE BANKS IN THE UNITED STATES (Status of policy as of January and February 1992) (Number of banks and percent of banks answering question) (By volume of total domestic assets, in $ billions, as of December 31. (By type of bank) This report is authorized by law [12 U.S.C. 225(a), 2 48(a), needed to make the results comprehensive, accurate, and timely.

and 263].

1991 )

Your voluntary cooperation in submitting this report is

The Federal Reserve System regards the individual bank information provided by each respondent as confidential. determined subsequently that any information collected on this form must be released, respondents will be notified.

If it should be

Demand deposits have expanded at a very strong pace over the past two months. The Federal Reserve is seeking information from depository institutions about possible reasons for this surge and to update our knowledge about the relationships between compensating balance and mortgage servicing arrangements and demand deposits. I.

Adjusting for normal seasonal variation and any mergers, January and February. above normal

very strong banks

pet

banks

All Respondents 7 12.7 $10.0 and over 3 10.3 under $10.0 4 15.4 -.---- ---..-.---.-. . ...

banks

pot

27 15 12

32.7 34.5 30.8

demand

below normal

about normal

pet

18 10 8

banks

49.1 51.7 46.2

pet

3 1 2

deposit

growth

very weak

total

banks

5.5 3.4 7.7

pet

0 0 0

financial business demand deposits

banks

per

14 58.33 6 46.15 8 72.73

All Respondents $10.0 and over under $10.0

If you characterized recent growth in business attribute the strength? (more than one may apply) increased increased increased increased increased increased increased other

banks

household demand deposits

pot

banks

14 58.33 8 61.54 6 54.55

demand

during

(more than one may apply)

banks

pet

total

pet

banks

2 8.33 0 0 2 18.18

33.33

24 13 11

as "very strong" or "above normal". to what would you

compensating balance requirements due to lower interest rates compensating balance requirements because of higher use of credit services or operational services compensating balances to make up for shortages relative to requirements late last year demand deposit balances due to increased economic activity demand deposit holdings due to increased activity in financial markets demand deposit balances due to lower interest rates on other types of deposits demand deposit balances due to mortgage servicers holding higher balances

banks

bank

55 29 26

Increased compensating balance... requirements requirements due to lover because of to make up interest higher use for rates of credit shortag es

All Respondents $10.0 and over under $10.0

your

other accounts

6 46.15 2 18.18

deposits

banks

0.0 0.0 0.0

If you characterized recent growth as "very strong" or "above normal". was the strength in nonfinancial business demand deposits

please characterize

pet

banks

pet

banks

Increased demand deposit balances... due to lower due to due to due to increased increased interest mortgage economic financial rates on aervicers activity activity other deposits olding ---..........---------3ctbanks pet banks pot banks pet banks pet

8 .00 1 7 .69 7.69 1 9 69.23 1 81.33 4 33.33 10 83.33 -.- . --- .- .--. -- -. - .-- --. --- -- .19 76.00

5 20,00

2 8.00 2 15.38

7 28.00 11 44.00 5 38.46 6 46.15 2 16.67 5 41.67 0 -----.-.---.-.---.-.--

6 24.00 3 23.08 3 25.00

total

other banks 2 1 1

pot 8.00 7.69 8.33

banks 25 13 12

If your bank maintains accounts for mortgage servicers that service securitised mortgages, or if your bank services such mortgages directly, in what type of account are the principal and interest payments primarily placed prior to disbursement to the appropriate transfer agency or trustee for the mortgage security? demand

deposit banks All Respondents $10.0 and over under $10.0

pot

34 79.07 18 78.26 16 80.00

MMDAs banks

pet

7 16.28 4 17.39 3 15.00

other banks

pet

5 11.63 3 13.04 2 10.00

total banks 43 23 20

-125.

Roughly what proportion

of the balances in

demand deposits held at your bank are held by businesses?

