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 04/01/2015.

Class III FOMC - Internal (FR)

March 13, 2009

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

Reuters/ University of Michigan Survey of Consumers .................1 Table Michigan Survey of Consumer Attitudes .......................................2

The Domestic Financial Economy ..............................................................

3

Table Selected Financial Market Quotations .............................................3 The International Economy ........................................................................ Trade in Goods and Services ...........................................................4 Prices of Internationally Traded Goods ...........................................7 Tables and Charts Trade in Goods and Services ...........................................................4 U.S. International Trade in Goods and Services (Chart) .................5 U.S. Exports and Imports of Goods and Services (Table)...............6 Prices of U.S. Imports and Exports (Chart) .....................................8 Prices of U.S. Imports and Exports (Table).....................................9

ii

4

Supplemental Notes The Domestic Nonfinancial Economy Reuters/University of Michigan Survey of Consumers The early March reading for the Reuters/University of Michigan index of consumer sentiment held steady at its low level. This month’s preliminary sentiment reading showed some improvement in households’ outlook for the economy likely related to recent government policies; however, concerns about income and job prospects continued to erode households’ appraisal of their personal financial situation and buying conditions for household durables. Among items not included in the overall index, consumers’ expectations about the change in the unemployment rate over the next twelve months improved slightly, but nearly two-thirds of households still expect rising unemployment. Households were broadly more pessimistic about buying conditions, including cars and homes, primarily because of uncertainty about income. The median of expected inflation over the next 12 months moved up 0.3 percentage point, to 2.2 percent, and the median of expected inflation over the next 5 to 10 years moved down to 2.8 percent, about the same as its average over the past five years.

-1-

2

March 13, 2009

Reuters/University of Michigan Survey of Consumers Indexes of consumer sentiment (Not seasonally adjusted) 2008

2009

Aug.

Sept.

Oct.

Nov. Dec.

Jan.

Feb. Mar.P

Composite of current and expected conditions1 Current conditions1 Expected conditions1

63.0 71.0 57.9

70.3 75.0 67.2

57.6 58.4 57.0

55.3 57.5 53.9

60.1 69.5 54.0

61.2 66.5 57.8

56.3 65.5 50.5

56.6 62.3 53.0

Personal financial situation Now compared with 12 months ago2 Expected in 12 months2

72 105

86 120

60 106

59 107

62 109

70 114

65 103

63 100

52 72

65 83

49 71

42 65

39 66

47 69

31 66

43 67

Appraisal of buying conditions Cars Large household appliances2 Houses

103 110 146

108 107 140

98 89 117

115 88 145

121 116 130

124 101 143

127 103 146

123 96 139

Expected unemployment change - next 12 months

150

141

156

162

162

154

159

156

Prob. household will lose a job - next 5 years

22

21

24

27

25

24

27

28

Expected inflation - next 12 months Mean Median

5.3 4.8

4.6 4.3

4.3 3.9

2.9 2.9

1.7 1.7

2.5 2.2

2.3 1.9

2.4 2.2

Expected inflation - next 5 to 10 years Mean Median

3.9 3.2

3.3 3.0

3.1 2.9

3.1 2.9

2.6 2.6

3.4 2.9

3.5 3.1

2.9 2.8

Category

Expected business conditions Next 12 months2 Next 5 years2

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. Expected change in unemployment is the fraction expecting unemployment to rise minus the fraction expecting unemployment to fall, plus 100. P Preliminary. 1. Feb. 1966 = 100. 2. Indicates the question is one of the five equally-weighted components of the index of sentiment.

Consumer sentiment 1966 = 100 120

1985 = 100 170 150

6

100 90

110

5

5

Median, 5 to 10 years ahead

4

4

80

90

70

70

Mar. P Conference Board (left scale)

50

60

Mar.

3 2

50 Feb.

P Preliminary.

