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

May 14,

SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the Federal Open Market Committee

By the Staff Board of Governors of the Federal Reserve System

1993

TABLE OF CONTENTS

Page THE DOMESTIC NONFINANCIAL ECONOMY

Consumer sentiment . Business inventories

. .

. .

. .

. .

. . . .

. .

. .

. .

. .

. .

. .

. .

1 1

Table University of Michigan Survey Research Center: Survey of consumer attitudes .. . . .... Changes in manufacturing and trade inventories Inventories relative to sales .. . . . ...

Ratio of inventories to sales ..

. . .

...

THE FINANCIAL ECONOMY May Senior Loan Officer Opinion Survey

Loan growth by bank group

.

.

. ..

. .

1

13

. . . . . .

Tables Treasury and agency financing - revised. . . . . . . . . . . Monetary aggregates Commercial bank credit and short- and

.

. 14 . . 15

intermediate-term business credit. Selected financial market quotations

.

.

16

.

17

. . . .

THE INTERNATIONAL ECONOMY Developments in foreign industrial countries

SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Consumer Sentiment According to preliminary results from the Michigan survey, consumer confidence continued to deteriorate in the first part of May.

Based on about 60 percent of the sample, the composite index

declined from an April level of 85.6 to 81.9.

The May decline in

the overall index reflected a moderate worsening in the current conditions component and a substantial further decline in expected conditions. The overall index has been slipping steadily since its peak of 91.0 in December 1992.

Although the current conditions component of

the index remains above December's level, the expected conditions component is sharply lower than in December, primarily because of greater pessimism about business conditions over the next year. Among survey components not included in the index, unemployment expectations deteriorated further in May; nearly returning to preelection levels, while expected inflation over the next year fell from 4.1 percent to 3.8 percent.

Inflation expectations over the

next 5 to 10 years worsened, but consumers' assessments of buying conditions for cars and homes were little changed from the generally positive attitudes expressed in April.

More consumers expressed a

willingness to draw down savings for major purchases, but their willingness to buy goods on credit was about unchanged. Business Inventories Retail inventories rose at an annual rate of $49.3 billion in current-cost terms in March, following an accumulation of $40 billion in February.

With a decline in sales over the two

months, the retailers' inventory-sales ratio climbed to 1.61 months

-2at the end of March.

Excluding auto dealers, the ratio also rose

considerably in March to 1.51 months. A substantial portion of the March retail inventory accumulation was in auto dealers' stocks, but nonauto inventories also increased significantly.

Stocks at general merchandise,

apparel, and furniture and appliance stores (the GAF grouping) rose $14.3

billion and accounted for more than half of the March rise in

nonauto inventories.

Part of this buildup likely reflected the

impact of the severe weather in March, which depressed sales.1 Relatively large increases in inventories also were reported by retail outlets for lumber and building materials; these increases likely were inflated somewhat by recent surges in lumber prices. For all manufacturing and trade, inventories expanded in March at a $78.8 billion annual rate in current-cost terms.

For the first

quarter as a whole, stocks in manufacturing and trade rose $49.3 billion

(annual rate),

substantially above the average pace of

$18 billion observed over the second half of last year.

1. However, the advance retail sales report for April indicated that GAF sales rose 1.6 percent last month, retracing the bulk of the loss posted in March.

May 14,

1993

UNIVERSITY OF MICHIGAN SURVEY RESEARCH CENTER: SURVEY OF CONSUMER ATTITUDES (Not seasonally adjusted) 1992 Sep

1992 Oct

1992 Nov

1992 Dec

1993 Jan

1993 Feb

1993 Mar

1993 Apr

1993 May (p)

Composite of current and expected conditions

75.6

73.3

85.3

91.0

89.3

86.6

85.9

85.6

81.9

Current conditions Expected conditions

88.3 67.4

82.5 67.5

96.4 78.2

93.4 89.5

98.6 83.4

96.0 80.6

101.6 75.8

99.9 76.4

97.4 71.9

102 123

90 121

109 124

99 131

110 127

100 125

111 119

104 120

104 111

78 68

80 67

99 91

126 103

111 97

103 95

96 88

95 91

91 86

130 126 162

121 123 148

134 140 160

145 142 162

134 145 166

132 148 158

136 152 173

137 155 167

139 148 169

44 65

34 61

43 70

39 59

37 64

40 52

46 74

43 64

45 74

Expected unemployment change - next 12 months

127

125

109

99

98

110

117

115

122

Expected inflation - next 12 months Expected inflation - next 5 to 10 years

4.1 5.0

3.6 5.1

4.6 5.5

3.3 5.2

3.5 4.8

4.6 5.9

4.9 4.9

4.1 4.8

3.8 5.7

Indexes of consumer sentiment (Feb. 1966=100)

