Greenbook/Tealbook

Prefatory Note

The attached document represents the most complete and accurate version available based on original files from the FOMC Secretariat at the Board of Governors of the Federal Reserve System. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act.

Content last modified 03/31/2011.

Class III FOMC – Internal (FR)

June 24, 2005

CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes

Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System

Contents The Domestic Nonfinancial Economy ........................................................ 1 Manufacturers’ Shipments, Orders, and Inventories .......................1 Housing ............................................................................................1

Tables Orders and Shipments of Nondefense Capital Goods......................2 The Market for Existing Homes ......................................................3 The Market for New Single-Family Homes ....................................4

Charts Computers and Peripherals ..............................................................2 Communications Equipment............................................................2 Medium and Heavy Trucks..............................................................2 Other Equipment..............................................................................2

The Domestic Financial Economy ...........................................................5 Tables Commercial Bank Credit .................................................................6 Selected Financial Market Quotations .............................................7

Supplemental Notes The Domestic Nonfinancial Economy Manufacturers’ Shipments, Orders, and Inventories Shipments of nondefense capital goods excluding aircraft ticked up 0.2 percent in May following an upward-revised increase of 1.4 percent in April. Deliveries of communications gear jumped 8.5 percent and recouped much of the previous month’s decline. But shipments of computers and peripheral equipment declined 2.4 percent, and shipments in the non-high-tech category edged down 0.2 percent. New orders for nondefense capital goods excluding aircraft declined 2.3 percent in May, reflecting widespread declines. The staff’s constructed series on real adjusted durable goods orders moved down 1.9 percent in May after having risen 0.8 percent in April. The book value of manufacturing durable goods inventories (which constitute nearly twothirds of total manufacturing inventories) increased at an annual rate of less than $10 billion in May following an anemic accumulation in April. The inventory-shipments ratio was unchanged at 1.41 months in May. Housing Sales of new and existing homes remained at a high level in May. Sales of existing homes (including single-family homes and condos and co-ops) edged down 0.7 percent in May from April’s record high. Sales of existing single-family homes slipped roughly 1 percent in May while sales of condos and co-ops rose 2-1/4 percent. The inventory of existing homes for sale increased in May and represented 4.3 months’ supply at the May sales pace, similar to the average over the past year and a half. Sales of new homes rose 2 percent in May to an annual rate of nearly 1.3 million units; sales were revised down about 3 percent in each of the two previous months. The stock of new homes for sale edged up in May, representing 4.2 months’ supply at last month’s sales pace, about the same as the average during the past year. The median sales price of existing homes was up 12-1/2 percent in May from a year earlier. During the twelve months ending in May, the median sales price of existing single-family homes advanced 12 percent, and the median price of condos and co-ops rose 15 percent. The average sales price of new homes was 8 percent higher in May than a year earlier; the twelve-month change in May 2004 was 6-3/4 percent. The median price of new homes sold in May was up only 2-1/2 percent from a year earlier, compared with the increase of 8-1/4 percent posted during the year ending in May 2004.

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Orders and Shipments of Nondefense Capital Goods (Percent change; seasonally adjusted current dollars) 2004 Indicators

2005

Q4

Q1

Mar.

Annual rate

Apr.

May

Monthly rate

Shipments Excluding aircraft Computers and peripherals Communications equipment All other categories

9.7 9.6 40.3 -17.1 8.6

12.8 14.0 33.9 16.2 10.0

1.1 -.1 2.3 3.4 -1.0

2.3 1.4 5.9 -9.3 1.9

-.7 .2 -2.4 8.5 -.2

Orders Excluding aircraft Computers and peripherals Communications equipment All other categories

4.7 6.3 34.6 -23.0 5.9

7.6 21.8 18.0 99.3 14.9

-3.2 -1.6 -5.4 -8.2 .1

4.0 1.7 15.1 -3.0 -.3

14.5 -2.3 -7.0 -.5 -1.5

Memo: Shipments of complete aircraft1

27.1

23.9

27.9

34.7

n.a.

1. From Census Bureau, Current Industrial Reports; billions of dollars, annual rate. n.a. Not available.

Computers and Peripherals

Communications Equipment

Billions of dollars, ratio scale

12 Shipments Orders

11

12 11

10

10

9

9

17 15 13 11

8

8

9

7

7

6

6

May

Billions of dollars, ratio scale

21 Shipments Orders

17 15 13 11 9

7

May

5

5

1999

2000

2001

2002

2003

2004

2005

5

3

800

7 5

1999

2000

Medium and Heavy Trucks 950

21

2001

2002

2003

2004

2005

3

Other Equipment

Thousands of units, ratio scale Sales of class 4-8 trucks Net new orders of class 5-8 trucks

950

Billions of dollars, ratio scale

52

800

700

700

600

600

52

Shipments Orders May

48

48

500

45

45

400

400

42

42

300

300

39

39

500

200

May

1999 2000 2001 2002 2003 2004 2005 Note. Annual rate, FRB seasonals. Source. For class 4-8 trucks, Ward’s Communications; for class 5-8 trucks, ACT Research.