2004

2006

2008

P

3 2

Median, 12 months ahead 1

30 2002

Percent 6

110

Reuters/Michigan (right scale)

130

10

Expected inflation (Reuters/University of Michigan)

1

40 30 2010

0

2002 P Preliminary.

2004

2006

2008

0 2010

3

III-T-1

Selected Financial Market Quotations (One-day quotes in percent except as noted) 2007

2008

Change to Mar. 12 from selected dates (percentage points)

2009

Instrument Aug. 6

Dec. 15

Jan. 27

Mar. 12

2007 Aug. 6

2008 Dec. 15

2009 Jan. 27

5.25

1.00

.13

.13

-5.12

-.87

.00

4.74 4.72

.04 .28

.13 .32

.21 .44

-4.53 -4.28

.17 .16

.08 .12

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

5.26 5.29

.53 1.35

.29 2.04

.40 .75

-4.86 -4.54

-.13 -.60

.11 -1.29

Large negotiable CDs1 3-month 6-month

5.34 5.27

1.85 2.24

1.08 1.57

1.13 1.75

-4.21 -3.52

-.72 -.49

.05 .18

Eurodollar deposits3 1-month 3-month

5.33 5.35

1.50 2.55

.75 1.75

1.00 1.65

-4.33 -3.70

-.50 -.90

.25 -.10

Bank prime rate

8.25

4.00

3.25

3.25

-5.00

-.75

.00

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

4.49 4.52 4.82

.48 1.57 3.08

.68 1.74 3.17

1.00 2.05 3.34

-3.49 -2.47 -1.48

.52 .48 .26

.32 .31 .17

U.S. Treasury indexed notes5 5-year 10-year

2.43 2.48

2.99 2.66

1.84 1.97

2.10 2.25

-.33 -.23

-.89 -.41

.26 .28

Municipal general obligations (Bond Buyer)6

4.51

5.85

5.13

5.03

.52

-.82

-.10

Private instruments 10-year swap 10-year FNMA7 10-year AA8 10-year BBB8 10-year high yield8

5.44 5.34 6.12 6.57 9.21

2.76 3.50 6.86 9.59 18.30

2.84 3.65 6.15 8.89 14.78

3.10 3.73 6.71 9.15 15.73

-2.34 -1.61 .59 2.58 6.52

.34 .23 -.15 -.44 -2.57

.26 .08 .56 .26 .95

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

6.59 5.65

5.19 4.94

5.10 4.90

5.03 4.80

-1.56 -.85

-.16 -.14

-.07 -.10

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

Record high

2008

Change to Mar. 12 from selected dates (percent)

2009

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

Level

Date

Dec. 15

Jan. 27

Mar. 12

Record high

2008 Dec. 15

2009 Jan. 27

14,165 1,565 5,049 856 15,807

10-9-07 10-9-07 3-10-00 7-13-07 10-9-07

8,565 869 1,508 453 8,664

8,175 846 1,505 456 8,524

7,170 751 1,426 390 7,626

-49.38 -52.03 -71.75 -54.41 -51.75

-16.28 -13.57 -5.45 -13.80 -11.98

-12.29 -11.23 -5.24 -14.37 -10.53

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. Derived from a smoothed Treasury yield curve estimated using all outstanding securities and adjusted for the carry effect. 6. Most recent Thursday quote. 7. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 8. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: August 6, 2007, is the day before the August 2007 FOMC meeting. December 15, 2008, is the day before the December 2008 FOMC monetary policy announcement. January 27, 2009, is the day before the most recent FOMC monetary policy announcement. Data for the 3-month commercial paper rate on December 15, 2008, are from December 4, 2008, the most recent date for which a sufficient volume of new issues was available to calculate this rate. _______________________________________________________________

4

The International Economy Trade in Goods and Services The U.S. international trade deficit narrowed to $36 billion in January from $39.9 billion in December, as a steep fall in imports more than offset a fall in exports. Trade in Goods and Services 2008 Nominal BOP Exports Imports Real NIPA Exports Imports Nominal BOP Net exports Goods, net Services, net

Annual rate Monthly rate 2008 2008 2009 Q2 Q3 Q4 Nov. Dec. Jan. Percent change

-2.9 -7.5

22.9 18.2

-1.8 -7.1

12.3 -7.3

-681.1 -820.8 139.7

-725.7 -871.5 145.8

9.2 6.2

-6.1 -11.9

-5.8 -5.8

-5.7 -6.7

3.0 -23.6 ... -3.5 -16.0 ... Billions of dollars

... ...

