greenbooks · August 16, 1993

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

August 13,

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 Consumption. . . Inventories . . . Prices . . . . . . Agriculture. .

. .

. . .

. .

. ... . . . .

. . .

. . . .

. . .

Tables

1 Sales of North American produced autos and light trucks Retail sales . . . . . . . . . . . . . S. . 8 University of Michigan Survey Research Center: . . . 99 . . Survey of consumer attitudes . Retail inventories . ... . . . . . . . . . . 11 . . . 11 Retail inventory/sales ratios. . . . . .. 12 Business inventories . . . . . . . . . Inventory/sales ratios . . . . . . . . .. 12 .. 14 Recent changes in consumer prices . . . . . 14 Recent changes in producer prices. . . . . . 15 U.S. crop production . . . . . . . . . Corn and soybean production, selected s tates . . . . . 16 . . . 17 Futures prices for farm commodities. . Charts . . . . .

. . . . .

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

8 10 10 10 13

August Senior Loan Officer Opinion Survey on . . . . . . . . Bank Lending Practices. .

. ..

Real PCE goods excluding motor vehicles . . . . . . Consumer homebuying attitudes MBA indexes of mortgage loan applications Builders' rating of new home sales . . . . . . . Ratio of inventories to sales. .

. . . .

THE FINANCIAL ECONOMY

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

. .

.. . .. 25 . . .. 26

SUPPLEMENTAL NOTES

THE DOMESTIC NONFINANCIAL ECONOMY Consumption Nominal retail

sales increased 0.1

percent in July.

in the the retail control category, which excludes dealers

and building material and supply

stores

jumped 2.4

stores rose

automotive

stores, rose 0.4

Sales in July were particularly brisk in the GAF merchandise

Spending

percent.

category:

posted a 1.4 percent increase, sales

General

at apparel

percent, and spending at furniture and appliance

1.7 percent.

Elsewhere, movements in sales were

The level of spending in the retail

small.

control category for the

second quarter is now estimated to have been higher than reported earlier:

the May decline of 0.1 percent was

0.2 percent gain, 0.4 percent rise.

revised up to

and June's 0.3 percent increase became a These upward revisions imply that real PCE for

goods excluding motor vehicles was around $2 billion higher in the second quarter than had been estimated by the BEA. Sales of domestic motor vehicles dropped further

in the

first

ten-day selling period of August to 10.4 million units

(annual

rate).

all

Weaker

sales of GM models accounted for almost

of the

declines in both autos and trucks.

SALES OF NORTH AMERICAN PRODUCED AUTOS AND LIGHT TRUCKS2 (Millions of units at a seasonally adjusted annual rate)

Q2 Total Autos Light trucks

12.05 6.94 5.11

1993 July 11.66 6.74 4.92

1-10 11.54 6.61 4.93

1993 July 11-20 21-31 11.89 7.07 4.82

11.50 6.51 4.99

Aug. 1-10 10.39 5.88 4.50

1. Excludes some vehicles produced in Canada and Mexico that are classified as imports by industry. Ten-day figures include estimates for Chrysler, Hyundai, and Suzuki sales. 2. Monthly rates use BEA seasonal factors. Ten-day rates use FRB factors prorated to BEA monthly factors.

-2-

The University of Michigan's composite index of consumer attitudes posted another small decline in the first part of August. Respondents' views of expected conditions held steady in August after falling sharply in the first half of 1993, but assessments of current conditions worsened. Among the questions not included in the composite index, consumers' appraisal of car and home buying conditions slipped in August.

Respondents'

expectations about the change in unemployment

deteriorated further, falling to the most unfavorable reading since early 1992.

Average expected inflation over the next twelve months

rose by almost a percentage point, to 5.3 percent, while average expected inflation over the next five years declined slightly, to 4.8 percent. Inventories Retail inventories rose in June at an annual rate of $13.2 billion in current-cost terms.

Excluding auto dealers, retail

stocks increased $11.1 billion, similar to buildups in April and May.

Revisions to earlier months were small.

With a 0.2 percent

rise in sales, the retailers' inventory-sales ratio edged up to 1.58 months in June;

excluding auto dealers, the ratio was unchanged at

1.49 months. Inventory changes in June generally were small for most types of nonauto retail establishments.

However, for stores in the GAF

grouping, inventories posted another sizable increase, and the inventory-sales ratio for these stores edged up further to 2.39 months in June, near the high end of the range of recent years. However, sales at GAF stores rose 1.7 percent in July, according to advance data released yesterday, and their inventory situation may have eased considerably since mid-year.

-3For all manufacturing and trade, inventories rose at an annual rate of $16.9 billion in June and $26 billion for the second quarter as a whole.

With these data now in hand, the second-quarter

accumulation of manufacturing and trade stocks still appears to be close to BEA's assumption in preparing the advance GDP estimate. Prices Consumer prices edged up just 0.1 percent in July after remaining unchanged in June.

For items other than food and energy,

the CPI also was up 0.1 percent in July, pushing the twelve-month change in this measure down to 3.2 percent. Consumer food prices were flat in July; declines in the prices of vegetables, beef, and poultry were offset by increases elsewhere. The floods in the Midwest and drought in the Southeast have not yet had a perceptible effect on consumer food prices.