Personal financial situation Now compared with 12 months ago* Expected in 12 months* Expected business conditions Next 12 months* Next 5 years* Appraisal of buying conditions Cars Large household appliances* Houses Willingness to use credit Willingness to use savings

* -(p) (f)

Indicates the question is one of the five equally-weighted components of the index of sentiment. -- Preliminary -- Final

Note: Figures on financial, business, and buying conditions are the percent reporting 'good times' (or 'better') minus the percent reporting 'bad times' (or 'worse'), plus 100. Asterisk (*) indicates the question is one of the five equally-weighted components of the index of sentiment. Expected change in unemployment is the fraction expecting unemployment to rise minus the fraction expecting unemployment to fall.

CHANGES IN MANUFACTURING AND TRADE INVENTORIES (Billions of dollars at annual rates; based on seasonally adjusted data) 1992 Q3

1993 Q4

Q1

1993 Jan.

Feb.

Mar.

Current-cost basis Total Excluding auto dealers Manufacturing Defense aircraft Nondefense aircraft Excluding aircraft Wholesale Retail Automotive Excluding auto dealers

18.7 21.5 6.1 -9.5 3.6 12.1 3.3 9.3 -2.8 12.1

17.7 9.0 -21.9 -1.7 -3.5 -16.7 16.5 23.1 8.7 14.4

49.3 28.1 4.2 -4.1 .0 8.3 8.4 36.7 21.2 15.5

26.6 13.0 -5.7 -5.0 -1.7 1.0 10.9 21.4 13.6 7.8

42.5 17.6 7.5 -2.9 2.9 7.5 -4.5 39.5 24.9 14.5

78.8 53.7 10.8 -4.5 -1.3 16.5 18.7 49.3 25.1 24.2

10.1 8.5 3.9 -3.5 9.7 1.6 8.1

7.1 5.0 -14.5 9.6 12.0 2.1 9.9

n.a. n.a. n.a. n.a. n.a. n.a. n.a.

-6.7 .7 -5.6 2.2 -3.3 -7.3 4.0

16.8 -4.5 -2.9 -6.9 26.6 21.3 5.4

n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Constant-dollar basis Total Excluding auto dealers Manufacturing Wholesale Retail Automotive Excluding auto dealers

INVENTORIES RELATIVE TO SALES 1 (Months supply; based on seasonally adjusted data) 1992 Q3

1993 Q4

Q1

1993 Jan.

Feb.

Mar.

Current-cost basis Total Excluding auto dealers Manufacturing Defense aircraft Nondefense aircraft Excluding aircraft Wholesale Retail Automotive Excluding auto dealers

1.50 1.48 1.57 5.37 5.19 1.41 1.34 1.56 1.89 1.48

1.48 1.46 1.52 5.41 4.64 1.37 1.35 1.55 1.85 1.47

1.47 1.44 1.48 5.23 5.11 1.33 1.33 1.60 2.00 1.50

1.46 1.44 1.50 5.42 5.06 1.35 1.32 1.55 1.86 1.47

1.46 1.43 1.47 5.29 5.28 1.33 1.32 1.57 1.95 1.47

1.47 1.43 1.46 5.19 5.02 1.32 1.33 1.61 2.00 1.51

1.59 1.56 1.68 1.39 1.64 2.00 1.54

1.57 1.54 1.63 1.41 1.62 1.93 1.53

n.a. n.a. n.a. n.a. n.a. n.a. n.a.

1.54 1.52 1.60 1.37 1.61 1.89 1.53

1.54 1.51 1.58 1.37 1.63 1.99 1.54

n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Constant-dollar basis Total Excluding auto dealers Manufacturing Wholesale Retail Automotive Excluding auto dealers

1. Ratio of end of period inventories to average monthly sales for the period.

RATIO OF INVENTORIES TO SALES (Current-cost data) Ratio

S2.05 Manufacturing 11.85

i

Total

- I

i

1

,

•-1.25 i

-

1 1979

1981

1983

II i 1985

I 1987

I 1989

I I 1991

I

Mar. I13

1.25

1993

Ratio 2.7-

1.5

Wholesale

S1.4

Mar.

