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

December 18,

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 Initial claims for unemployment insurance.

.

.

.

.

1

Tables Unemployment insurance benefits

.

.

.

. .

.

..

.

.

.

2

Charts Unemployment insurance .

.

.

.

. . .

3

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

..

.

4

.

5 6

THE INTERNATIONAL ECONOMY U.S. merchandise trade through October

.

.

.

.

.

... .

.

.

7

Tables Merchandise trade:

Census-based data.

. ..

8

SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Initial Claims for Unemployment Insurance Initial claims, adjusted for the effect of the emergency unemployment compensation (EUC) program,

moved up to an adjusted

level of 376,000 during the week ended December 5.

Seasonal

adjustment problems associated with the Thanksgiving holiday likely reduced the level of claims during the preceding week and imparted an offsetting boost to the level of claims during the most recent week.

However, the average of claims (including the EUC effect)

over this two-week period--363,000--was well below that

recorded in

recent months. The level of insured unemployment held about unchanged at 3.02 million during the week ended November 28.

Like initial

claims, the level of insured unemployment also has been biased downward by the EUC program during recent months. this effect

Correcting for

requires assumptions about how long new claimants

continue to receive benefits; staff estimates suggest that a bias of around 200.000 persons--about two-thirds of the decline since July-is the right order of magnitude.

-2December 18, 1992 UNEMPLOYMENT INSURANCE BENEFITS (In thousands)

1992

Oct. 24

Oct. 31

Nov. 7

Nov. 14

Nov. 21

Nov. 28

Dec. 5

-------- Seasonally adjusted; BLS basis 1 - -- -- - Initial claims All regular programs 2 State programs Insured unemployment Total All regular programs 3 State programs Extended benefits

Emergency unemployment benefits 4

369 360

363 355

394 386

381 374

370 362

330 325

356 347

3119 3119 3008

3086 3086 2976

3141 3141 3033

3036 3036 2920

3001 3001 2902

3022 3022 2902

--

*

*

*

*

*

1506

1501

1410

1597

1305

1660

2.9

2.8

2.9

2.8

2.9

2.8

State-insured

Unemployment rate 5

Not

-----------

seasonally adjusted------------

Regular state programs Initial claims Insured unemployment 1. 2. 3. 4. 5. *

333 2518

332 2530

392 2512

348 2725

402 2412

Only regular state components are seasonally adjusted. Includes federal employees and ex-servicemen. Includes federal employees, railroad workers, and ex-servicemen. Not seasonally adjusted Percent of covered employees receiving regular state benefits. Less than 500 people received extended benefits.

317 3015

449

-3-

UNEMPLOYMENT INSURANCE Seasonally Adjusted, BLS Basis ADJUSTED INITIAL CLAIMS* Thousands

All regular programs

Dec. 5 375.5

1982

1984

1986

1988

1990

INSURED UNEMPLOYMENT

Millions

EMERGENCY BENEFITS

Nov. 28 1.7

Q4

Q1

1992

.

Q2 Q3 1992

All regular programs

1990 1992 eligible to by individuals also benefits program *Initial claims adjusted to include initial claims filed under the emergency unemployment file under regular programs. 1982

1984

1986

1988

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

1991 1

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

1992 Q2

1992 Q3

1992 Sep

1992 Oct

1992 Nov p

Growth Q4 91Nov

9

2p

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

Ml M2 M3

9.8 0.4 -1.3

10.3 0.2 -0.1

19.1 3.7 1.8

22.7 5.2 0.4

13.9 3.5 1.8

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

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

14.5 2.3 0.6

Levels bil. $ Nov 9 2p

Selected components 4.

M1-A

5. 6.

Currency Demand deposits

7.

Other checkable deposits

8.

M2 minus M1 2

9. 10. 11. 12. 13. 14.

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

15.

Savings deposits (including MMDAs)

6.

Small time deposits

17. M3 minus M2

18. 19.

3

Large time deposits At commercial banks, net

4

20, 21.