Energy prices

also were unchanged in July, with lower prices for gasoline and heating oil offset by higher prices for electricity and natural gas. Over-the twelve months ending in July, energy prices were down 1/4 percent, with refined-petroleum products more than accounting for the decline. Prices of consumer goods other than food and energy were unchanged in July after edging down in June.

Tobacco prices

retreated a bit further as the price cuts announced last April continued to be put in place.

Prices of apparel and house

furnishings also dropped back last month.

Elsewhere, new car prices

rose 0.3 percent, keeping the twelve-month change below 2-1/2 percent.

However, used car prices posted another sizable

increase to a level 9.1 percent above the year-earlier level. Prices of non-energy services increased 0.2 percent in July. Owners' equivalent rent was flat after jumping 0.4 percent in June;

1. This was the lowest reading since the early 1970s, when wageprice controls were in place.

-4for the twelve months ending in July, this measure rose 3.1 percent, at the low end of its range over the past year.

In addition, the

price of medical care services posted another modest increase last month, and auto finance charges fell further.

In contrast to this

favorable news, airfares jumped 2.8 percent after early summer discounts were removed. Producer prices for finished goods declined in July for a second consecutive month.

Excluding food and energy, prices of

finished goods edged up 0.1 percent last month, and were up just 1-3/4 percent over the twelve months ending in July.

Tobacco prices

fell another 0.5 percent in July, as cigarette makers finished implementing the price cuts announced last April.

But prices of

passenger cars rose 0.8 percent on a seasonally adjusted basis, because incentives were not sweetened as much as is usual at this time of the year. Finished energy prices dropped 1 percent further in July, with substantially lower prices for gasoline and fuel oil partially offset by higher prices for electricity and natural gas.

During the

past year, producer prices of refined petroleum products have declined more than 10 percent, while electricity and natural gas prices have risen. The index for finished food edged down 0.1 percent in July, pulled down by lower prices for meats and poultry.

In contrast,

prices of fresh and dry vegetables jumped last month, partially offsetting the huge decline in June that pulled these prices down to an unusually low level.

The floods in the Midwest and drought in

the Southeast did not have a significant effect on finished food prices in July.

However, at the crude food level, the prices of

corn, soybeans, and wheat rose at double-digit rates in July.

-5Prices of intermediate materials other than food and energy edged up 0.1 percent in July;

over the past twelve months, prices of

these materials have risen 1-1/4 percent, compared with 3/4 percent over in the year-earlier period.

At the crude level, prices for

items other than food and energy rose 0.6 percent in June; decreases for logs and timber were more than offset by increases for most other items. Agriculture In its August crop report, the Department of Agriculture reduced further its projections for 1993 U.S. corn and soybean production.

The agency is now forecasting a corn harvest of

7.423 billion bushels, down about 5 percent from its mid-July projection, and a soybean harvest of 1.902 billion bushels, down about 4 percent. As expected, data by state showed large declines in production of both crops in several states along the Mississippi and Missouri Rivers.

Many other states also are reporting lower corn production

than in 1992, but soybean production is expected to rise in some key states, notably Ohio and Indiana.

If the current estimates hold up

through coming months, national production of the two crops will come in well below 1992's bumper harvest, though far above the disastrously low levels of 1983 and 1988, especially for corn. The USDA report also contained production estimates for a broad range of other crops.

Among the grains, production forecasts were

lowered for wheat, oats, and sorghum

(an important feed grain in the

central and southern Plains) and raised slightly for barley.

The

forecast for cotton production was raised substantially, to a level 14 percent above production in 1992.

By contrast, initial estimates

of 1993 production of peanuts and tobacco show the output of those

-6crops falling about 10 percent from the levels of 1992, a reflection of drought damage in the southeast and in the mid-Atlantic states. To help gauge the effect of agricultural crop losses on the economy, the staff priced out the USDA's production estimates, using average farm prices for 1987.

These calculations indicate that the

constant-dollar value of twelve major field crops will decline about $5 billion from 1992 to 1993. to drought and flood, however.

Not all the decline can be attributed USDA's farm programs encouraged

farmers to withhold more acres from production this year than in 1992.

More important, the likelihood of matching last year's

exceptionally high yields seemed remote from the beginning.

recognition of those factors, the USDA was in May already predicting significant production declines, before any crop losses could be identified.

By our tally, the USDA's May figures were indicating a

drop in constant-dollar output of the field crops of about $2-3/4 billion.

The reduction since May--$2-1/4 billion--represents

the aggregate change in crop prospects since the flooding started.2 In the futures markets, prices of farm crops fell sharply on August 12, the first day of trading after the USDA crop forecast was released.

The agency's soybean estimate was slightly above the

range of estimates that had been anticipated in the market, and it

2. In contrast, the national press this week has been reporting much larger estimates of crop damage. Because the estimates have been presented, in most cases, without further explanation, we can only guess at the reasons why they are higher than the numbers we have derived. In contrast to our method of excluding the anticipated production decline from our estimate of crop losses, some observers may be counting all the year-to-year change in production as losses due to drought or flood. Also, some analysts probably are pricing the losses in current dollars rather than constant 1987 dollars; this practice would raise the estimate of losses, as the prices of most farm crops currently are above their 1987 levels. Finally, our estimates are derived from national totals and therefore do not factor out regional offsets to the losses that have occurred in the areas affected by flood and drought.