1979

t981

1983

1985

1987

1989

1991

S.3 1.2 1.1

1993

Ratio 1.7

Ratio 2.7 --

Retail GAPF group

,., 2.5

-

-'4

8

'1A.,"

I

2.3 -

2.1

-

1979

-

1981

1.6

,cia

-

-

1.5

-

1.4

Total excluding auto

--

1983

T

Mar.

1985

1987

1989

1991

1993

THE FINANCIAL ECONOMY The May 1993 Senior Loan Officer Opinion Survey on Bank Lending Practices The May 1993 Senior Loan Officer Opinion Survey on Bank Lending Practices posed

questions about changes in bank lending standards

and terms, changes in loan demand by businesses and households, levels of bank capital, developments in the real estate market, and reasons for the

recent weakness in bank lending.

Fifty-eight

domestic commercial banks and eighteen U.S. branches and agencies of foreign banks participated in the survey. In contrast to recent surveys, a significant number of respondents reported some easing of terms and standards on commercial and industrial loans. estate loans were little changed.

Standards on commercial real A substantial fraction of

respondents indicated that the demand for loans by small and mediumsized businesses has increased since January and demand by large customers has declined.

A small fraction of respondents indicated

that they had tightened standards on home mortgage loans, but a larger fraction reported increased willingness to make loans to individuals.

The respondents indicated that demand for residential

mortgages and home equity lines of credit had picked up in recent months and the demand for consumer loans had increased less. Bank lending does not appear to have been constrained recently by low levels of capital.

As in the last three surveys, almost all

of the respondents judged their bank's capital position to be either fairly comfortable or very comfortable.

Nonetheless, more than a

third of the respondents reported taking actions over the last quarter to improve their capital positions.

More than a fifth of

the respondents reporting fairly comfortable or very comfortable capital positions indicated that they were taking a more aggressive lending stance as a result, although most reported some difficulty

-7-

in finding attractive lending opportunities.

Most banks with

comfortable capital positions that were not aggressive lenders pointed to risk as a reason for their caution. New questions on the survey focused on anticipated changes in terms and standards on commercial and industrial loans, developments in the real estate market, and the reasons for the weakness in bank lending over the past two years.

Most of the respondents indicated

that no changes in terms and standards were anticipated for the balance of this year, but a significant number expected terms and standards to be eased somewhat. prices were reported stable;

For the most part.

real estate

about the same number of respondents

reported prices rising as reported them falling.

A majority of the

banks reporting falling prices indicated that the rate of decline was down from a year ago.

The respondents indicated that commercial

and industrial lending has been weak over the past two years primarily because of weak demand for bank loans.

In addition, the

respondents indicated that the riskiness of residential mortgage lending and consumer installment lending was somewhat lower now than it was before the 1990-91 recession. Business Lending Nonmerger-related commercial and industrial loans. survey, most domestic banks

In the May

reported unchanged standards for

approving commercial and industrial loans.

For the first time since

these questions were added to the survey in 1990, however, a small net easing of standards was reported for borrowers of all sizes. The respondents indicated that standards were eased because of reduced industry-specific problems and an improvement in the general economic outlook. The respondents also reported some easing of terms on commercial and industrial loans and lines of credit.

There were

-8very small net increases in the maximum sizes of credit lines for borrowers of all sizes, much as in the January survey.

The costs of

credit lines were reported to be lower, with a substantial net decline reported for large borrowers.

A similar number of

respondents reported cuts in spreads of loan rates over base rates, with the largest net decline again going to large borrowers.

The

substantial net declines in credit line costs and loan spreads reported in this survey are the first since these questions were added to the survey in 1990.

In contrast, the May survey showed

little change in the use of covenants or collateralization. U.S. branches and agencies of foreign banks reported a slight net easing of standards but slightly tighter terms since the January survey.

The branches and agencies reported a small net increase in

the maximum size of credit lines and a very small net tightening of other terms. Real estate loans.

Domestic respondents reported virtually no

changes in standards on commercial real estate loans.

As in the

past two surveys, standards for commercial office buildings had a small net tightening.

The U.S. branches and agencies of foreign

banks reported little change in standards on real estate loans but a small net tightening in those on construction and land development loans. Anticipated changes in terms and standards.

A new set of

questions asked the respondents how they anticipated terms and standards on commercial and industrial loans would change over the balance of the year.