200

36

1999

2000

2001

2002

2003

2004

2005

36

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The Market for Existing Homes 2004 2004

Q3

2005 Q4

Q1

2005 Mar.

Apr.

May

Sales1 Single-family and condos and co-ops Percent change Previously reported level

6,784 9.7

6,797 -1.5

6,877 1.2

6,837 -0.6

6,870 0.7

7,180 4.5 7,180

7,130 -0.7

5,964 9.4

5,970 -1.6

6,047 1.3

5,980 -1.1

6,010 0.7

6,280 4.5 6,280

6,210 -1.1

820 12.2

828 -0.7

829 0.2

854 3.0

858 1.4

902 5.1

922 2.2

2,392

2,385

2,392

2,331

2,331

2,373

2,530

4.3

4.3

4.2

4.1

4.1

4.0

4.3

185.2 9.3

189.3 8.8

189.3 9.7

190.3 10.2

193.0 10.3

205.0 14.5

207.0 12.5

Single-family Median Percent change

184.1 8.3

188.2 7.6

187.5 8.8

188.3 9.4

191.9 10.3

203.1 14.7

204.6 12.2

Mean Percent change

236.2 9.3

239.8 8.5

240.6 9.4

241.8 9.7

246.0 10.3

251.5 9.8

257.5 9.8

Repeat-transaction price index5 Percent change

326.0 11.0

333.9 13.4

341.3 11.9

348.8 12.5

n.a. n.a.

n.a. n.a.

n.a. n.a.

Condos and co-ops Median Percent change

193.6 17.0

6,796.7 4.7

6,876.7 8.1

6,836.7 8.2

203.4 13.9

220.8 16.9

221.0 15.2

Single-family Percent change Previously reported level Condos and co-ops Percent change

Inventories Existing homes for sale2 Months’ supply3

Prices4 Single-family and condos and co-ops Median Percent change

Note: Quarterly levels are averages of monthly data. 1. Thousands of units, seasonally adjusted annual rate, except where noted. Percent change is from previous comparable period, not at an annual rate. 2. Single-family and condos and coops in thousands of units, seasonally adjusted, end of period stock. 3. Single-family and condos and coops at current sales rate; expressed as the ratio of inventories adjusted with staff seasonals to seasonally adjusted sales. 4. Price levels are expressed in thousands of dollars and are not seasonally adjusted. Percent changes are from the comparable period a year earlier. 5. The index equals 100 in the first quarter of 1980. Source: OFHEO. n.a.--data not reported on a monthly basis.

June 23, 2005

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The Market for New Single-Family Homes 2004 2004 Sales1 Total Percent Change Previously reported level

Q3

2005 Q4

Q1

2005 Mar.

Apr.

May

1,203 10.8

1,164 -3.2

1,243 6.8

1,238 -.4 1,254

1,272 2.0 1,313

1,271 -.1 1,316

1,298 2.1

Regional Sales Northeast Midwest South West

83 210 562 348

68 221 533 342

85 216 582 360

73 192 628 344

77 211 631 353

98 218 600 355

74 268 595 361

Inventories New homes for sale2

395

406

418

442

443

437

442

Months’ supply3

4.0

4.3

4.1

4.3

4.2

4.2

4.2

Prices4 Average Percent change

274.5 11.4

274.0 10.4

286.3 11.8

283.4 7.8

288.1 10.4

282.5 4.9

281.4 8.1

Median Percent change

221.0 13.3

213.5 11.3

228.8 15.1

221.4 .0

225.3 7.5

232.2 4.5

217.0 2.5

Constant-quality price index5 Percent change

141.9 7.6

142.9 7.0

146.6 8.4

145.7 4.4

n.a. n.a.

n.a. n.a.

n.a. n.a.

1. Thousands of units, seasonally adjusted annual rate, except where noted. Percent change is from previous comparable period, not at an annual rate. 2. Thousands of units, seasonally adjusted. Monthly figures are end of periodstock. Quarterly and annual figures are averages of monthly figures. 3. At current sales rate, seasonally adjusted. The ratio of NSA inventories to NSA sales is seasonally adjusted by Census; as a result, the seasonally adjusted ratio may not be the same as the ratio of SA inventories to SA sales. Quarterly and annual figures are averages of monthly figures. 4. Price levels are expressed in thousands of dollars and are not seasonallyadjusted. Quarterly and annual values of average and median prices are equal to a weighted average of monthly data;the weights are based on the response rate to the survey in each month. Percent changes are from the previous comparable period a year earlier. 5. 1996 = 100. Based on characteristics of homes sold in 1996. n.a.--data not reported on a monthly basis.

June 24, 2005

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The Domestic Financial Economy

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Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit Total 1. Adjusted1 2. Reported 3. 4. 5. 6.

Securities Adjusted1 Reported Treasury and agency Other2

7. 8. 9. 10. 11. 12. 13. 14.