0 to 20 percent

banks All Respondents $10.0 and over under $10.0

Has your bank encouraged compensating balances?

pet

l.B

1 0

3.4 0.0

21 to 40 percent banks

8 4 4

41 to 60 percent

pet

banks

14.5 13.8 15.4

pet

27.3 20.7

34.6

percent banks All Respondents

$10.0 and over under $10.0

17 8 9

pet

10 6 4

total banks

18.2 20.7 15.4

55 29 26

total

pet

bankr

14.8

5 3

17.9 11.5

46 23

85.2 82.1

54 28

88.5

pot

banks

pet 31.5 28.6 34.6

to 40

41 to 60

percent

banks 4 3 1

pot 7.4 10.7 3.8

banks

pet

24.1

6 7

21.4 26.9

61 to 80 over 80 percent percent total -----------.-.---------.-.-banks 14 7 7

pet

banks

25.9 25.0 26.9

pet

6 4 2

banks 54 28 26

11.1 14.3 7.7

How has this proportion changed over the past two years?

banks

pet

banks

pot

19 35.2 5 9.3 All Respondents $10.0 and over 1 3.6 12 42.9 7 26.9 4 15.4 under $10.0 - --- --- --- ----- ---. -. --. -- -.-.- --. - .-- .

unchanged banks 19 9 10

pet 35.2 32.1 38.5

decreased decreased somewhat significantly total banks

pet

banks

pet

banks

1.9 54 1 10 18.5 5 17.9 1 3.6 28 5 19.2 0 0.0 26 .- ---. - ---. - ---.-. ----.

What proportion of your large (over $250 million in annual sales) business customers hold sweep accounts? 0 to 20 percent banks

All Respondents $10.0 and over under $10.0

What proportion accounts?

47 26 21

your middle market

pet 90,4 96.3 84.0

banks

All Respondents $10.0 and over under $10.0

What proportion of your

small

21 to 40 percent banks

pet

84.3

25 I8

96.2 72.0

pet

41 to 60 percent banks

pet

61 to 80 percent banks

over 80 percent banks

pet

1 1

1.9 3.7

1.9

0.0

2 0

3.8 0.0

0.0

4.0

8.0

(between $50

0 to 20 percent

8e.

38.2 41.4 34.6

banks

increased increased significantly somewhat

Ob.

banks

Roughly what proportion of the balances in business demand deposits held at your bank would you estimate typically is made up of funds held under formal compensating balance arrangementa? (Include balances held to compensate for credit services and operational services.) 0 to 20

8a.

21 12 9

pet

the payment for services with fees by pricing such payments more favorably than payments through

All Respondents $10.0 and over under $10.0

7b.

banks

15 6

yes

7a.

over 80 percent

61 to 80 percent

million and $250 million in

21 to 40 percent banks

pet

6 1

11.8 3.8

20.0

41 to 60 percent

banks 0 0 0

pet 0.0 0.0 0.0

banks 1 0 1

1 0 1

annual

61 to 80 percent pet 2.0 0.0 4.0

pet

total banks

1.9 0.0 4.0

sales)

over 80 percent

banks

pet

2.0

0.0

4.0

52 27 25

business customers hold sweep

total banks 51 26 25

(under $50 million in annual sales) business customers hold sweep accounts? 0 to 20 percent banks

All Respondents $10.0 and over under $10.0

44 24 20

pot 88.0 96,0 80.0

21 to 40

percent banks

pet

8.0

1 3

4.0 12.0

41 to 60 percent banks 2 0 2

pet 4.0 0.0 8.0

61 to 80 percent banks

pet

0.0

- - 0 - - 0.0 --

over 80 percent banks 0 0 0

pet 0.0 0.0 0.0

total

banks 50 25 25

-13Specific Questions on Compensating Balance Arrangements Answer the remaining questions only if your institution allows businesses to pay for credit services or operational services credits earned on compensating balances.

9a.

Please indicate what interest rate is used as a basis for calculating earnings credits. three-month Treasury bill banks All

Respondents

$10.0 and over under $10.0

9b.

pet

fixed nonmarket rate

overnight rate banks

pet

banks

other

pet

banks

total

pet

banks

80.0

0.0

20.0

22 22

75.9 84.6

0 0

0.0 0.0

0 0

0.0 0.0

7 4

24.1 15.4

29 26

If the interest rate that is used as the basis for calculating earnings credits have been changed over

the

past

two

please indicate the previous basia. three-month Treasury bill banks

All Respondents $10.0 and over under $10.0

9c.

pet

fixed nonmarket rate

overnight rate banks

5 71.4 3 60.0 2 100.0

pet

0 0 0

banks

0.0 0.0 0.0

0 0 0

other

pet

banks

0.0 0.0 0.0

2 2 0

total banks

pet

28.6 40.0 0.0

7 5 2

Over what period is this rate measured? daily

monthly

weekly

pet

banks

pet

banks

quarterly

pet

banks

other

banks

total

pet

banks

All Respondents $10.0 and over

0 0

0.0 0.0

2 2

3.6 6.9

50 26

90.9 89.7

1 0

1.8 0.0

2 1

3.6 3.4

55 29

under $10.0

0.0

92.3

3.8

Over what period are compensating balance requirements measured?