About 15 percent of the domestic respondents

reported anticipating some easing of terms and standards. responses of the foreign branches and agencies were roughly balanced.

The

-9Demand.

The substantial increase in the demand for bank loans

reported in the January survey was not repeated in May. Nonetheless, a number of respondents reported stronger demand by small and medium-sized borrowers.

While the demand for bank credit

by large borrowers was reported to be down slightly in the latest survey, the respondents indicated that the weakening resulted from financing increasingly obtained from nonbank intermediaries or in capital markets rather than from the slackening of overall credit demand by these customers.

As in the January survey, the branches

and agencies of foreign banks reported a small net increase in the demand for loans. Lending to Households As they have for the past year, respondents reported increased willingness to lend to households.

About a quarter of the banks

indicated that they were more willing than they had been in January to make general purpose loans to individuals, including loans taken down under home equity lines of credit.

A slightly larger fraction

reported increased willingness to make consumer installment loans. In contrast, standards on residential mortgages showed a small net tightening--the first tightening in over a year. The respondents indicated that demand for credit by households increased over the past three months after changing little the previous three months.

The largest net increases were in the

demand for residential mortgages and for home equity lines of credit.

The net increase reported in the demand for consumer

installment loans was more modest. Capital Ratios The responses to the questions on capital adequacy indicate that the respondents' views of their capital positions were little changed since January.

As in the January survey, more than

-1090 percent of the domestic banks reported that both their risk-based capital ratio and their tier-1 leverage ratio were either "fairly comfortable" or "very comfortable." reported that either ratio was tight.

None of the

respondents

More than 20 percent of the

respondents reporting comfortable capital levels, about double the percentage in January, said that they took a more aggressive lending stance as a result.

Of these, however, almost all reported some

difficulty in finding attractive new deals.

Many of the respondents

not taking a more aggressive lending stance indicated that they did not do so because increasing their lending would require an unacceptable increase in risk given the weak state of loan demand. About a third of the respondents, the same fraction as in the January survey, reported taking steps over the past quarter to improve their capital positions.

Most of those taking such steps

issued capital, and 10 percent increased loan sales and securitizations.

Only 3 percent, down from 7 percent in January and

12 percent in November, reported that they maintained tight lending standards and terms over the past quarter to bolster their capital. Branches and agencies of foreign banks reported less satisfaction with capital positions at their parent institutions than did the domestic banks. positions improved.

In May, however, the reported capital

Most of the branches and agencies reported that

their parent's capital position was only "adequate."

Only one

institution, compared with three in January, reported a fairly tight capital position, whereas seven institutions, two more than in January, reported "fairly comfortable" capital.

Only one of the

respondents, a decline from the January and November surveys. reported maintaining tight lending standards to strengthen their parent firm's capital position.

Of the seven branches and agencies

-11that reported "comfortable" or "very comfortable" capital positions. only one reported lending more aggressively as a result. Real Estate Markets The domestic respondents reported some improvement in the commercial real estate market relative to six months ago.

Almost a

third reported that the volume of commercial real estate sales in their market area had picked up, while less than 10 percent reported weaker sales.

About equal numbers reported rising and falling

commercial real estate prices over the past six months.

In

addition, a majority of those reporting a decline in prices noted that

commercial real estate prices were falling less quickly now

than they had been six months ago. The branches and agencies of foreign banks were somewhat encouraging.

less

More of them reported decreasing than increasing

prices, and half of those reporting falling prices indicated that the ago.

rate of decline was about the same as it had been six months These responses are not particularly surprising because all of

the branches and agencies of foreign banks in the survey are in the New York, Chicago, and San Francisco Federal Reserve Districts.

The

foreign branches and agencies' assessment of the commercial real estate market was similar to that of the domestic respondents in those districts. Constraints on Bank Lending More than 80 percent of domestic

respondents reported that

growth in commercial and industrial lending at their bank over the past two years had been either somewhat weak or very weak.

They

attributed the weakness primarily to a low level of demand for bank loans owing to the relatively slow pace of the recovery and expansion.

The respondents also noted that increased bond and

equity issuance reduced the demand for bank borrowing.

About a

-12third of the respondents indicated that tight terms and standards had contributed to the slow growth in loans.