... ...

-39.9 -51.3 11.4

-36.0 -47.0 10.9

-723.5 -865.0 141.5

-42.6 -49.0

-561.5 -696.5 134.9

-42.5 -53.3 10.8

n.a. Not available. ... Not applicable. BOP Balance of payments. NIPA National income and product accounts. Source: U.S. Dept. of Commerce, Bureau of Economic Analysis; Census Bureau. _

The value of exports of goods and services fell 5.7 percent in January, following as similarly sized decline in December. All major categories of exports decreased. A substantial portion of the overall fall in exports was due to a decline in exports of capital goods, particularly in exports of machinery, and automotive products. Exports of industrial supplies, consumer goods, and services also moved down. The value of imports of goods and services fell 6.7 percent in January, with all major categories recording declines. The overall fall in imports was primarily due to declines in imports of oil, automotive products, and capital goods. The decline in the value of oil imports mainly reflected a lower price as volumes were little changed. Imports of automotive products declined as automakers made significant production cutbacks throughout North America. Imports of industrial supplies, consumer goods, and services also came in lower.

5

U.S. International Trade in Goods and Services (Quarterly) Contribution of Net Exports to Growth of Real Gross Domestic Product

Trade Balance Billions of dollars, annual rate

Percentage points, annual rate

0

3.5 3.0

-100

2.5

-200

2.0 -300

Jan.

1.5

-400

1.0

-500

0.5 0.0

-600

-0.5 -700

-1.0

-800

2000

2002

2004

2006

2008

-900

Selected Exports

-1.5

2000

2002

2004

2006

2008

-2.0

Selected Imports Billions of dollars, annual rate

Billions of dollars, annual rate

600

600

550

550

500

500

450

450

400

400 Capital goods

Capital goods ex. aircraft

350

350

300

300

250

Consumer goods

250

Industrial supplies

200

200

150

150

100

100

Industrial supplies

Consumer goods

Oil 50

Aircraft

2000

2002

2004

2006

2008

0

Source: U.S. Dept. of Commerce, Bureau of Economic Analysis; Census Bureau.

50

2000

2002

2004

2006

2008

0

6

U.S. Exports and Imports of Goods and Services (Billions of dollars; annual rate, balance of payments basis)

Exports of goods and services Goods exports Gold Other goods

Levels 2008 2008 2009 Q3 Q4 Dec. Jan. 1943.6 1692.0 1590.2 1498.9 1385.1 1162.0 1065.0 17.7 13.4 12.5 1367.4 1148.6 1052.5

986.4 15.6 970.8

Capital goods Aircraft & parts Computers & accessories Semiconductors Other capital goods

488.1 91.4 46.4 53.6 296.7

442.4 71.3 38.9 44.4 287.9

432.3 89.8 37.1 37.0 268.4

396.4 86.6 35.4 31.3 243.1

Automotive Ind. supplies (ex. ag., gold) Consumer goods Agricultural All other goods

131.3 399.4 169.4 128.1 51.0

106.9 296.9 154.7 100.1 47.6

92.5 247.5 147.5 89.1 43.6

66.3 235.6 136.9 90.8 44.9

558.6

530.0

525.2

512.4

Services exports Imports of goods and services Goods imports Oil Gold Other goods

Change1 2008 2008 2009 Q3 Q4 Dec. Jan. 42.2 -251.7 -97.8 -91.3 36.9 -223.1 -1.3 -4.3 38.2 -218.7