At thrift institutions Institution-only money market

22. 23.

mutual fund shares Term RPs, NSA Term Eurodollars, NSA

5.6

9.1

11.2

22.8

20.8

8.5

637.8

8.4 3.4

5.8 12.5

11.2 11.4

17.4 26.9

8.4 30.8

6.7 10.7

290.0 339.2

12.4

11.0

8.8

12.9

25.9

23.1

381.2

1.1

-3.0

-3.6

-2.3

-1.7

-0.8

2488.2

-7.0

-27.7

15.7

-25.3

12.9

-6.4

3.9 7.1 13.3 1.1 -6.9 9.3 -16.8

-3.9 0.5 12.0 -13.3 -6.7 18.9 -29.4

-8.2 -1.8 10.0 -16.7 -4.7 8.3 -17.7

-17.2 2.5 16.7 -16.8 -2.1 10.8 -15.9

10.1 1.1 14.7 -18.0 -8.1 8.8 -26.6

3.8 -1.4 10.3 -18.0 -4.3 10.1 -20.2

348.7 1261.4 749.8 511.6 804.6 431.8 372,9

-5.7

-9.3

-1.8

-7.5

-23.6

-6.6

682.9

-11.7 -5.1 -31.7

-18.9 -14.8 -37.0

-16.2 -16.0 -16.8

-14.4 -16.7 -3.5

-21.5 -25.4 -1.8

-11.9 -9.4 -24.7

369.5 303.0 66.5

33.4 -22.0 -11.0

20.1 7.8 -22.7

39.9 2.2 -25.6

0.0 29.5 -64.0

-64.1 35.2 -12.5

-12.3 32.6 10.1

203.5 79.4 47.8

74.6

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

5

24. Managed liabilities at commercial banks (25+26

25. 26. 27.

Large time deposits, gross Nondeposit funds

-0.6 -0.2 -0.4

-3.1 -4.8 1.7

0.4 -3.7 4.1

3.5 -3.4 6.9

-8.4 -7.9 -0.5

-3.5 -3.3 -0.2

673.9 370.0 303.9

0.4 -0.8

5.0 -3.3

0.5 3.6

3.0 3.9

3.5 -4.0

-0.9 0.7

64.4 239.5

0.2

1.3

-0.1

-7.2

-3.0

-3.2

19.2

Net due to related foreign

institutions 6

28. Other 29. U.S. government deposits at commercial 7 banks 1. 2. 3. 4. 5.

Amounts shown are from fourth quarter to fourth quarter. Nontransactions MZ is seasonally adjusted as a whole. The non-M2 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.

6.

Consists of borrowing from other than commercial banks in the form of federal funds purchased, 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. Consists of Treasury demand deposits and note balances at commercial banks. - preliminary

COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT 1 (Percentage change at annual rate, based on seasonally adjusted data) 1990 Dec. to 1991 Dec.

1992 Q2

1992 Q3

1992 Sep.

1992 Oct.

1992 Nov. p

Level, bil.$ 1992 Nov. p

Commercial bank credit 1. Total loans and securities at banks 2.

Securities

3.

U.S. government

4.

Other

5.

Loans

3.9

3.0

4.1

6.7

4.8

17.7

16.5

15.1

7.4

11.7

9.5

831.6

23.8

21.9

17.8

9.3

13.3

13.9

653.7

1.6

-2.0

5.9

0.0

6.7

-6.7

177.9

-0.2

-1.8

0.0

6.5

2.1

3.0

2,105.0

4.8 2,936.6

6.

Business

-2.8

-4.2

-0.9

4.8

0.4

5.2

606.0

7.

Real estate

2.9

0.2

0.5

5.3

5.8

3.1

889.5

8.

Consumer

-3.9

-3.0

-2.6

-2.0

-4.0

-1.4

354.5

9.

Security

21.3

22.4

12.5

71.0

-9.1

-23.7

64.4

Other

-2.8

-9.0

1.5

11.6

4.5

14.0

190.7

10.