month pet

banks

Does your institution plan to adjust its

year

pet

banks

52 94.55 29 100.0 23 88.46

All Respondents $10.0 and over under $10.0

9e.

quarter

banks 32 19 13

All Respondents $10.0 and over under $10.0

banks 55 29 26

no pet

banks

58.2 65.5 50.0

23 10 13

reserve requirements?

total pet 41.8 34.5 50.0

banks 55 29 26

Can compensating balance account surpluses in one period be carried over to the following period? no

yes banks All Respondents $10.0 and over under $10.0

10b.

pet

11 20.00 5 17.24 6 23.08

earnings credit rate to reflect the upcoming change in yes

10a.

banks

14 25.45 8 27.59 6 23.08

total

13 8 5

pet 24.1 28.6 19.2

banks 6 1 5

pet 11.1 3.6 19.2

for some customers

total

pet

banks

banks 35 19 16

64.8 67.9 61.5

54 28 26

Can compensating balance account deficiencies in one period be carried over to the following period?

banks All Respondents $10.0 and over under $10.0

10 4 6

for some customers

yes pet 18.5 14.3 23.1

banks 11 6 5

pet 20.4 21.4 19.2

banks 33 18 15

pet 61.1 64.3 57.7

total banks 54 28 26

years.

-14lOc.

If either surpluses or deficiencies can be carried over, are there any limits on these period-to-period carryovers? yes

for some customers

.- =--

banks

pet

banks

All Respondents 29 54.7 $10.0 and over 17 60.7 under $10.0 12 48.0 -------------.----.-.---.-.--

tOd.

7 3 4

banks

All Respondents $10.0 and over under $10.0

3 2 1

banks All Respondents $10.0 and over under $10.0

13 6 7

pet

32.1

8 9

28.6 36.0

28 25

pet

banks

5.7 7.1 4.0

pot

banks

pet

67.9

26.4

64.3

72.0

8 6

28.6 24.0

total banks 53 28 25

banks 14 7 7

pet

41 to 60 percent banks

28.0 29,2 26.9

15 6 9

pet 30.0 25.0 34.6

61 to 80

percent banks 5 3 2

pot

over 80 percent banks

10.0 12.5 7.7

pet

3 2 1

total banks

6.0 8.3 3.8

50 24 26

What proportion of a middle market (between $50 million and $250 million in annual sales) firm's service fees are typically covered by earnings credits from compensating balances?

banks

pet

to 40

41 to 60 percent

percent banks

pet

banks

pet

6.0

12.0

56.0

$10.0 and over 1 4.2 under $10.0 2 7.7 ------------------.-.---.-.--

12.5

54.2

11.5

57.7

All Respondents

What proportion of a small (under $50 million in earnings credits from compensating balances?

21 to 40

percent

pot

banks

61 to 80

percent banks 10 5 5

pet

over 80 percent banks

20.0 20.8 19.2

pet

3 2 1

pet

41 to 60 percent

50 24 26

banks

pet

61 to 80 percent banks

pet

over 80 percent banks

pot

total banks

10 5

20.0 20.8

40.0

20.0

12.0

37.5

7.7

19.2

42.3

5 5

20.8 19.2

3 3

12.5 11.5

24 26

fall

below

service

charges.

what

compensating balance account volumes are held by businesses that

would make up the shortfall with fee payments?

banks

All Respondents $10.0 and over under $10.0

ii.

pct

5.9

1 2

4.0 7.7

21 to 40 percent banks 4 1 3

pet 7.8 4.0 11.5

41 to 60 percent banks

pet

17.6

20.0

15.4

61 to 80 percent banks 17 8 9

pet 33.3 32.0 34.6

over 80 percent banks

pet

total banks

35.3

40.0

30.8

would adjust balances within the accounting period to make up for the shortfall? 0 to 20 percent banks

All Respondents $10.0 and over under $10.0

35 18 17

pet 68.6 72.0 65.4

bank

banks

6.0 8.3 3.8

8.0 8.3

0 to 20 percent

your

total

4 2

In accounting periods in which earnings credits appear likely i.

annual sales) firm's service fees at .your bank are typically covered by

0 to 20

banks

All Respondents $10.0 and over under $10.0

12.

banks

for some customers

21 to 40 percent

26.0 25.0 26.9

0 to 20 percent

1lc.

total

pet

What proportion of a large (over $250 million in annual sales) firm's service fees at your bank are typically covered by earnings credits from compensating balances? 0 to 20 percent

lib.