-7-

triggered heavy selling.

Corn and wheat prices moved lower as well,

even though the USDA figures for those crops were not out of line with forecasts that were being made before the USDA report was released.

Livestock prices were mixed in yesterday's trading.

RETAIL SALES (Percent change: seasonally adjusted) 1992 Q4

1993

1993 June

May

2.9

1.7 1.6

.7 .4

.2 .4

Retail control Previous estimate

2.2

1.0 .7

.2 .1

.4 .3

GAF

2.7

1.5

1.7

Durable goods stores

4.3

3.6

1.5

-.0

3.9 5.5 4.4 -. 1

1.1 .2 .8 -1.3

3.0 3.9 2.2 4.7

3.4 1.7 .4 .1

-1.5 -. 2 .3 5.6

.6 -,7 1.7 .3

Nondurable goods stores

2.1

Apparel Food General merchandise

2.8 1.3 1.9

-2.5 .5 2.0

.4 -.4 1.7

1.2 -. 4 .9

.4 .2 .9

2.4 -.1 1.4

stations

-. 4

2.7

Other nondurables

3.9

-.7

1.1

Total sales Previous estimate

Bldg. material and supply Automotive dealers Furniture and appliances Other durable goods

Gasoline

-1.2

July

-. 7

-. 5

-. 6

-. 5

1. Total retail sales less building material and supply stores and automotive dealers, except auto and home supply stores. 2. General merchandise, apparel, furniture, and appliance stores. 3. Excludes mail order nonstores; mail order sales are also excluded from the GAF grouping. 4. Includes sales at eating and drinking places, drug stores and proprietary stores.

Real PCE Goods excluding Motor Vehicles* Billions of 87$ 1440

1400

July

1360

1320

1280

I 1990

-L . 199

* Values for May, June, and July are staff forecasts.

1I 1I 1 1 1992

I1I 1I I

I l 11 1 1993

1240

August 13, 1993 UNIVERSITY OF MICHIGAN SURVEY RESEARCH CENTER:

SURVEY OF CONSUMER ATTITUDES

(Not seasonally adjusted) 1992 Dec

1993 Jan

1993 Feb

1993 Mar

1993 Apr

1993 May

1993 Jun

1993 Jul

1993 Aug (p)

Indexes of consumer sentiment (Feb. 1966=100) Composite of current and expected conditions

91.0

89.3

86.6

85.9

85.6

80.3

81.5

77.0

75.4

Current conditions Expected conditions

93.4 89.5

98.6 83.4

96.0 80.6

101.6 75.8

99.9 76.4

98.7 68.5

98.7 70.4

96.2 64.7

92.5 64.5

99 131

110 127

100 125

111 119

104 120

103 115

108 117

102 112

90 116

126 103

111 97

103 95

145 142 162

134 145 166

132 148 158

136 152 173

137 155 167

140 152 163

140 147 166

141 147 171

134 149 165

110

117

115

125

127

130

133

3.3 5.2

3.5 4.8

4.6 5.9

4.9 4.9

4.1 4.8

4.4 5.7

4.8 5.2

4.4 5.0

5.3 4.8

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 Expected unemployment change - next 12 months Expected inflation - next 12 months Expected inflation - next 5 to 10 years * --

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

(p) -- Preliminary (f) -- 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.

-10-

Millions of units (annual rate)

CONSUMER HOMEBUYING ATTITUDES (Seasonally adjusted)

Diffusion index

Consumer homebuying attitudes (right scale)

1987 1988 1989 1990 1991 1992 1993 1 The homebuying attitudes index is calculated by the Survey Research Center (University of Michigan) as the proportion of respondents rating current conditions as good minus the proportion rating such conditions as bad.

MBA INDEXES OF MORTGAGE LOAN APPLICATIONS Purchase Index

210 -

March 16, 1990 = 100

Weekly 180 -

Seasonally adjusted 1 150

120

VCi

'r -

I ^

/ 'I

-Augus 6

August

Not seasonally adjusted

60 -

1990 1991 1. Seasonally adjusted by Federal Reserve Board Staff

Millions of units (annual rate)

1992

BUILDERS' RATING OF NEW HOME SALES 1 (Seasonally adjusted)

1993

Diffusion index

Builders' rating of new home sales (right scale) Aug (p)

June

Single-family starts (left scale)

1993 . 1992 1991 1990 1989 1988 1987 sates as good rating current respondents proportion of data as the IThe index is calculated from National Association of Homebuilders to excellent minus the proportion rating them as poor.

-11RETAIL INVENTORIES

(Change in current cost at seasonally adjusted annual rate; billions of dollars) 1992 Q3

Total retail (previous) Excluding auto dealers (previous) Durable goods Lumber, bldg. mat. Auto dealers Furniture Other durable goods 1 Nondurable goods General merchandise

8.9

23.1

33.6

11.7

14.4

4.0 2.0 -2.8 1.8 3.1

Apr.