Loans3 Total Business Real estate Home equity Other Consumer Adjusted4 Other5

Level ($ billions), May 2005

2003

2004

Q4 2004

Q1 2005

Apr. 2005

May 2005

5.9 5.6

8.9 8.4

6.7 6.9

14.0 12.0

4.7 4.4

6.7 8.4

6,882 7,028

8.6 7.2 8.9 4.9

6.5 5.2 5.0 5.5

1.1 2.4 -10.6 24.1

22.7 14.8 20.7 5.8

-8.6 -8.4 -23.6 15.3

10.3 16.2 5.8 32.3

1,866 2,012 1,202 809

4.9 -9.4 11.1 30.8 8.8 5.4 5.8 6.8

9.8 1.4 13.9 43.4 9.7 8.8 6.0 7.9

8.7 6.8 13.4 37.6 9.3 -1.1 2.9 4.0

10.9 15.9 13.7 18.7 12.8 8.2 5.0 -3.7

9.6 18.0 11.5 12.1 11.5 7.8 .4 -7.4

5.3 14.6 2.4 10.0 .9 -11.6 -8.4 21.5

5,016 957 2,684 424 2,261 687 1,047 688

Note. Data are adjusted to remove estimated effects of consolidation related to FIN 46 and for breaks caused by reclassifications. Monthly levels are pro rata averages of weekly (Wednesday) levels. Quarterly levels (not shown) are simple averages of monthly levels. Annual levels (not shown) are levels for the fourth quarter. Growth rates are percentage changes in consecutive levels, annualized but not compounded. 1. Adjusted to remove effects of mark-to-market accounting rules (FIN 39 and FAS 115). 2. Includes private mortgage-backed securities, securities of corporations, state and local governments, foreign governments, and any trading account assets that are not Treasury or agency securities, including revaluation gains on derivative contracts. 3. Excludes interbank loans. 4. Includes an estimate of outstanding loans securitized by commercial banks. 5. Includes security loans and loans to farmers, state and local governments, and all others not elsewhere classified. Also includes lease financing receivables.

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III-T-1

Selected Financial Market Quotations (One-day quotes in percent except as noted) 2004

Change to June 23 from selected dates (percentage points)

2005

Instrument June 28

Dec. 31

May 2

June 23

2004 June 28

2004 Dec. 31

2005 May 2

1.00

2.25

2.75

3.00

2.00

.75

.25

1.36 1.74

2.18 2.52

2.88 3.10

3.00 3.17

1.64 1.43

.82 .65

.12 .07

Commercial paper (A1/P1 rates)2 1-month 3-month

1.28 1.45

2.29 2.28

3.00 3.10

3.19 3.31

1.91 1.86

.90 1.03

.19 .21

Large negotiable CDs1 3-month 6-month

1.53 1.82

2.50 2.72

3.16 3.38

3.43 3.61

1.90 1.79

.93 .89

.27 .23

Eurodollar deposits3 1-month 3-month

1.29 1.51

2.32 2.49

3.03 3.14

3.26 3.41

1.97 1.90

.94 .92

.23 .27

Bank prime rate

4.00

5.25

5.75

6.00

2.00

.75

.25

Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year

2.88 3.97 4.90

3.08 3.63 4.34

3.63 3.87 4.27

3.63 3.73 4.04

.75 -.24 -.86

.55 .10 -.30

.00 -.14 -.23

U.S. Treasury indexed notes 5-year 10-year

1.56 2.25

1.03 1.65

1.16 1.61

1.39 1.69

-.17 -.56

.36 .04

.23 .08

Municipal revenue (Bond Buyer)5

5.37

5.04

4.83

4.76

-.61

-.28

-.07

Private instruments 10-year swap 10-year FNMA6 10-year AA7 10-year BBB7 5-year high yield7

5.21 5.30 5.59 6.18 8.30

4.65 4.61 4.98 5.38 7.34

4.67 4.59 4.98 5.50 8.31

4.36 4.26 4.73 5.31 7.98

-.85 -1.04 -.86 -.87 -.32

-.29 -.35 -.25 -.07 .64

-.31 -.33 -.25 -.19 -.33

Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable

6.21 4.19

5.77 4.10

5.75 4.22

5.57 4.23

-.64 .04

-.20 .13

-.18 .01

Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month

Record high

2004

Change to June 23 from selected dates (percent)

2005

Stock exchange index Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 Wilshire 5000

Level

Date

Dec. 31

May 2

June 23

Record high

2004 Dec. 31

2005 May 2

11,723 1,527 5,049 655 14,752

1-14-00 3-24-00 3-10-00 12-28-04 3-24-00

10,783 1,212 2,175 652 11,971

10,252 1,162 1,929 586 11,422

10,421 1,201 2,071 634 11,927

-11.10 -21.39 -58.99 -3.12 -19.15

-3.35 -.92 -4.82 -2.68 -.37

1.66 3.32 7.36 8.24 4.42

1. Secondary market. 2. Financial commercial paper. 3. Bid rates for Eurodollar deposits collected around 9:30 a.m. eastern time. 4. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 5. Most recent Thursday quote. 6. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 7. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: June 28, 2004, is the day before the most recent policy tightening began. May 2, 2005, is the day before the most recent FOMC announcement. _______________________________________________________________________