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

July 2

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 Employment and unemployment. . . Wages . . . . . . . . . . . . . . Consumer confidence. . . . . . . Business fixed investment . . . Erratum. . . . . . . . . . . . .

. . . . .

. . . . .

. . . . . ... . .

Table Changes in employment . . . . . . .... Selected unemployment and labor force participation rates . . . . . .... Labor productivity and costs . . . ... Average hourly earnings . . . . . . ... Business capital spending indicators. Chart Other labor market indicators. . . . . Factors influencing wage inflation . .

. .

S 5 S 7

. Nonresidential construction and selected indicators. . Indicators of consumer sentiment .

.

THE FINANCIAL ECONOMY Tables

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

.

.

.

.

.

. .

. .

. .

. .

..... . . . .

.

.

......

THE INTERNATIONAL ECONOMY Bundesbank interest rate cuts .

.

.

.

The U.S. net international investment position, 1992

8 10

SUPPLEMENTAL NOTES THE DOMESTIC NONFINANCIAL ECONOMY Employment and Unemployment The recovery in the labor market appears to have paused in June.

Nonfarm payroll employment was up just 13,000, the average

workweek for production workers retraced its jump in May, and the civilian unemployment rate ticked back up to 7 percent.

More

complete estimates raised payroll employment in April, principally because of slightly larger increases in most services industries than previously shown; for May, the rebound in construction jobs now appears to have been less rapid, but retail employment increased a bit faster.

Taken together, the data on payroll hours of production

or nonsupervisory workers,

for the quarter as a whole, rose at a

4.1 percent annual rate. The modest rise in nonfarm jobs in June followed two months of fairly rapid increases.

Two industries--construction and services--

accounted for the bulk of the deceleration in employment.

In

construction, a rebound in hiring from a depressed March level contributed to the pickup in payroll employment growth in April and May, but employment then edged down in June.

Among the services

industries, the June gains in the large health and business services sectors were relatively small, employment in personal services was little changed after a large gain in May, and jobs in amusement and recreation continued to retrace part of sizable jump in April.

In

retail trade, monthly gains in employment last month continued to average close to 40,000, but jobs at wholesalers fell noticeably. In contrast to the pattern elsewhere, manufacturing employment has been on a steady slide over the recent three-month period, with monthly declines averaging 56,000; slightly during the first quarter.

factory employment had moved up

-2In addition to the deceleration in employment, the average workweek of production and nonsupervisory workers retraced its jump in May.

The declines in June, like the increases a month earlier,

were widespread across service-producing industries.

The factory

workweek edged down to 41.3 hours last month, slightly below the average earlier in the year.

At 34.4 hours, the overall workweek in

June was the same as the average for the first four months of the year. The household survey measure of total civilian employment dropped back slightly in June, after a steep increase in May. the same time, unemployed edged up. concentrated among adult workers

At

Increases in joblessness were

(aged 25 years and older); by

reason for unemployment, a rise in the number of permanent job losers more than accounted for the increase.

The unemployment rates

for younger workers, which often are quite volatile during the summer months, were little changed in June. Wages Average hourly earnings of production or nonsupervisory workers declined slightly in June and were up at just a 0.7 percent annual rate over the second quarter.

By industry, a deceleration in the

rate of wage change was widespread between the first and second quarters, with the noticeable exception of finance, insurance, and real estate.

The average rate of increase in this measure of wage

change during the first half of 1993 now matches the 2-1/4 percent pace that prevailed in 1992. Consumer Confidence The University of Michigan's composite index of consumer confidence rose 1.2 points in June, owing to a modest improvement in consumers' assessments of expected conditions and no change in their appraisals of current conditions.

The June improvement in the

-3composite index is small relative to the deterioration seen in the first five months of 1993; the index still stands well below its recent peak in December.

Among the questions not included in the

composite index, consumers' average appraisal of car-buying conditions remained flat at a relatively high level after posting gains in the previous three months, and respondents' expectations of the change in unemployment worsened slightly.

Expected inflation

over the next twelve months rose another 0.4 percentage point to 4.8 percent, but average expected inflation over the next five years declined by half a percentage point to 5.2 percent. Business Fixed Investment Updates of the table on page II-22 and the chart on page II-24 of the Greenbook are attached.