May

June

9.9

40.0

15.1

13.2

14.3

9.9

20.6

11.7

1.3 .1 7.0 10.6

18.6 .5 8.7 6.4 3.0

25.0 4.4 19.3 -1.3 2.6

3.9 -.2 -. 1 4.2 -. 1

26.4 2.4 19.5 2.3 2.2

11.8 .4 3.4 5.3 2.6

-8.2 -. 6 -5.7 -.2 -1.7

8.1 -.3 2.2 7.5 -1.2

4.9 4.3

4.5 3.2

8.6 7.5

6.0 4.0

13.6 10.9

3.3 3.0

9.5 9.0

5.1 -.0

-1.2

11.1

1.2

1.4

-. 3

-3.4

2.3 -2.1

4.1 -4.0

.6 -.4

2.4 .8

2.2 -. 8

2.1 -1.5

2.5 1.4

2.7 2.5

8.3

13.6

6.7

10.6

15.4

10.4

11.4

10.1

G. A. F. 2 1. 2.

1993 Mar.

Food

Apparel Other nondurable goods1

1993

FRB calculated. Equals: General Merchandise, Apparel, and Furniture & Home Furnishings.

RETAIL INVENTORY/SALES RATIOS 1

1992

1993

1993 Mar.

Apr.

May

June

Total retail Excluding auto dealers

1.56 1.48

1.55 1.47

1.60 1.49

1.58 1.50

1.61 1.51

1.59 1.49

1.57 1.49

1.58 1.49

Durable goods Lumber, bldg. mat. Auto dealers Furniture Other durable goods

2.16 2.20 1.89 2.27 3.10

2.15 2.14 1.85 2.35 3.20

2.25 2.23 1.99 2.30 3.32

2.18 2.16 1.91 2.36 3.17

2.27 2.25 2.00 2.32 3.42

2.21 2.21 1.94 2.30 3.26

2.17 2.13 1.89 2.29 3.24

2.17 2.16 1.90 2.35 3.06

Nondurable goods General merchandise Food Apparel Other nondurable goods

1.22 2.31 .83 2.39 3.59

1.21 2.31 .83 2.44 3.34

1.22 2.35 .83 2.52 3.43

1.23 2.35 .83 2.58 3.47

1.23 2.38 .84 2.63 3.34

1.22 2.34 .83 2.55 3.42

1.23 2.35 .83 2.55 3.41

1.23 2.33 .83 2.56 3.53

G. A. F.

2.32

2.35

2.37

2.40

2.42

2.38

2.39

Months' supply, based on current-cost data.

-12BUSINESS INVENTORIES (Change at annual rates in seasonally adjusted current cost; billions of dollars)

1992

Manufacturing and trade (previous) Excluding autos (previous) Manufacturing Trade, total Wholesale Retail Excluding autos Durable Auto Nondurable

1993

Mar.

Apr.

May

June

16.3

20.4

39.9

26.0

52.5

40.6

20.6 21.5

16.9

19.0

11.7

20.6

26.1

33.1

37.2

26.4 32.0

14.7

4.4 11.9 3.0 8.9 11.7 4.0 -2.8 4.9

-19.1 39.5 16.5 23.1 14.4 18.6 8.7 4.5

1.2 38.7 5.1 33.6 14.3 25.0 19.3 8.6

7.3 18.7 8.9 9.9 9.9 3.9 -. 1 6.0

3.7 48.9 8.9 40.0 20.6 26.4 19.5 13.6

9.2 31.4 16.3 15.1 11.7 11.8 3.4 3.3

15.4 5.2 4.0 1.3 7.0 -8.2 -5.7 9.5

-2.7 19.6 6.4 13.2 11.1 8.1 2.2 5.1

May

June

Totals may not add because of rounding.

INVENTORY/SALES RATIOS

1992

Manufacturing and trade Excluding autos Manufacturing Trade, total Wholesale Retail Excluding auto

1993

1993 Mar.

Apr.

1.50 1.48

1.48 1.46

1.47 1.44

1.57 1.45 1.34 1.56 1.48

1.52 1.46 1.35 1.55 1.47

1.48 1.47 1.33 1.60 1.49

1.49 1.46 1.33 1.58 1.50

1.47 1.48 1.34 1.61 1.51

1.49 1.46 1.33 1.59 1.49

1.50 1.45 1.31 1.57 1.49

1.47 1.46 1.33 1.58 1.49

-13-

RATIO OF INVENTORIES TO SALES (Current-cost data) Ratio - 2.05 Manufacturing

?,"

-' 1 85

Excluding aircraft Lo

e'l., t

\.\ I

June-

1.45

1 1993

1.25

SI 1979

I 1983

1981

. . 1985

I I 1987

I 1989

I 1991

Ratio 1.5 Wholesale

1.4

- 1.3

S1.2

1979

I I II I i 1983 1985

1981

I 1987

I 1989

1.1 1991

Ratio 2.7 Retail

Ratio 1.7 ;-.

.,.

