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

September 20

SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS

Prepared for the Federal Open Market Committee

By the Staff Board of Governors of the Federal Reserve System

1996

TABLE OF CONTENTS

Page THE NONFINANCIAL ECONOMY Housing .

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Private housing activity

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Selected financial market quotations Commercial bank credit . . . . . . .

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3 4

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1

Table

Chart Private housing starts

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THE FINANCIAL ECONOMY Tables

SUPPLEMENTAL NOTES

THE DOMESTIC NONFINANCIAL ECONOMY Housing Total private housing starts rose 4-1/2 percent in August to 1.53 million units at an annual revised up slightly.

rate;

total

starts in July were

An 8-1/4 percent increase in single-family At a 1.24

starts more than accounted for the August increase. million unit annual rate, highest level

single-family starts in August reached the

recorded since early 1994.

from the permits data was not as robust:

In contrast, the signal Permits for single-family

houses were flat in August and have moved lower since boosting the

last spring,

ratio of single-family starts to permits to

relatively high level by historical standards.

As

1.15, a

discussed in

Part 2 of the Greenbook, other indicators of activity in the

single-

family market for August also paint a less upbeat picture than the starts figures:

Multifamily housing starts fell 9-1/2 percent last

month, retracing most of their July increase.

Private Housing Activity (Millions of units; seasonally adjusted annual rate)

1995

1995 Q4

Q1

Q2r

1996 Juner

Julyr

Auq.P

All units Starts Permits

1.35 1.33

1.41 1.44

1.47 1.41

1.49 1.44

1.49 1.42

1.46 1.46

1.53 1.39

Single-family units Starts Permits New home sales Existing home sales

1.08 1.00 0.67 3.80

1.13 1.08 0.68 3.98

1.16 1.08 0.75 3.95

1.19 1.10 0.74 4.21

1.21 1.09 0.73 4.16

1.14 1.07 0.78 4.14

1.24 1.07 n.a. n.a.

Multifamily units Starts Permits

0.28 0.33

0.28 0.36

0.31 0.33

0.31 0.34

0.28 0.33

0.32 0.38

0.29 0.32

Mobile homes Shipments

0.34

0.35

0.35

0.37

0.37

0.37

n.a.

Note. p Preliminary. r Revised. n.a. Not available.

Private Housing Starts (Seasonally adjusted annual rate) Millions of units

UI

I fiI

1977

1979

III

1981

1983

I

1985

1987

1989

IIII IV

I t

I

I

1991

I

11Aug. J

I

1993

1995

IJ

Selected Financial Market Quotations' (Percent except as noted) Change to Sep. 19, from:

1996

Feb.

July

FOMC,

Sep. 19

low

high

Aug. 20

5.24

5.23

0.08

-0 16

-0.01

5.21 5.40 5.64

5.04 5.11 5.32

5.11 5.26 5.53

0.35 0.59 0.98

-0.10 -0.14 -0.11

0.07 0.15 0.21

5.27 5.12

5.50 5.59

5.37 5.40

5.45 5.54

0.18 0.42

-0.05 -0.05

0.08 0.14

5.21 5.12 4.99

5.44 5.59 5.83

5.31 5.38 5.54

5.38 5.32 5.73

0.17 0.20 0.74

-0.06 -0.27 -0.10

0.07 -0.06 0.19

5.13 5.13

5.38 5.56

5.28 5.38

5.38 5.50

0.25 0.37

0.00 -0.06

0.10 0.12

8.25

8.25

8.25

8.25

0.00

0.00

0.00

4.98 5.58 6.02

6.62 7.06 7.19

6.14 6.59 6.80

6.46 6.87 7.05

1.48 1.29 1.03

-0.16 -0.19 -0.14

0.32 0.28 0.25

Municipal revenue (Bond Buyer) s

5.67

6.24

5.98

6.12

0.45

-0.12

0.14

Corporate-A utility, recently offered

7.18

8.23

7.83

8.03

0.85

-0.20

0.20

High-yield corporate 6

9.57

10.36

10.00

9.98

0.41

-0.38

-0.02

6.94 5.19

8.42 6.01

7.88 5.89

8.14 5.90

1.20 0.71

-0.28 -0.11

026 0.01

July

FOMC,

high

Aug. 20

5.15

5.39

4.76 4.67 4.55

Feb.