The tight terms and

standards, in turn, were reportedly the result of tighter regulatory scrutiny of bank loan portfolios and the riskiness of such loans. Only two of the fourteen banks that indicated that tight terms and standards were a cause of the weakness in business lending reported that higher costs owing to capital regulation, deposit insurance premiums, or other causes were responsible for the changed terms and standards.

The respondents reported a net decrease in the riskiness

of residential mortgage and consumer installment loans. A smaller fraction, although still a majority, of the branches and agencies of foreign banks reported weak commercial and industrial loan growth in recent years.

Those reporting weak loan

growth indicated that the weakness resulted from the sluggish economy and tighter terms and standards at their institution. foreign branches and agencies attributed the tighter terms and standards to high levels of risk and high lending costs.

The

-13Loan Growth by Bank Group Data for this table in Greenbook Part 2, page III-6,

were

revised on Friday, May-14, 1993. LOAN GROWTH BY BANK GROUP (Seasonally adjusted annual rates) All banks

Large domestic banks

Small domestic banks

Foreignrelated institutions

Total loans 1992

- Q4

1993 - Jan. Feb. Mar. Apr.

1.0

.4

1.6

-1.7 -4.3

-6.9 -5.8 -2.4 - .5

0 3.7 3.3 6.4

.3 .6

1.8 13.3 -24.0 -12.0 -14.4

Business loans 2 1992

-

Q4

-2.0

-2.0

-2.0

-2.0

1993

- Jan. Feb. Mar. Apr.

2.2 -2.4 -5.2 -6.1

-3.4 -2.2 -7.8 -13 .1

-2.2 6.7 9.7 3.7

-12.2 -15.4 -4.7

Real 1992

-

Q4

2.4

1993

- Jan. Feb. Mar. Apr.

-5.0 -3.1 .5 -. 4

17.0

estate loans

-8.0 -10.5 -3.9 -1.2

5.8

-21.9

1.1 4.7 6.3 3.0

-34.7 -9.5 -14.4 -24.3

1. Data are adjusted for breaks caused by reclassifications. 2. Includes holdings of bankers acceptances and nonfinancial commercial paper.

-14-

REVISED

TREASURY AND AGENCY FINANCING1 (Total for period: billions of dollars) 1993

June p

Q2p

Apr.

May.

-62.4

-25.6

10.7

-39.8

3.5

60.1

63.1

10.4

28.8

23.9

53.2

50.4

1.8

26.7

21.9

2.2 51.0 6.9

-1.7 52.1 12.7

-17.7 19.5 8.7

13.9 12.7 2.1

2.1 19.9 2.0

8.3

-30.2

-18.9

23.0

-34.3

21.6

51.8

40.5

17.5

51.8

-6.0

-7.3

-2.2

-12.0

Q1 Treasury financing Total

surplus/deficit

(-)-

Means of financing deficit: Net cash borrowing from the public Marketable borrowings/ repayments

(-)

Bills Coupons Nonmarketable Decrease in the cash balance Memo: Cash balance at end of period 2

Other

6.9

Federally sponsored credit agencies, net cash borrowing FHLBs 5 FHLMC FNMA Farm Credit Banks SLMA FAMC

8.5 -1.4 11.6 -0.5 -0.3 -0.9 .0

--

-

--

----

--

-

1. Data reported on a not seasonally adjusted, payment basis. 2. Includes checks issued less checks paid, accrued items and other transactions. 3. Excludes mortgage pass-through securities issued by FNMA and FHLMC. 4. Federal Agricultural Mortgage Corporation. 5. Excludes data for March 1993. p--projected. Details may not add to totals due to rounding. Note:

-15MONETARY AGGREGATES (Based on seasonally adjusted data except as noted)

1~1~ Aggregate or component

19921

---------------i. MI

14.3 1.8 0.3

2. MB 3. M3

1993 Feb

1993 Q1

Percentage 16-8 2.7 0.2

1993 Mar

1993 Apr

Growth Q4 92 Apr 93

change (annual rate)--------------

6.6 -2.0 -3.8

-0.2 -4.0 -1.8

2.7 -1.0 -1.7

9.0 0.1 1.9

6 -2 Level bil. $ Apr 93

----------- Percentage change (annual rate)-----

Selected components 4. M1-A 5. 6.

Currency Demand deposits

7.

Other checkable deposits

8.