-99.5 -.8 -98.7

-78.6 3.1 -81.6

-45.7 -20.2 -7.4 -9.2 -8.9

-6.3 27.0 -1.2 -9.2 -22.9

-36.0 -3.2 -1.7 -5.7 -25.3

7.7 -24.4 19.4 -102.5 5.5 -14.6 .0 -28.0 -1.7 -3.3

-15.1 -51.4 -9.5 -11.1 -59.2

-26.2 -11.9 -10.6 1.7 1.3

1.8

-12.7

7.2 .4 -.7 2.1 5.4

5.3

-28.6

2667.2 2253.5 2069.0 1931.2

40.0 -413.6 -128.4 -137.8

2250.1 1858.5 1680.2 1550.0 528.9 334.9 267.6 218.1 12.7 6.6 4.7 5.6 1708.5 1517.0 1407.9 1326.3

30.4 -391.6 -123.8 -130.2 31.3 -194.1 -19.4 -49.4 .1 -6.1 -2.0 .9 -1.0 -191.4 -102.3 -81.7

Capital goods Aircraft & parts Computers & accessories Semiconductors Other capital goods

464.9 34.3 103.3 26.2 301.2

425.2 32.3 86.6 23.1 283.2

405.1 34.5 78.2 20.7 271.8

381.9 28.6 78.1 18.6 256.6

-5.3 -3.9 -6.1 -.8 5.4

-39.7 -1.9 -16.7 -3.1 -18.0

-16.6 3.6 -7.8 -2.2 -10.2

-23.3 -5.9 -.0 -2.1 -15.3

Automotive Ind. supplies (ex. oil, gold) Consumer goods Foods, feeds, beverages All other goods

232.4 343.7 500.6 91.9 75.0

195.2 285.9 454.1 88.3 68.3

177.7 241.8 433.7 85.3 64.3

138.2 234.8 428.5 82.2 60.7

-17.1 12.7 6.0 1.7 1.1

-37.3 -57.8 -46.5 -3.6 -6.6

-19.4 -49.3 -9.5 -2.0 -5.6

-39.5 -7.1 -5.2 -3.1 -3.6

417.1

395.0

388.8

381.3

9.6

-22.0

-4.5

-7.5

12.21 118.34

13.36 69.35

14.78 49.57

14.60 40.89

-.20 1.15 2.84 8.38 -48.98 -16.25

-.18 -8.68

Services imports Memo: Oil quantity (mb/d) Oil import price ($/bbl)

1. Change from previous quarter or month. Source: U.S. Dept. of Commerce, Bureau of Economic Analysis; Census Bureau.

7

Prices of Internationally Traded Goods Non-oil imports. Following January’s 0.8 percent decline, the prices of core imports fell a further 0.4 percent in February. For both months, the drop was due to falling prices for material-intensive goods. The prices of foods, feeds, and beverages fell 3.2 percent in February, and those for non-fuel industrial supplies fell 0.7 percent. Declining prices for chemicals contributed the most to the fall in the price of industrial supplies, but all other categories saw their prices fall as well. Prices for finished goods were little changed, as declines in the prices of capital goods excluding computers and semiconductors offset price increases in automotive products. The average level of core import prices in January and February was 10 percent at an annual rate below the 2008 fourth quarter average, as prices in most sub-categories posted declines. The main contributors to the overall price decline were foods and nonfuel industrial supplies, whose prices fell at annual rates of 6½ percent and 33½ percent, respectively. The average price of imported finished goods declined at an annual rate of just ¼ percent. Oil. The BLS price index for imported oil increase 3.9 percent in February, marking the first increase in the index in last six months. The spot price of West Texas intermediate crude oil averaged $39 per barrel in February, but has since moved higher to close most recently at $46.25 on March 13. Exports. Following a 0.8 percent increase in January, the prices of exported core goods fell 0.2 percent in February. Prices of agricultural products increased 6.2 percent in January but fell back 1.7 percent in February. Prices of exported finished goods were flat in February following a 0.7 percent rise in January. The average level of core export prices in January and February was 9¼ percent at an annual rate below the fourth quarter average, as prices for material-intensive goods fell 22 percent. In contrast, prices of exported finished goods rose 2½ percent.