2.5 -

2.3

1993

GAF group

h*'

2.1

- 1.6

A,,,

u" "Au

A',g

Total excluding auto

1979

1981

1983

1985

1987

1989

1991

-1.5

1.4

1993

-14RECENT CHANGES IN CONSUMER PRICES (Percent change; based on seasonally adjusted data)1

Relative importance, Dec. 1992

1991

1992

1992 --Q4

1993 Q1

1993 Q2

June

----- Annual rate-----All items 2 Food Energy All items less food and energy Commodities Services Memo: CPI-W 3

July

-Monthly rate-

100.0 15.8 7.3

3.1 1.9 -7.4

2.9 1.5 2.0

3.2 1.4 1.9

4.0 2.6 3.1

2.2 1.4 -3.8

.0 -.4 -.2

.1 .0 .0

76.9 24.7 52.2

4.4 4.0 4.6

3.3 2.5 3.7

3.8 1.5 4.7

4.3 4.6 4.4

2.9 .6 4.1

.1 -.1 .2

.1 .0 .2

100.0

2.8

2.9

3.2

4.1

2.0

1. Changes are from final month of preceding period to final month of period indicated. 2. Official index for all urban consumers. 3. Index for urban wage earners and clerical workers.

RECENT CHANGES IN PRODUCER PRICES 1 (Percent change; based on seasonally adjusted data)

Relative importance, Dec. 1992

1991

1992

1992 --Q4

1993 Q1

1993 Q2

----- Annual rate------

June

July

-Monthly rate-

100.0 22.4 13.9 63.7 40.6 23.1

-. 1 -1.5 -9.6 3.1 3.4 2.5

1.6 1.6 -.3 2.0 2.1 1.7

-.3 3.3 -10.2 1.2 1.2 .6

4.3 -1.6 16.6 3.6 3.2 4.4

.6 1.3 -3.5 1.2 1.2 1.2

-. 3 -. 9 -.5 -.1 -.3 .2

-.2 -.1 -1.0 .1 .1 .1

Intermediate materials 2 Excluding food and energy

95.4 81.8

-2.7 -.8

1.1 1.2

-2.1 -.3

5.7 4.7

.3 -. 3

.3 .1

-.2 .1

Crude food materials Crude energy Other crude materials

41.2 39.5 19.3

-5.8 -16.6 -7.6

3.0 2.3 5.7

5.1 -17.8 1.9

1.9 -10.1 24.3

-1.5 19.3 10.9

-3.1 .2 .2

1.2 -4.9 .6

Finished goods Consumer foods Consumer energy Other finished goods Consumer goods Capital equipment

1. Changes are from final month of preceding period to final month of period indicated. 2. Excludes materials for food manufacturing and animal feeds.

-15-

U.S

1991

CROP PRODUCTION 1

USDA Projection for 1993 May 11 July 12 Aug. 11

1992

billions of bushels Corn Soybeans Wheat Sorghum Oats Barley

7 48 1 .99 1 98 59 .24 .46

9.48 2.20 2.46 .88 30 .46

8.50 2.05

2.52 .66 25

7 .85 1 98 2.60 .67 26

7 .42 1 .90 2.55 .64 25 47

billions of hundredweight 7

Rice

billions of pounds Peanuts Tobacco

4.93 1.66

4.28 1 72

n.a, n.a,

n.a. n.a,

3.91 1.55

millions of bales 10.

Cotton

17 .61

16.22

17 .50

17 .80

18.55

millions of tons 1l 12.

Sugar beets Sugar cane

28.20 30.25

28.93

30.36

n.a. n.a.

28.05 30.85

Memo: billions of 1987 dollars 13

13 Value, 12 crops Value, 12 crops

41 18

47.05

44.31

Data are from the U.S. Department of Agriculture Calculated by the staff from USDA data.

43.30

42.18

-16CORN AND SOYBEAN PRODUCTION, SELECTED STATES (Billions of bushels) USDA Forecast

1990

1991

1992

For 1993

Iowa Illinois Nebraska Indiana Minnesota Ohio Wisconsin Michigan South Dakota Missouri

1.56 1.32 .93 .70 .76 .42 .35 .24 .23 .21

1.43 1.18 .99 .51 .72 .33 .38 .25 .24 .21

1.90 1.65 1.07 .88 .74 .51 .31 .24 .28 .32

1.25 1.40 .95 .76 .46 .40 .27 .24 .18 .20

Total, 10 states

6.72

6.24

7.90

6.11

Total, U.S.

7.93

7.48

9.48

7.42

Illinois Iowa Minnesota Indiana Ohio Missouri Arkansas Nebraska South Dakota Kansas

.35 .33 .18 .17 .14 .12 .09 .08 .05 .05

.34 .35 .20 .17 .14 .14 .09 .08 .06 .04

.41 .36 .17 .19 .15 .16 .10 .10 .06 .07

.37 .28 .14 .22 .17 .12 .09 .09 .04 .05

Mississippi Michigan

.04 .04

.05 .05

.06 .05

.05 .05

Total, 12 states

1.64

1.71

1.88

1.67

Total,

1.93

1.99

2.20

1.90

Corn:

Soybeans:

U.S.

-17FUTURES PRICES FOR FARM COMMODITIES 1

Pricing date Commodity and contract

May 13

June 30

July 7

July 30

Aug. 11

Aug. 12

2.40 6.01 3.05

2.38 6.59 2.96

2.58 7.15 3.17

2.42 6.88 3.13

2.47 6.83 3.17

2.44 6.56 3.11

Cattle, Oct. Cattle, Apr.