M2 minus M12

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

Overnight RPs and Eurodollars, n.s.a. General-purpose and broker-dealer money market mutual fund shares Commercial banks Savings deposits (including MMDAs) Small time deposits Thrift institutions Savings deposits (including MMDAs) Small time deposits

17. M3 minus M23 Large time deposits 4 At commercial banks At thrift institutions Institution-only money market mutual fund shares Term RPs, n.s.a. Term Eurodollars, n.s.a.

13.7

15.3

6.2

3.7

4.3

14.4

656.8

9.1 18.0

10.3 19.6

9.4 3.7

8.6 0.0

8.9 0.4

9.6 18.6

301.4 347.3

15.4

19.3

7.3

-6.8

0.0

0.0

386.4

2,6

-2.8

-5.5

-5.6

-2.5

-3.7

2429.6

1.8

2.2

-10.7

10.0

0.0

-56.0

69.5

-5.2 -0.1 14.5 -15.8 -5.5 14.8 -21.5

-4.1 0.2 12.9 -17.2 -6.0 8.7 -21.7

-10.1 -2.2 1.6 -7.6 -9.0 -0.2 -19.1

-21.2 2.8 2.5 3.1 -16.6 -10.0 -24.1

-1.8 -2.9 -2.9 -2.9 -8.3 -5.1 -12.6

-5.0 -1.8 3.0 -9.1 -3.0 2.3 -9.3

331.7 1254.8 755.8 499.0 770.3 425.6 344.6

-6.6

-14.4

-13.4

9.9

-S.i

11.5

662.8

-16.3 -15.4 -19.6

-17.1 -18.3 -11.3

-17.8 -18.0 -17.5

-15.1 -12.3 -28.6

-20.4 -20.9 -18.3

9,5 8.7 11.2

343.1 277.9 65.1

18.2 7.8 -22.6

-19.3 23.1 -28.5

-14-1 10.9 -7.7

25.5 37.6 74.5

-5.9 55.4 59.7

-3.0 37.6 -4.9

200.4 88.8 48.3

----- Average monthly change (billions of dollars) ----Memo 5 Managed liabilities at commercial banks (lines 25 + 26) Large time deposits, gross Nondeposit funds Net due to related foreign institutions 6 Other U.S. government deposits at commercial banks7

-2.1 -4.6 2.5

-4.7 -5-6 0.8

-0-3 -3.6 3.3

-2.0 -1.5 -0.5

8.0 -2.7 10.7

7.5 -0-7 8.2

685.1 355.0 330.1

2.8 -0.2

2.6 -1.8

2.7 0.7

-0.8 0.3

5.8 4.8

8.4 -0.2

88.2 241.8

-0.5

-1.2

-0.5

-2.0

-4.8

5.5

24.3

1. Change from fourth quarter to fourth quarter. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. The non-M2 component of M3 is seasonally adjusted as a whole. 4. Net of holdings of money market mucual funds, depository institutions, U.S. government, and foreign banks and official institutions. 5. Calculated on end-month-of-quarter basis. 6. 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 (including borrowing from the Federal Reserve and unaffiliated foreign banks, loan RPs, and other minor items). Data are partially estimated. 7. Treasury demand deposics and note balances at commercial banks.

-16COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT (Percentage change at annual rate, based on seasonally adjusted data) Category

1991 Dec. to 1992 Dec.

1992 Q4

1993 Q1

1993 Feb.

1993 Mar.

1

1993 Apr. p

Level, bil.$ 1993 Apr. p

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

Securities

3.5

2.7

1.6

1.5

5.4

5.0

2,962.8

13.0

7.1

11.7

16.0

21.9

15.5

869.9

3.

U.S. government

17.5

10.7

14.1

18.4

23.7

16.2

691.6

4.

Other

-1.2

-5.8

2.3

7.6

14.5

13.6

178.3

0.2

1.0

-2.4

-4.3

-1.3

0.6 2,092.9

5.

Loans

6.

Business

-3.2

-2.0

-1.8

-2.4

-5.2

-6.1

589.7

7.

Real estate

2.1

2.4

-2.5

-3.1

0.5

-0.4

886.9

8.

Consumer

-1.8

-1.2

6.1

7.0

2.0

11.6

364.5

9.

Security

18.2

3.7

-14.8

-26.6

15.6

-32.6

60.8

0.7

7.3

-15.1

-29.0

-9.5

16.6

191.0

10.