8

Prices of U.S. Imports and Exports Merchandise Imports

Categories of Core Imports 12-month percent change

12-month percent change

10 8

15

6 Core goods

20

Material-intensive goods

4

10 5

Finished goods

2

0 0 -5

-2

2000

2002

2004

-10

-4

Non-oil goods 2006

2008

-6

2000

Oil

2002

2004

2006

2008

-15

Natural Gas Dollars per barrel

Spot West Texas intermediate

Import unit value 2000

2002

2004

2006

2008

145 135 125 115 105 95 85 75 65 55 45 35 25 15 5

Merchandise Exports

300

2000 = 100

Dollars per million Btu

Import price index (left scale)

250

25

200

20

150

15

100

10

50

5

Spot Henry Hub (right scale)

0

2000

2002

2004

2006

2008

12-month percent change

14 12 8 6

15 Material-intensive goods

4

Core goods

10 5

Finished goods

2

0

0

-5

-2

Total goods

-10

-4

-15

-6 2004

2006

2008

-8

Source: Bureau of Labor Statistics; Wall Street Journal; Commodity Research Bureau.

25 20

10

2002

0

Categories of Core Exports 12-month percent change

2000

30

2000

2002

2004

2006

2008

-20

9

Prices of U.S. Imports and Exports (Percentage change from previous period) Annual rate 2008 2009 Q3 Q4 Q1e Merchandise imports Oil Non-oil Core goods1

Monthly rate 2008 2009 Dec. Jan. Feb.

----------------------- BLS prices --------------------4.1 -47.8 -24.9 -4.6 -1.2 -.2 5.8 -93.2 -77.5 -25.2 -4.2 3.9 3.3 -11.9 -9.3 -1.1 -.8 -.6 6.1

-11.6

-9.9

-1.3

-.8

-.4

2.3 4.4 1.2 1.4

-1.0 -.4 -.6 -1.6

-.2 .7 .7 -1.1

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

.2 .5 .3 .0

-.0 -.3 .2 .0

13.8 11.1 14.5

-29.3 -16.6 -32.6

-27.9 -6.4 -33.4

-3.7 2.2 -5.4

-3.1 .0 -4.1

-1.3 -3.2 -.7

-8.2 -6.5 -25.1

-7.2 -2.5 -69.2

-7.5 -11.3 -49.6

-.7 .5 -.1

-.7 -3.1 -8.5

-.9 -.1 -13.2

3.8

-21.5

-8.1

-2.2

.5

-.1

5.2

-24.8

-9.3

-2.6

.8

-.2

Finished goods Cap. goods ex. comp. & semi. Automotive products Consumer goods

2.8 3.3 1.2 3.0

1.6 1.9 1.1 1.5

2.5 4.4 .6 -.7

.1 .2 -.1 -.1

.7 .9 .4 .3

-.0 .2 -.3 -.3

Material-intensive goods Agricultural products Industrial supples ex. ag.

7.7 5.8 8.5

-46.2 -53.1 -44.6

-22.0 -6.3 -27.5

-5.9 -6.2 -5.9

1.0 6.2 -.9

-.5 -1.7 -.1

-8.8 -6.5

-8.6 -13.8

-7.3 -6.3

-1.1 -.5

-1.1 -2.2

.2 1.9

Finished goods Cap. goods ex. comp. & semi. Automotive products Consumer goods Material-intensive goods Foods, feeds, beverages Industrial supplies ex. fuels Computers Semiconductors Natural gas Merchandise exports Core goods2

Computers Semiconductors

--------------------- NIPA prices --------------------Chain price index Imports of goods & services Non-oil merchandise Core goods1

9.2 2.9 4.6

-37.1 -9.7 -8.3

n.a n.a n.a

... ... ...

... ... ...

... ... ...

Exports of goods & services Total merchandise Core goods2

6.7 5.6 6.6

-21.9 -24.2 -25.6

n.a n.a n.a

... ... ...

... ... ...

... ... ...

1. Excludes computers, semiconductors, and natural gas. 2. Excludes computers and semiconductors. e Estimate based on average of two months. n.a. Not available. ... Not applicable. BLS Bureau of Labor Statistics. NIPA National income and product accounts. Source: U.S. Dept. of Commerce, Bureau of Economic Analysis; Bureau of Labor Statistics.