Short- and intermediate-term business credit 11. Business loans net of bankers acceptances

-2.4

-3.7

-1.2

5.0

-1.6

4.4

598.8

12. Loans at foreign branches 2

-1.6

26.3

1.6

4.9

14.8

29.1

25.3

13. Sum of lines 11 and 12

-2.4

-2.6

-1.1

4.8

-1.0

5.4

624.1

-10.4

-3.9

7.1

1.7

20.2

49.6

151.3

-3.9

-2.9

0.5

4.4

2.7

13.9

775.4

-16.2

-27.3

-19.5

-25.1

5.1

-25.5

23.0

1.4

-1.6

8.6

4.3

-2.4

n.a.

-2.9

-3.1

2.2

3.7

1.4

n,a.

14. Commercial paper issued by nonfinancial firms 15. Sum of lines 13 and 14 16. Bankers acceptances, U.S. traderelated 3 ,4 17. Finance company loans to business 4 18. Total (sum of lines 15, 16, and 17)

304.5 5 1,094.5

1. Average of Wednesdays. Data are adjusted for breaks caused by reclassifications. 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Consists of acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage of goods. 4. Based on average of data for current and preceding ends of month. 5. October 1992. p--Preliminary. n.a.--Not available.

5

-61 SELECTED FINANCIAL MARKET QUOTATIONS (percent) 1992

1992

1992

Change from:

. . . . . ..

Sept 4

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

FOMC Nov 17

Dec 17

FOMC Sept 4 Nov 17

Short-term rates Short-term rates Federal funds"

3.19

3.04

2.94

-0.25

-0.10

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

2.92 2.96 3.06

3.17 3.38 3.54

3.20

3.37 3.58

0.28 0.41 0.52

0.03 -0.01 0.04

Commercial paper 1-month 3-month

3.22 3.22

3.29 3.83

3.69 3.66

0.47 0.44

0.40 -0.17

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

3.06 3.06 3.11

3.18 3.77 3.77

3.41 3.39 3.49

0.35 0.33 0.38

0.23 -0.38 -0.28

3.31 3.31

3.13 3.88

3.44 3.44

0.13 0.13

0.31 -0.44

6.00

6.00

6.00

0.00

0.00

U.S. Treasury (constant maturity) 3-year 4.38 10-year 6.40 30-year 7.29

5.21 6.86 7.55

5.21 6.77 7.43

0.83 0.37 0.14

0.00 -0.09 -0.12

Municipal revenue5 (Bond Buyer)

6.31

6.57

6.44

0.13

-0.13

Corporate--A utility recently offered

8.06

8.45

8.27

0.21

-0.18

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

7.84 5.15

8.32 5.20

8.23 5.47

0.39 0.32

-0.09 0.27

Eurodollar deposits 1-month 3-month

4

Bank prime rate Intermediate- and long-term rates

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

1989 Record highs

Date

Lows Jan 3

1992 FOMC Nov 17

Dec 17

Percent change from: Record highs

1989 lows

FOMC Nov 17

-4.22 -0.47 -6.82 -1.30 -0.60

52.44 55.27 27.91 73.94 56.42

2.38 3.47 1.60 5.01 3.69

Stock prices Dow-Jones Industrial 3413.21 NYSE Composite 240.24 AMEX Composite 418.99 NASDAQ (OTC) 667.12 Wilshire 4278.27

6/1/92 2144.64 3193.32 3269.23 12/8/92 154.00 231.09 239.12 2/12/92 305.24 384.29 390.42 12/8/92 378.56 627.07 658.46 12/8/92 2718.59 4101.16 4252.45

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

One-day quotes except as noted. Average for two-week reserve maintenance period closest to date shown. Last observation is average to date for maintenance period ending December 23. 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 Friday previous to date shown.

THE INTERNATIONAL ECONOMY

U.S. Merchandise Trade through October The U.S. merchandise trade deficit narrowed substantially in October to $7.0 billion (seasonally adjusted, Census basis) from a revised September deficit of $8.6 billion.

Exports grew 3 percent

and imports declined slightly. The growth of exports in October was primarily in capital goods (partly aircraft and partly machinery other than computers), nonmonetary gold, and consumer goods.

The level of exported capital

goods in October was 4 percent higher than the third-quarter average; exported consumer goods were also substantially higher than in the third quarter. The decline in imports was in consumer goods (from a strong September level) and passenger cars from Canada.