13.2 10.7 16.0

banks

Can they be carried past the end of a calendar year? yes

lla.

pet

21 to 40 percent

41 to 60 percent

banks

pet

banks

15.7

2 6

8.0 23.1

7 4 3

pct 13.7 16.0 11.5

61 to 80 percent banks 1 1 0

pet 2.0 4.0 0.0

over 80 percent banks

pet

total banks

0.0

proportion

your

-15-

iii.

would make up for the

shortfall

by holding higher balances 0 to 20 percent banks

All Respondents

$10.0 and over under $10.0

13.

38 20 18

pet 76.0 80.0 72.0

to 40

percent banks 6 1 5

pet 12.0 4.0 20,0

the next accounting period?

41 to 60 percent banks

pet

4 3

8.0 12.0

4.0

61 to 80 percent

banks

pet

2.0

0 1

0.0 4.0

over 80 percent banks 1 1 0

pet 2.0 4.0 0.0

total banks 50 25 25

Please indicate the formula moat comonly used at your institution for determining required compensating balances.

-16MONETARY AGGREGATES (based on seasonally adjusted data unless otherwise noted)

1991

1991,

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

Ml M2 M3

1992 Qipe

1992 Jan

1992 Feb

Growth 1992 Q4 91Mar pe Mar 92pe

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

8.0 2.8 1.2

11.1 2.3 1.0

16¾ 4k 2Z

16.2 3.2 1.4

27.0 9,4 7.0

14 0 -3

Levels - bil. $ Feb 92

Percent change at arrual rates---------

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

17h 4 1i

Selected components 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

HM-A Currency Demand deposits Other checkable deposits

22. 23.

8.8

154

13.6

28.1

584.8

8.4 3.4

7.4 10.0

7% 23

9.4 18.2

9.8 45.7

4 24

271.6 305.1

12.4

15.0

194

20.5

25.1

346.0

1.1

MZ minus Ml2 Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money market mutual fund shares Commercial banks Savings deposits (including HHOAs) Small time deposits Thrift institutions Savings deposits (including MMDAs) Small time deposits

17. M3 minus M23 18. 19. 20. 21.

5.6

Large time deposits 4 At commercial banks, net institutions At thrift Institution-only money market mutual fund shares Term RPs, NSA Term Eurodollars, NSA

-0.7

-1.4

3.2

-5

2544.8

26.9

1.6

-59

77.5

12.3 1.0 22.9 -24.3 -2.6 31.1 -31.1

-19 -2 11 -17 -2 24 -24

363.7 1264.7 688.9 575.8 838.5 395.3 443.2

-7.6

39.9

181

3.9 7.1 13.3 1.1 -6.9 9.3 -16.8

-4.0 3.9 16.0 -8.5 -8.8 10.2 -22.5

1 19h -19% -3½ 22k -24%

-1.7 0.2 20.0 -21.7 -2.7 24.1 -24.5

-5.5

-4.9

-7h

-7.0

-4.4

-18

725.9

-11.7 -5.1 -31.7

-18.9 -14.4 -36.7

-20 -17J -29"

-25.3 -25.8 -24.5

-16.8 -12.5 -35.4

-24 -20 -43

421.9 342.8 79.0

33.4 -21.6 -9.9

37.0 -23.6 -8.3

27% -3% -224

22.1 0.0 -24.6

38.2 18.6 10.5

188.2 72.0

57.8

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

24. Managed liabilities at commercial banks (25+261 25. Large time deposits, gross 26. Nondeposit funds 27. Net due to related foreign institutions 28. Other' deposits at commercial 29. U.S. government 7 banks

-5t -6

-1.1 -0.2 -1.0

4.6 -4.0 8.6

0.4 -1.4

6.2 2.4

0.2

0.9

-4.8 -7.9 3.1

1.3 -2.4 3.7

4.6 -1.6

-1.2 5.0

-14

1.3

-8.3

694.9 413.6 281.3 -2 -4 2

1. 2. 3. 4. S.

Amounts shown are from fourth quarter to fourth quarter. Nontransactions M2 is seasonally adjusted as a whole. The non-MZ component of M3 is seasonally adjusted as a whole. institutions. Net of large denomination time deposits held by money market mutual funds and thrift Dollar amounts shown under memoranda are calculated on an end-month-of-quarter basis.