They show revised data through May

on private nonresidential construction put in place. Erratum The sentence on p. I-11 of the Greenbook. which describes the staff projection of productivity should read:

"On balance, we

expect productivity. . .to rise at a 1-3/4 percent annual rate, on average, over the period from 1993:Q3 to 1994:Q4. ..

"

CHANGES IN EMPLOYMENT 1 (Thousands of employees; based on seasonally adjusted data)

1991

1992

Q4

1993

1993

1992 Q1

Q2

Apr.

May

June

------------ Average monthly changes-------Nonfarm payroll employment 2

-72

80

135

162

161

255

215

13

-88 -44 -39 -5 -33 -30 -9 39 30 4 17

59 -26 -22 -5 -5 20 -2 78 29 31 22

123 -12 -9 -3 4 35 3 92 36 47 12

155 7 3 5 7 62 0 77 29 31 7

148 -56 -46 -10 28 43 4 132 26 41 13

243 -72 -54 -18 36 51 11 221 35 67 12

192 -43 -49 6 55 51 5 119 26 32 23

8 -53 -35 -18 -6 26 -3 56 17 23 5

Private nonfarm production workers Manufacturing production workers

-71 -29

74 -13

132 1

149 16

132 -39

187 -53

248 -29

-38 -36

Total employment 3 Nonagricultural

-62 -53

130 122

196 182

85 145

218 237

-149 -127

857 847

-54 -8

Memo: Aggregate hours of private production -.1 workers (percent change) 34.3 Average workweek (hours) 40.6 Manufacturing (hours)

.1 34.4 41.1

.2 34.4 41.2

.1 34.4 41.3

.3 34.5 41.4

.7 34.4 41.5

1.2 34.7 41.4

-1.0 34.4 41.3

Private Manufacturing Durable Nondurable Construction Trade Finance, insurance, real estate Services Health services Business services Total government

1. Average change from final month of preceding period to final month of period indicated. 2. Survey of establishments. 3. Survey of households.

SELECTED UNEMPLOYMENT AND LABOR FORCE PARTICIPATION RATES (Percent; based on seasonally adjusted data)

Civilian unemployment rate (16 years and older) Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older Fulltime workers Labor force participation rate Teenagers 20-24 years old Men, 25 years and older Women, 25 years and older

1993

1993

1992 Q4

Ql

Q2

7.4

7.3

7.0

7.0

7.0

6.9

7.0

18.7 10.8 5.7 5.1

20.0 11.3 6.4 5.7

19.4 11.1 6.3 5.8

19.6 11.0 5.9 5.4

20.1 10.8 5.8 5.4

20.7 10.6 5.8 5.4

19.7 11.4 5.7 5.3

19.8 10.4 5.9 5.6

6.5

7.1

7.0

6.6

6.6

6.6

6.6

6.6

66.0

66.3

66.2

66.0

66.2

65.9

66.3

66.2

51.7 76.8 76.7 56.5

51.3 77.1 76.7 57.0

51.2 77.0 76.4 57.1

51.5 77.3 76.1 56.8

51.9 77.4 76.2 56.8

51.7 76.9 76.1 56.6

52.7 78.0 76.3 56.9

51.4 77.4 76.4 57.1

1991

1992

6.7

Apr.

May

June

-5-

OTHER LABOR MARKET INDICATORS Initial Claims for Unemployment Insurance* Thousands

Average Weekly Hours* Hours 35.4

35.1

34.8

34.5

34.2

1990 * Including

1991

1992

1993

1990

EUC adjustment.

1991

1992

33.9

1993

Production or non-supervisory workers.

Temporary Help*

Percent Percent 3

....

--.

...... ~--rt ....

-~

Jun 1.8

I

II

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

1981

1983

1985

...... rr

1989

1987

1991

1993

" Employment in personnel services as a share of total private employment.

Jobs Hard to Get*

percent

Labor Force --

Millions

Civilian labor force --

1993 1992 1991 1990 * rom the Conference Board's Survey of Consumer Sentiment.