74.90 75.05

75.12 76.45

75.07 76.57

75.20 76.65

75.37 76.95

75.22 76.97

Hogs, Oct. Hogs, Apr.

43.47 43.10

40.30 40.25

44.12 43.72

45.72 44.85

44.92 43.40

45.55 44.05

Corn, Dec. Soybeans, Nov. Wheat, Dec.

1. The prices of corn, soybeans, and wheat are in dollars per bushel. The prices of cattle and hogs are in dollars per hundredweight.

-18THE FINANCIAL ECONOMY Senior Loan Officer Opinion Survey on Bank Lending

August

The August

1993

Senior Loan Officer Opinion

Lending Practices posed questions

Survey on Bank

about changes in bank lending

standards and terms, changes in loan demand by businesses households,

bank capital levels, the effects

Availability Program, and loan sales.3 banks

and eighteen U.S.

Practices

and

of the Credit

Sixty domestic commercial

branches and agencies of foreign banks

participated in the survey. The survey results show a continuation of the

easing of lending

terms and standards reported in the May survey and a strengthening of demand for bank credit by both households

and businesses.

respondents reported some easing of terms and standards for commercial and industrial loans than did so in the May survey.

Standards for commercial real estate loans were little changed, and thus remain very restrictive.

A small fraction of respondents

indicated that they had eased standards on home mortgage loans, and a larger fraction reported increased willingness to make loans to individuals.

A substantial fraction of respondents indicated that

the demand for business loans had increased over the last three months.

Household demand for bank credit was also reported to have

picked up, particularly for residential mortgages. As in the last four surveys, almost all the respondents judged their bank's capital position to be either fairly comfortable or very comfortable.

The fraction of respondents taking a more

aggressive lending stance owing to fairly comfortable or very comfortable capital positions increased from one-fifth in May to more than one-third in the August survey.

As in May, however, most

3. The data on loan sales are not yet sufficiently complete for discussion in this report.

-19of those taking a more aggressive lending stance reported difficulty in finding attractive lending opportunities. Special questions on the survey asked about the effects of the Credit Availability Program on bank lending to small and mediumsized businesses.

Thus far, it appears that the program has had

little effect on lending to these businesses, although the respondents expect that it will allow an easing of terms and standards for such loans when fully implemented. Business Lending Commercial and industrial loans other than for mergers. Domestic respondents reported a fairly significant net easing of standards and terms for commercial and industrial loans in the August survey.

Standards for approving business loans to medium-

sized firms had been eased by more than 20 percent of the respondents.

The fractions that had eased standards for large and

small borrowers were somewhat smaller, but still well above the fractions reported in the May survey.

Larger fractions of the

respondents reported having eased some lending terms, especially price terms, on commercial and industrial loans and lines of credit. Credit line costs and spreads for large and medium-sized firms had been eased by 30 percent to 40 percent of the respondents, while more modest, though still substantial, fractions had eased these terms for smaller borrowers.

Fewer respondents reported having

eased non-price terms--including the sizes of credit lines, loan covenants, and collateralization requirements.

Nonetheless, the net

easing of non-price terms was larger than in May. U.S. branches and agencies of foreign banks reported no change in business lending standards.

They reported very small mixed

changes in most loan terms, although there was a small net decrease in credit line costs.

-20Real estate loans.

Most domestic respondents reported that

standards for commercial real estate loans were basically unchanged over the last three months.

Very small net easings on commercial

real estate loans other than those for commercial office buildings were reported, and the net tightening of standards for loans for commercial office buildings was the smallest in any recent survey. U.S. branches and agencies of foreign banks reported no changes in standards for commercial real estate loans. Demand.

A substantial fraction of domestic respondents

reported stronger demand for business loans by firms of all sizes in the August survey.

The increase in demand was larger than in May

for middle-market and small firms, and it reversed the May survey's reported decline in demand by large firms.

The causes of the

increased demand were about evenly split between inventory investment and investment in plant and equipment.

Branches and

agencies of foreign banks reported a small net decrease in the demand for loans after reporting a small increase in May. Lending to Households Respondents also reported increased willingness to lend to households.

A third of the banks indicated that they were more

willing than they had been in May to make general purpose loans to individuals, including loans taken down under home equity lines of credit, while more than a quarter of the respondents reported increased willingness to make consumer installment loans.

Moreover,

there was a small net easing of standards for residential mortgages in August, reversing the small tightening reported in May. About 30 percent of the respondents reported increased demand by households for consumer installment loans and home equity lines of credit over the last three months. demand for residential mortgages.

About half reported stronger

-21Capital Ratios The responses to the questions on capital adequacy indicate that the respondents' views of their capital positions had changed little since May.

As in the May survey, more than 90 percent of

domestic respondents 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 one-third of the

respondents reporting comfortable capital levels said that they had taken a more aggressive lending stance as a result, compared with about 10 percent in January and 20 percent in May.

Those reporting

a more aggressive lending stance continue to note that it is difficult to find attractive new deals, however.