Other

Short- and intermediate-term business credit -3.3

-3.1

-2.7

-4.9

-5.7

-6.6

580.9

12. Loans at foreign branches 2

2.0

11.4

-30.0

-61.4

-34.9

5.1

23.5

13. Sum of lines 11 and 12

-3.1

-2.5

-3.9

-7.2

-6.9

-6.1

604.4

14. Commercial paper issued by nonfinancial firms

9.5

16.6

-9.3

-2.4

30.1

151.0

15. Sum of lines 13 and 14

-0.8

1.2

-5.0

-6.3

-8.7

1.0

755.4

-16.9

-6.8

-10.4

-26.3

10.8

n.a.

22.5

1.8

1.2

-2.5

-10.6

6.7

n.a.

305.4

-0.5

1.0

-4.4

-8.0

-4.1

n.a.

1,082.6

11. Business loans net of bankers acceptances

16. Bankers acceptances, U.S. traderelated 3 ,4 17. Finance company loans to business 4 18. Total (sum of lines 15, 16, and 17)

-16.1

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. March 1993. p--Preliminary. n.a.--Not available.

5

-17SELECTED FINANCIAL MARKET QUOTATIONS (Percent except as noted) 1992

1993

Instrument Sept.

4

FOMC. Mar. 23

Change to May From Sept. 4

May 13

13,

From FOMC, Mar. 23

SHORT-TERM RATES 2 Federal funds

3.19

3.03

2.94

-0.25

-0.09

Treasury bills 3-month 6-month 1-year

2.92 2.96 3.06

2.92 3-03 3.15

2.93 3.02 3.17

0.01 0.06 0.11

0.01 -0.01 0.02

Commercial paper 1-month 3-month

3 .22 3.22

3.14 3.23

3.10 3.12

0.12 -0.10

-0.04 -0.11

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

3.06 3.06 3.11

3.09 3.09

3.06 3.07

-0.03

3.18

3.15

0.00 0.01 0.04

3 31

3.06 3.13

3.00 3.06

-0.31

3.31

-0.25

-0.06 -0.07

6.00

6.00

6.00

0.00

0.00

4.38

4.31

4.35

6.40 7.29

5.91 6.77

6.02 6.96

-0.03 -0.38 -0.33

0.04 0.11 0.19

6.31

5.90

5.90

-0.41

0.00

8.06

7.55

7.66

-0.40

0.11

7.84

7.57 4.82

7.42 4.63

-0.42 -0.52

-0.15 -0.19

Eurodollar 1-month 3-month

Bank

1993

-0.02 -0.03

deposits

prime rate

INTERMEDIATE- AND LONG-TERM RATES U.S. Treasury 3-year 10-year 30-year

(constant maturity)

5 Municipal revenue (Bond Buyer) Corporate--A utility. recently offered 6 Home mortgages FHLMC 30-yr. fixed rate FHLMC 1-yr. adjustable rate

5.15

1989

1993

Low. Jan. 3

FOMC, Mar. 23 May 13

Percentage change to May 13

Record high Stock exchange index

Level Dow-Jones Industrial NYSE Composite AMEX Composite NASDAQ (OTC) Wilshire

3482.31 251.36 428.43 708.85 4475.25

Date

2144.64 3461.86 3447.99 3/10/93 154.00 247-26 243.27 5/12/93 305.24 419.56 427.91 2/4/93 378.56 675.04 675.64 3/10/93 2718.59 4396.65 4331.18 5/12/93

1. One-day quotes except as noted. 2. Average for two-week reserve maintenance period closest to date shown. Last observation is average for maintenance period ending May 12.

1993.

3. Secondary market.

From

From

record high

1989 low

-0.99 -3.22 -0.12 -4.69 -3.22

60.77 57.97 40.19 78.48 59.32

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.

From FOMC. Mar. 23 -0.40 -1.61 1.99 0.09 -1.49

-18THE

INTERNATIONAL ECONOMY

Developments in Foreign

Industrial Countries

Strikes that began in eastern Germany on May 3 appear to be ending.

IG Metall, the union representing the more than 40,000

striking engineering and metal workers, agreement on May 14. wages

by about

25

The agreement

percent by the end

western German wages by 1996.

announced a tentative

calls for an increase in nominal of this

year and parity with

In addition, the agreement

allows

financially strapped firms to opt out of negotiated wage increases. The 1991

strike was

generated when employers broke contracts

agreed to in

that called for an increase in nominal wages by about

25 percent beginning in April and parity with western German wages by early next year.

Before the strikes

union leadership must vote to accept the

are formally concluded, the negotiated settlement.