1990

- -Three-month

1991

moving average

1992

1993

LABOR PRODUCTIVITY AND COSTS (Percent change from preceding period at compound annual rate;

based on seasonally adjusted data) 1992 Q2

Q3

Q4

19911 19921

1993 -Q1

1992-Q1 to 1993- Q1

Output per hour Total business Nonfarm business Manufacturing Nonfinancial corporations 2

1.4 1.3 2.6

2.9 2.8 5.2

.7 1.4 5.3

3.2 2.7 3.8

3.4 3.2 7.0

-1.5 -1.6 4.8

1.4 1.4 5.2

2.3

3.6

2.0

4.4

5.0

-2.4

2.2

4.1 4.1 4.7

3.5 3.4 3.0

1.5 2.0 3.6

3.9 3.5 3.4

3.8 3.9 6.3

3.7 3.3 .7

3.2 3.1 3.5

3.9

2.5

1.6

3.0

3.1

2.9

2.6

2.7 2.8 2.1

.5 .6 -2.0

.8 .6 -1.7

.7 .7 -.4

.5 .6 -.6

5.3 5.0 -3.9

1.8 1.7 -1.6

1.5

-1.0

-.4

-1.4

5.4

.4

Compensation per hour Total business Nonfarm business Manufacturing Nonfinancial corporations 2 Unit labor costs Total business Nonfarm business Manufacturing Nonfinancial corporations 2

-1.8

1. Changes are from fourth quarter of preceding year to fourth quarter of year shown. 2. The nonfinancial corporate sector includes all corporations doing business in the United States with the exception of banks, stock and commodity brokers, finance and insurance companies; the sector accounts for about two-thirds of business employment. 3. N.A. Not available.

AVERAGE HOURLY EARNINGS (Percentage change; based on seasonally adjusted data) 1 1992 1991

Total private nonfarm

Manufacturing Durable Nondurable Contract construction Transportation and public utilities Finance, insurance and real estate Total trade Services

1992

Q4

1993 Q1

1993 Q2

Apr.

May

June

-Annual rate-

-Monthly rate-

2.9

2.2

2.3

3.8

.7

-. 1

.4

-. 1

3.0 3.2 2.9 1.5

2.3 2.2 2.5 1.1

2.5 3.4 .0 2.9

2.8 2.3 1.9 2.0

2.1 1.6 3.3 -4.4

.4 .5 .5 .0

.0 .0 .0 -1.1

.1 -.1 .4 -.1

1.5

1.7

.6

2.7

-.3

-.2

.1

.0

4.3 3.0 3.9

3.5 2.1 2.6

5.3 1.4 2.3

4.4 4.9 3.4

4.8 .9 .7

.4 -.1 -.3

1.6 .5 .7

-.8 -.1 -.2

1. Annual changes are measured from final quarter of preceding year to final quarter of year indicated.

FACTORS INFLUENCING WAGE INFLATION VACANCY AND UNEMPLOYMENT RATES* Percent

Percent

Unemployment rate

1979

1980

1981

1982

1983

1984

1985

1986 1987 1988 1989 1990 'The vacancy rate is the Conference Board's help wanted index divided by total payroll employment

MICHIGAN SURVEY EXPECTED PRICE INFLATION*

1979

1980

1981

1982

1983

1984

* Mean expected inflation over the next twelve months.

1985

1986

1991

1992

1993

Twelve-month percent change

1987

1988

1989

1990

1991

1992

1993

-8-

Indicators of Consumer Sentiment Car Buying Attitudes versus Light Vehicle Sales millions of units 18 -

Index 160 Michigan Index of Car Buying Attitudes Total Light Vehicle Sales, SAAR

- - -

150

16 SJune 14

140

.May

\l

/

12

A/

,

/

/

--

130

-

120

-

110

10 1989

1990

100

1991

1992

1993

Consumer Confidence -Michigan - - -

Index Index

140

- Conference Board Index

120

..

..-.

100 -

...... - .. 1989

...

l 1 1m

1990

1991

June

iL 11 i

11 11I nI n fi

1992

40

1993

Comparison of Current and Expected Conditions (Michigan Survey)

Index i

-

150

Current Conditions

- - - - Expected Conditions

120 June \

S

1989

1990

/

90

-/

1991

-

1992

1993

60

-9BUSINESS CAPITAL SPENDING INDICATORS (Percent change from preceding comparable period; based on seasonally adjusted data, in current dollars) 1992

1993

Q3

Q4

.7 3.0 1.0 3.5

1993

Q1

Mar.

Apr.