Non-oil imports in

October were about 1 percent above the average for the third quarter.

The value of oil imports rose slightly in October; the

price of oil increased by about 10 cents per barrel and the quantity imported declined slightly from the September average.

Table 1

December 17,

1992

Merchandise Trade: Census-Based Data (in billions of dollars, seasonally adjusted*)

Exports Total

Ag.

363.8 393.6 421.7

1989 1990 1991

I NonAg.

I

Imports Total

Oil

NonOil

I Balance

42.2 40.2 40.1

321.6 353.4 381.6

473.2 495.3 487.1

50.4 62.2 51.2

422.8 433.2 435.9

-109.4 -101.7 -65.4

51.8

Quarters at annual rates: Qtr 1 2 3 4

408.4 420.8 419.7 440.7

39.3 37.9 40.1 43.3

369.1 382.9 379.7 397.4

474.6 476.5 494.6 503.1

51.8 52.5 48.8

422.9 424.7 442.1 454.3

-66.2 -55.7 -74.9 -62.4

1992 Qtr 1 2 3

440.8 441.2 445.9

43.2 42.2 45.7

397.6 399.0 400.3

499.9 525.4 545.5

41.9 52.3 57.0

458.0 473.2 488.5

-59.1 -84.3 -99.6

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

31.6 31.7 33.2 32.0 32.5 33-7 32.3 32.6 32.3 34.5 33.6 33.8

3.7 3.4 3.6 3.4 3.4 3.5 3.2 3.3 3.2 3.1 3.3 3.1

28.0 28.3 29.5 28.7 29.2 30.2 29.1 29.2 29.1 31.3 30.3 30.7

41.4 39.2 41.8 39.8 40.6 40.7 41.3 41.8 41.3 43.9 43.1 40.0

5.8 5.2 4.8 4.1 4.6 4.2 4.2 5.3 5.9 6.3 6.5 5.3

35.5 34.0 37.0 35.7 36.0 36.5 37.1 36.5 35.4 37.6 36.6 34.7

-9.8 -7.5 -8.6 -7.8 -8.1 -7.0 -9.0 -9.2 -9.0 -9.4 -9.5 -6.2

1991 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

34.3 33.7 34.2 35.5 35.0 34.7 35.2 34.5 35.3 36.8 37.3 36.1

3.1 3.4 3.4 3.2 3.3 3.0 3.4 3.3 3.3 3.6 3.5 3.7

31.2 30.3 30.8 32.2 31.7 31.7 31.8 31.2 32.0 33.3 33.7 32.3

41.2 39.0 38.5 39.7 40.0 39.4 40.8 41.1 41.8 42.7 41.4 41.7

5.2 4.0 3.7 4.1 4.6 4.3 4.1 4.5 4.5 4.1 4.1 3.9

35.9 34.9 34.8 35.7 35.4 35.1 36.8 36.5 37.2 38.6 37.2 37.8

-6-9 -5.3 -4.3 -4.3 -5.0 -4.7 -5.6 -6.6 -6.5 -5.9 -4.1 -5.6

1992 Jan Feb Mar Apr

35.5 37.7 37.1 36.4 35.7 38.2 37.8 35.8 37.9 39.2

3.6 3.7 3.5 3.8 3.3 3.5 3.9 3.6 4.0 4.1

31.9 33.9 33.6 32.7 32.4 34.7 33.9 32.2 33.9 35.1

41.3 41.0 42.7 43.5 42.9 45.0 45.1 44.8 46.5 46.2

3.7 3.3 3.5 4.0 4.2 4.8 4.8 4.6 4.8 4.9

37.6 37.6 39.2 39.5 38.7 40.1 40.3 40.2 41.7 41.4

-5.8 -3.3 -5.6 -7.1 -7.2 -6.8 -7.3 -9.0 -8.6 -7.0

1991

Monthly Rates: 1996

Jan

May

Jun Jul Aug Sep Oct

* All data are on a revised end-use basis. Source:

U.S. Department of Commerce, Bureau of the Census, Customs Valuation.