As in May, most of

those respondents not taking a more aggressive lending stance indicated that increasing their lending would require an unacceptable increase in risk, given the weak state of loan demand. About a quarter of the respondents reported taking steps over the past quarter to improve their capital positions, somewhat less than the fraction reported in the January and May surveys.

Issuance of

capital and loan sales and securitizations were the most common steps reported. Branches and agencies of foreign banks were less comfortable with the capital positions at their parent institutions.

Although

the reported capital positions have improved somewhat since January, about half the branches and agencies reported that their parent's capital position was only "adequate."

None of the institutions

reported a fairly tight capital position, however, and one reported a "very comfortable" position.

Of the eight branches and agencies

that reported "comfortable" or "very comfortable" capital positions, three reported lending more aggressively as a result.

-22Effects of the Credit Availability Program The August survey asked the domestic respondents a series of questions about the effects of the Credit Availability Program (CAP) on their lending to small and medium-sized businesses.

This

program, which was announced in March, includes provisions intended to allow the strongest banks and thrifts to make and carry a limited portfolio of loans to small and medium-sized businesses and to farms with minimal documentation;

clarify the use of the category Other

Assets Especially Mentioned

(OAEM); reduce the appraisal burden on

loans secured by real estate; of Other Real Estate Owned

change the rules regarding financing

(OREO); enhance and streamline the

appeals and complaint processes;

and improve examination processes

and procedures. The survey responses suggest that the CAP has not had a substantial effect on the supply of credit to small and medium-sized businesses, although many of the respondents expect it to do so in the future.

Only four of the respondents have implemented minimal-

documentation loan programs, although seven banks are in the process of doing so and another twenty reported being likely to do so in the future.

The number of loans made under the minimal-documentation

programs varied widely from bank to bank, as did the dollar volumes. A total of nearly $140 million has been extended under the four banks' programs.

The banks pointed out, however, that they would

have made most of these loans even in the absence of a minimaldocumentation program. A substantial fraction of the respondents expect that the proposed changes in appraisal requirements will allow their bank to ease both terms and standards for small business loans.

The

anticipated effects of the proposed increase in the appraisal threshold to $250,000 were about the same as those for the proposed

-23exemption for business of,

loans of less than $1 million where the

or rental income derived from, the real

collateral

is not the primary

sale

estate taken as

source of repayment.

The anticipated effects of the other CAP

initiatives on the

volume of lending to small and medium-sized businesses varied. substantial

fraction of respondents

financing rules

reported that

changes in OREO

and improved examination procedures would have

moderate effect on

lending.

Fewer respondents indicated that

clarification of OAEM use would have an appreciable effect, and very few expected changes

in the appeals and complaint process to have

effect on their bank's lending.

-24MONETARY AGGREGATES (Based on seasonally adjusted data excet as noted)

19921

Q23 2 01

-1992

May

J9= -

Q22

May

Jun.

Aggregate or component

,j -I

7u:.

J. ;.

ip;

Aggregate

Percentage change

'(annua ra-e

14 3

6.6

10.5

27.4

1.8

-1.9

2.1

10.5

0.3

3.8

2.3

8.5

4. M1-A

13.7

6.2

13.0

5. 6.

9.1 18-0

9.5 3.7

15.4

7.3

-2.6

-5.4

-1.4

1.8

-10.2

-17.0

-5.2 0.1 14.5 -15.8 14.8 21.5

-10.1 -2.2 1.6 -7.6 -8-9 -0.2 -19.0

-6-6

-13.0

3.5

-16.3 -15.4 -19.6

-17.8 -18.0 -17.5

18.2 7.9 -22.6

-14.1 9.9 0.0

1. M1 2. M2 3. M3

1 Jul

13.8

10.1

1 935.6

-1.3

-2,2

-0.6

4159.0

26.5

7.3

14.0

10-9

683.3

9.7 16.1

10.4 40.8

11.1 5.0

11.0 17.3

10.1 12.C

309.6 365.S

6.3

28.9

7.3

13.3

8.7

402.3

3.3

-0.1

-4.0

-2.9

2429.7

-57.5

53.3

17.0

-6.2

71.6

17.4 4.3 14.0 -10.3 2.5 9.0 -5.6

-1.4 -0.1 6.4 -10-2 -4.5 2-8 -13.6

-1.1 -4.4 0.5 -11-7 - .5 2.2 -15.2

-3.6 -1.1 3.5 -8.0 -6.0 1.1 14.2

335.8 1254.9 769.3 485.7 765.4 430.5 334.9

-2.2

-19.1

-22.0

-7-9

643.7

-1.3 0.3 -7.9

-0.3 3.0 -14.7

-13.2 -14-1 -9.3

18.6 -22.4 0.0

-10.4 -10.3 -10-7

336.8 273.1 63.8

0.4 29.5 32.3

14.4 5.4 38.2

-27.8 23.2 -34.7

-18.8 34.8 76-3

-9.0 21.8 0.3

195.0 92.3 47.1

Selected components

Currency Demand deposits 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

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

-5-5

-0.7 0.1 4.6 -6.7 4.8 0.7 11.4

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 5 Other U.S. government deposits at 6 commercial banks

3.2 -3.6 6.8

3.7 1.0 4.7

2.8 1.3 -4.1

4.8 -3.7 8.5

16.5 -8.1 24.6

2-8 4.1

2.0 2.7

-5.1 0.9

1.8 6.8

15.2 9.4

-0.5

2.4

-5.1

7.0

4.1

- .