May

3.4 2.6 .6 3.1

1.1 3.3 10.1 1.5

4.6 4.4 6.3 3.9

-3.8 -3.8 -7.1 -2.8

1.2 1.3 1.0 1.4

-25.8

4.6

21.3

38.0

-15.3

n.a.

2.0

6.8

3.1

7.0

4.1

-.2

-4.0 2.1 2.5 1.9

6.8 4.2 2.6 4.6

.7 4.4 9.0 3.1

-10.9 1.0 -4.8 2.8

3.7 .4 -2.5 1.2

-1.1 -2.4 6.5 -4.8

-2.2 -12.5 1.0 -5.5 .3 .7

1.4 -.3 2.8 -1.2 4.6 -1.2

.2 -2.2 4.9 6.2 -4.3 -.4

1.8 -5.7 -.3 8.1 3.3 1.6

-.5 3.4 1.1 -11.9 .7 3.1

2.5 1.2 -.8 2.9 4.1 3.5

2.6

14.5

-8.2

-8.8

1.9

2.6

-2.4

9.7

3.3

-26.9

-5.0

22.4

3.1 9.5 -11.3

9.7 14.5 -1.9

13.1 18.3 .0

na. n.a. n.a.

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

Producers' durable equipment Shipments of nondefense capital goods Excluding aircraft and parts Office and computing All other categories Shipments of complete aircraft 1 Sales of heavy weight trucks Orders of nondefense capital goods Excluding aircraft and parts Office and computing All other categories Nonresidential structures Construction put-in-place Office Other commercial Industrial Public utilities All other Rotary drilling rigs in use Footage drilled2 Memo: Business fixed investment 3 Producers' durable equipment 3 Nonresidential structures 3

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

1. From the Current Industrial Report "Civil Aircraft and Aircraft Engines." Monthly data are seasonally adjusted using FRB seasonal factors constrained to BEA quarterly seasonal factors. Quarterly data are seasonally adjusted using BEA seasonal factors. 2. From Department of Energy. 3. Based on constant-dollar data; percent change, annual rate. n.a. Not available.

-10-

NONRESIDENTIAL CONSTRUCTION AND SELECTED INDICATORS* (Index, Dec. 1982 - 100, ratio scale) Total Building

- Construction ------ Permits, Contracts, or New commitments

1980

1982

1984

1986

Office

1984

1990

1992

Other Commercial

1986

1988

1990

1992

1984

1986

1988

1990

1992

1988

1990

1992

Institutional

Industrial

1984

1988

1986

1938

1990

1992

1984

1986

Six-month moving average for all series shown. For contracts, individual sectors include private & public buildings. All other include private only. New commitments are the sum of permits and contracts.

-11MONETARY AGGREGATES (Based on seasonally adjusted data except as noted)

19921

1993 Q12

Aggregate or component Aggregate 1. Ml

1993 Q22 (pe)

1993 Apr.

1993 May

1993 Jun. (pe)

1992:Q4 Level to (bil. $) Jun. 93 May 93 (pe)

Percentage change (annual rate) 14.3 1.8 0.3

6.6 -2.0 -3.8

4. M1-A

13.7

6.2

13

14.4

26.7

7

5. 6.

9.1 18.0

9.5 3.7

9% 16

9.6 18.6

10.4 41.1

11 4

7.3

6%

0.0

29.2

8

8A

395.8

-2.6

-5.5

-1%

-2.9

1

-2%

2438.9

1.8

-10.2

-12%

-34.4

-5.2 -0.1 14.5

-10.1

-2 M2

3. M3

10% 2y% 2%

27.6 10.8

1067.2

3506.1 4170.8

9.3

Selected components

Currency Demand deposits

7. Other checkable deposits 8. M2 minus M13 9. 10. 11. 12. 13. 14. 15. 16.

Overnight RPs and Eurodollars, n.s.a. General-purpose and brokerdealer money market funds Commercial banks Savings deposits Small time deposits Thrift institutions Savings deposits Small time deposits

17. M3 minus M23 18. 19. 20. 21. 22.

Large time deposits At commercial banks 4 At thrift institutions Institution-only money market mutual funds Term RPs, n.s.a.

23.

Term Eurodollars, n.s.a.