Instrument

low I

Short-term rates Federal funds2 Treasury bills' 3-month 6-month 1-year Commercial paper 1-month 3-month Large negotiable CDs3 1-month 3-month 6-month Eurodollar deposits4 1-month 3-month Bank prime rate Intermediate- and Long-term Rates U.S. Treasury (constant maturity) 3-year 10-year 30-year

Home mortgages7 FHLMC 30-yr fixed rate FHLMC I-yr adjustable rate

Percentage change to Sep. 19, from:

1996

Record high July

FOMC,

Record

July

FOMC,

Level

Date

low

Aug. 20

Sep. 19

high

low

Aug. 20

5889.20

9/16/96

5346.55

5721.26

5867.74

-0.36

9.75

2,56

NYSE Composite

365.42

9/16/96

336.07

356.61

363.94

-0.41

8.29

2.06

S&P 500 Composite

683.98

9/16/96

626.65

665.69

683.00

-0.14

8.99

2.60

1249.15

6/5/96

1042.37

1124.67

1212.09

-2.97

16.28

7.77

Stock exchange index Dow-Jones Industrial

NASDAQ (OTC)

9.88 -0.84 6701.74 6504.57 6099.34 5/24/96 6758.69 Wilshire 5000 1. One-day quotes except as noted. 2. Average for two-week reserve maintenance period closest to date shown. Last observation is the average to date ending September 25, 1996 3. Secondary market. 4. Bid rates for Eurodollar deposits at 11 a.m. London time. 5. Most recent observation based on one-day Thursday quote and futures market index changes. 6 Merrill Lynch Masterl high bond index composite. 7. Quotes for week ending Friday previous to date shown.

3.03

Commercial Bank Credit (Percentage change; seasonally adjusted annual rate) 1

Type of credit

e o c 1995

1996 QI

1996 Q2

1996 Jun

1996 Aug

1996 Jul

Level, Aug 1996

(billions of$)

1. Total loans and securities

8.7

5.3

2.6

1.5

1.0

-1.0

3,668.8

2.

3.5

.6

-2.9

-10.2

-6.7

-10.8

966.4

.7

-11.1

-.2

-9.7

702.3

-7.9

-23.8

-14.4

264.0

Securities

3.

U.S. government

-3.1

-2.5

4.

Other 2

25.6

8.4

10.8

7.1

4.6

5.9

3.8

2.5

2,702.4

11.6

7.4

5.2

5.1

6.3

2.3

744.2

8.5

4.8

3.2

3.6

1.1

7.3

1,109.3

Loans 3

5. 6.

Business

7.

Real estate

-11.5

8.

Home equity

5.2

4.6

-1.0

-6.0

6.1

9.1

80.1

9.

Other

8.7

4.8

3.5

4.2

.7

7.3

1,029.2

10.

Consumer

6.9

4.9

12.3

4.7

4.0

514.2

17.7

13.9

9.3

15.2

6.7

10.6

671.3

76.7

Adjusted 4

11. 12.

Security

14.4

-3.3

-8.0

-7.3

-26.3

-53.8

13.

Other

18.4

21.0

12.8

10.0

15.5

-3.2

257.9

1. Monthly levels are pro rata averages of Wednesday data. Quarterly and annual levels (not shown) are simple averages of monthly levels and levels for the fourth quarter respectively. Growth rates shown are percentage changes in consecutive levels, annualized but not compounded. 2. Includes municipal securities, foreign government securities, corporate bonds, equities, and trading account assets. 3. Excludes interbank loans. 4. Includes estimates of consumer loans that have been securitized by banks and are still outstanding. 5. Includes loans to nonbank financial institutions, farmers, state and local governments, banks abroad, foreign governments, and all others not elsewhere classified. Also includes lease financing receivables.