Consists of borrowing

from other

than commercial banks

the

form of

federal

funds purchased,

42.3 239.1 19.5

securities

for borrowed money (including borrowing from the sold under agreements to repurchase, and other liabilities Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. 7. Consists of Treasury demand deposits and note balances at commercial banks. pe - preliminary estimate

-17SELECTED FINANCIAL MARKET QUOTATIONS

(percent) 1989

1992

-- - --- -.-.--

March highs

1992

-.--

FOMC Feb 5

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

Dec-Jan Lows

Change from: -.-.--

- - - - - - - - - - -- .-

Mar 89 Dec-Jan highs Lows

Mar 26

FOMC Feb 5

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

Short-term rates Federal funds 2/

9.85

4.09

3.94

-5.91

0.00

-0.15

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

9.10 9.11 9.05

3.84 3.89 4.00

3.72 3.76 3.81

4.01 4.15 4.36

-5.09 -4.96 -4.69

0.29 0.39 0.55

0.17 0.26 0.36

10.05 10.15

4.08 4.08

4.01 3.94

4.23 4.24

-5.82 -5.91

0.22 0.30

0.15 0.16

Large negotiable CDs 3/ 1-month 10.07 3-month 10.32 6-month 10.08

4.01 4.03 4.07

3.95 3.89 3.89

4.16 4.18 4.15

-5.91 -6.14 -5.93

0.21 0.29 0.26

0.15 0.15 0.08

Eurodollar deposits 4/ 1-month 10.19 3-month 10.50

4.00 4.00

3.94 3.88

4.13 4.19

-6.06 -6.31

0.19 . 0.31

0.13 0.19

Bank prime rate

6.50

-5.00

0.00

U.S. Treasury (constant maturity) 3-year 9.88 5.59 7.21 10-year 9.53 7.74 30-year 9.31

5.05 6.71 7.39

6.23 7.57 7.99

-3.65 -1.96 -1.32

1.18 0.86 0.60

0.64 0.36 0.25

Municipal revenue 5/ (Bond Buyer)

7.95

6.76

6.53

6.87

-1.08

0.34

0.11

Corporate--A utility recently offered

10.47

8.68

8.46

8.87

-1.60

0.41

0.19

Home mortgage rates 6/ 11.22 FHLMC 30-yr. FRM 9.31 FHLMC 1-yr. ARM

8.68 5.93

8.23 5.79

9.03 6.22

-2.19 -3.09

0.80 0.43

0.35 0.29

Commercial paper 1-month 3-month

11.50

Intermediate- and long-term rates

------------------------------.

1989

Record highs --- -

--- - ---

-- -

- --.-

Date

.- .- .--.. . . .--.. . . .

Lows Jan 3 - .--.. . . . . . .

Percent change from:

1992

FOMC Feb 5 . . . .

Mar 26 . . . .

. . .

Record highs

1989 lows

FOMC Feb 5

----------------------------.

Stock prices

Dow-Jones Industrial 3290.25 NYSE Composite 231.85 AMEX Composite 418.99 NASDAQ (OTC) 644.92 Wilshire 4121.28

3/3/92 1/15/92 2/12/92 2/12/92 1/15/92

2144.64 3257.60 3267.67 154.00 228.87 225.49 305.24 415.24 398.86 378.56 636.97 615.40 2718.59 4081.13 4008.62

-0.69 -2.74 -4.80 -4.58 -2.73

52.36 46.42 30.67 62.56 47.45

0.31 -1.48 -3.94 -3.39 -1.78

-- - - - - - - - - - - - - - - - - - - - . . - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -. . - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - --

I/ One-day quotes except as noted. 2/ Average for two-week reserve maintenance period closest to date shown. Last observation is average to date for maintenance period ending April 1, 1992.

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

-18-

THE INTERNATIONAL ECONOMY Import and Export Prices The index for prices of U.S. non-oil imports increased 0.3 percent (monthly rate) in February, after rising 0.5 and 0.6 percent in December and January, respectively.

The February

increase was led by higher prices of automotive products, up 0.9 percent, and consumer goods, up 0.5 percent.

The price of oil

imports declined 0.2 percent in February, after declining 8.7 and 9.4 percent in the previous two months. The price of exports increased 0.7 percent in February, after declining 0.6 and 0.7 percent in December and January.

The February

rise was largely the result of a 3.8 percent increase in the price index for foods, feeds and beverages, which reversed declines of 3.7 and 0.8 percent in the previous two months.

Cite this document

APA

Federal Reserve (1992, March 30). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19920331_part3

BibTeX

@misc{wtfs_greenbook_19920331_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1992},
  month = {Mar},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19920331_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}