-15.8

-S.5 14.8

-21.5

-2.2 1.6

-7.6 -9.0 -0.2 -19.1

3.7 -47.3

69

17.4 4.3 14.0 -10.3 2.8

0

9.6

1 8

-9 -4

10%

671.4

10 11

304.0 359.2

-5 -3%

-3

68.3 336.5

1259.4

4

764.7

-7A -6

494.7 772.1

3

i

429.0

-5.6

-13

-14

343.1

1.1

-15

-6

664.7

-6.6

-13.2

2%

11.7

-16.3 -15.4 -19.6

-17.8 -18.0 -17.5

-3% -2% -8

9.9 10.0 11.2

1.0 4.7 -12.9

-10 -90 -12%

343.6 279.3 64.4

18.2

-14.1

i

-3.0

14.4

289 28

36.4 -7.2

-5.4 26.6

-7% 18

202.8 88.0 50.8

7.9 -22.6

9.9 -2.6

9%

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

-4.6

-1.0 -3.6

2.5

2.8 -0.2

-2.1

-0.5

23. -1

680.3 356.2

2.6

3%3

324.1

2.4 0.1

1 2%

9.2 -0.6

-5.2 0.9

-0.5

2Y

5.4

-5.1

83.1 240.9 6

1. "Percentage change" is percentage change in quarterly average from fourth quarter of preceding year to fourth quarter of specified year. 'Average monthly change' is dollar change from December to December, divided by 12. 2. "Percentage change' is percentage change in quarterly average from preceding quarter to specified quarter. "Average monthly change' is dollar change from the last month of the preceding quarter to the last month of the specified quarter, divided by 3. 3. Seasonally adjusted as a whole. 4. Net of holdings of money market mutual funds, depository institutions, U.S. government, and foreign banks and official institutions. 5. 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. 6. Treasury demand deposits and note balances at commercial banks.

-12COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM BUSINESS CREDIT 1 (Percentage change at annual rate, based on seasonally adjusted data) Dec.

credit of Type

Level,

1991 to Dec. 1992

1992 Q4

1993 Q1

1993 Apr.

1993 Mar.

1993 May

May. 1993 ($billions)

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

Securities

3.6

2.7

1.6

5.1

4.9

8.9

2,984.7

13.0

7.1

11.6

21.6

15.7

5.4

873.4

3.

U.S. government

17.5

10.6

14.1

23.8.

16.5

4.3

694.8

4.

Other

-1.2

-5.6

1.8

13.1

12.3

9.5

178.6

0.2

1.0

-2.4

-1.7

0.5

10.4

2,111.3

-3.2

-2.0

-1.8

-5.4

-6.1

7.1

592.5

2.1

2.4

-2.6

0.1

-0.1

8.0

893.4

6.1

1.7

11.0

8.2

366.9

5.

Loans

6.

Business

7.

Real estate

8.

Consumer

-1.8

9.

Security

18.2

3.7

-14.8

15.6

-34.6

120.6

66.8

1.2

7.3

15.1

-10.1

16.5

0.0

191.7

10.

Other

-1.3

Short- and intermediate-term business credit -3.3

-3.0

-2.7

-5.9

-6.4

6.2

583.4

2.0

11.4

-30.0

-34.9

5.1

10.2

23.3

-3.1

-2.5

-3.8

-7.1

-5.9

5.6

606.7

9.5

16.6

-9.3

-16.1

31.0

17.5

153.3

-0.8

1.2

-4.9

-8.8

1.3

7.8

759.9

-16.9

-6.8

-10.4

10.8

-10.7

-16.1

22.0

17. Finance company loans to business 4

1.8

1.2

-2.5

6.7

5.1

n.a:

306.7

18. Total (sum of lines 15, 16, and 17)

-0.5

1.0

-4.4

-4.2

2.2

n.a.

1,084.0

11. Business loans net of bankers acceptances 12. Loans at foreign branches2 13. Sum of lines 11 and 12 14. Commercial paper issued by nonfinancial firms 15. Sum of lines 13 and 14 16. Bankers acceptances, U.S. trade-related 3 '4

1. Except as noted, levels are averages of Wednesday data and percentage changes are based on averages of Wednesday data; data are adjusted for breaks caused by reclassification; changes are measured from preceding period to period indicated. 2. Loans to U.S. firms made by foreign branches of domestically chartered banks. 3. Acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage of goods. 4. Changes are based on averages of month-end data. 5. April 1993. n.a. Not available.