. 714.0 344.5 . 369.5

S100.6 S268.9 . .

30.2

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 .d 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.

-25COMMERCIAL BANK CREDIT AND SHORT-

AND INTERMEDIATE-TERM BUSINESS

CREDIT 1

(Percentage change at annual rate, based on seasonally adjusted data) Dec.

I 1993 Q1

1991 to Dec. 1992

Type of credit

1993 Jul. p

1993 Jun.

1993 May

1993 Q2

Level, Jul 1993 p ($billions)

Commercial bank credit 1.

Total loans and securities at banks

Securities

U.S.

Other

government

Loans

3.6

2.7

7.3

8.6

9.5

8.6

3,037.9

13.0

11.6

10.7

4.4

12.7

5.2

888.7

17.5

13.0

12.0

4.0

16.4

6.1

707.8

-1.1

5.9

5.6

6.0

-1.3

1.3

180.9

-. 8

5.9

10.4

8.2

10.0

2,149.2

-3.2

-1.0

1.0

6.9

3.9

-2.2

592.6

2.1

-. 9

5.3

7.5

7.9

4.0

906.6

Business

Real estate

Consumer

-1.8

7.7

6.5

9.6

3.9

12.1

371.9

Security

18.4

-4.3

48.0

122.7

50.4

170.2

82.1

1.1

-13.6

8.8

15.7

11.1

195.9

10.

Other

Short- and intermediate-term business credit 11.

Business loans net of bankers

-3.3

-1.6

6.0

3.9

-3.5

583.3

2.0

-33.1

-5.2

-5.1

-20.5

-20.9

22.6

-3.1

-2.9

5.6

3.2

-4.5

605.8

9.5

-9.3

15.8

17.5

-1.6

38.4

158.0

-. 8

-4.2

3.5

7.8

2.4

4.1

763.8

-16.9

-10.4

-14.2

-16.1

-16.4

n.a.

21.7

1.8

-5.1

-. 4

-1.2

n.a.

303.1

-. 5

-4.6

2.0

5.3

n.a.

1,086.0

acceptances 12.

Loans at foreign branches 2

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 17.

Finance company loans to

business 4 18.

Total (sum of lines 15,

16,

.10

and 17) 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. p

June 1993. Preliminary.

n.a.

Not available.

-26SELECTED FINANCIAL MARKET QUOTATIONS (Percent except as noted)

Change to Aug 12, Instrument

From Sept. 4

SHORT-TERM RATES 2 Federal funds 3 Treasury bills 3-month 6-month 1-year

From FOMC. Jul 7

3.19

3.11

2.97

-0.22

-0.14

2.92 2.96 3.06

3.04 3.11 3.29

3.01 3.13 3.32

0.09 0.17 0.26

-0.03 0.02 0.03

3.22 3.22

3.17 3.20

3.14 3.19

-0.08

-0.03 -0.01

3.06 3.06 3.11

3.11 3.15 3.33

3.08 3.13 3.32

0.02 0.21

-0.03 -0.02 -0.01

3.31 3.31

3.06 3.19

3.06 3.13

-0.25 -0.18

0.00 -0.06

6.00

0.00

4.38 6.40 7.29

4.38 5.80 6.68

4.43 5.77 6.37

0.05 -0.63 -0.92

0.05 -0.03 -0.31

6.31

5.75

5.68

-0.63

-0.07

Corporate--A utility recently offered

8.06

7.48

7.21

-0.85

-0.27

Home mortgages FHLMC 30-yr. fixed rate FHLMC 1-yr. adjustable rate

7.84 5.15

7.23 4.58

7.21 4.55

-0.63

-0.02 -0.03

Commercial paper 1-month 3-month Large negotiable CDs 1-month 3-month 6-month 4 Eurodollar deposits 1-month 3-month Bank prime rate

-0.03

0.07

INTERMEDIATE- AND LONG-TERM RATES U.S. Treasury (constant maturity) 3-year 10-year 30-year 5 Municipal revenue (Bond Buyer)

-0.60

Record high Stock exchange index Level

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

3583.35 251.36 440.95 718.77 4477.53

Date

Low. Jan. 3

FOMC, Jul 7

8/11/93 2144.64 3475.67 3569.09 245.68 249.17 3/10/93 154.00 6/4/93 305.24 431.79 437.58 8/9/93 378.56 698.79 717.12 8/9/93 2718.59 4392.49 4463.04

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 August 18. 1993. 3. Secondary market.

-0.40 -0.87 -0.76 -0.23-0.32

1993

66.42 61.80 43.36 89.43 64.17

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.

2.69 1.42 1.34 2.62 1.61

Cite this document

APA

Federal Reserve (1993, August 16). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19930817_part1

BibTeX

@misc{wtfs_greenbook_19930817_part1,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1993},
  month = {Aug},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19930817_part1},
  note = {Retrieved via When the Fed Speaks corpus}
}