-131 SELECTED FINANCIAL MARKET QUOTATIONS (Percent except as noted) 1992 Instrument Sept. 4

I

1993 FOMC. May 18

Jul 1

Change to Jul 1, 1993 From Sept. 4

From FOMC. May 18

SHORT-TERM RATES 2 Federal funds

3.19

2.94

3.15

-0.04

0.21

Treasury bills 3-month 6-month 1-year

2.92 2.96 3.06

3.01 3.11 3.26

2.99 3.09 3.28

0.07 0.13 0.22

-0.02 -0.02 0.02

Commercial paper 1-month 3-month

3.22 3.22

3.12 3.15

3.21 3.24

-0.01 0.02

0.09 0.09

3.06 3.06 3.11

3.09 3.13 3.24

3.12 3.17 3.34

0.06 0.11 0.23

0.03 0.04 0.10

3.31 3.31

3.00 3.13

3.06 3.19

-0.25 -0.12

0.06 0.06

6.00

6.00

6.00

0.00

0.00

4.38 6.40 7.29

4.49 6.15 7.02

4.37 5.80 6.69

-0.01 -0.60 -0.60

-0.12 -0.35 0.33

6.31

5.90

5.75

-0.56

-0.15

8.06

7.84

7.48

-0.58

-0.36

7.84 5.15

7.42 4.63

7.34 4.59

-0.50 -0.56

-0.08 -0.04

3 Large negotiable CDs 1-month 3-month 6-month 4 Eurodollar deposits 1-month 3-month Bank prime rate INTERMEDIATE- AND LONG-TERM RATES U.S. Treasury (constant maturity) 3-year 10-year 30-year 5 Municipal revenue (Bond Buyer) Corporate--A utility. recently offered 6 Home mortgages FHLMC 30-yr. fixed rate 1-yr. adjustable rate FHLMC

Stock exchange index

3554.86 251.36 440.95 708.85 4475.25

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

5/27/93 2144.64 3444.39 3510.54 248.64 154.00 243.53 3/10/93 305.24 428.22 435.87 6/4/93 378.56 680.78 703.59 2/4/93 3/10/93 2718.59 4335.06 4445.95

-1.25 -1.08 -1.15 -0.74 -0.65

63.69 61.45 42.80 85.86 63.54

1.92 2.10 1.79 3.35 2.56

i 1. 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 July 7. 1993. 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.

-14THE INTERNATIONAL ECONOMY Bundesbank Interest Rate Cuts

On Thursday, July 1, the Bundesbank announced a reduction in its discount rate of 1/2 percentage point to 6-3/4 percent and a

reduction in its Lombard rate of 1/4 percentage point to 8-1/4 percent.

The Bundesbank also announced that it would conduct

next week's repurchase operations at a fixed rate of 7.30 percent,

down about 30 basis points from the rates at which -recent variablerate RPs had been done.

The central banks of Switzerland, Sweden,

Denmark, Ireland, Austria, Belgium, and the Netherlands preceded and followed the Bundesbank's action with similar rate cuts of their own yesterday.

These cuts did

Today, France and Spain also cut rates.

not come as a complete surprise; most market participants expected that the Bundesbank Council would reduce interest rates at one of its two remaining meetings before the summer recess.

Between

Wednesday and today, the three-month interbank interest rate in Germany declined about 20 basis points to 7.20 percent. interest rates elsewhere in Europe also declined.

Short-term

Bond yields in

Germany and other European countries edged up between 5 and 10 basis points. The U.S. Net International Investment Position, 1992 The net international investment position of the United States at the end of 1992 was negative $521 billion when direct investment was valued at the current cost of replacing plant and equipment and other tangible assets, according to data released on June 30 by the Department of Commerce; it was negative $611 billion when direct investment was valued at the current stock market value of owners' equity.

The position deteriorated in 1992 by $156 billion (on the

current cost basis) or $215 billion (on the stock market value basis).

The larger negative position reflected both recorded net

-15capital inflows in 1992 and estimated changes in asset values largely resulting from price increases in the U.S.

stock market,

price decreases in several leading foreign stock markets, and depreciation of several major foreign currencies against the dollar.