greenbooks · March 15, 2010

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 01/29/2016.

Class III FOMC - Internal (FR)

March 12, 2010

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

Consumer Spending ......................................................................... 1 Consumer Attitudes ......................................................................... 1 Federal Government Sector ............................................................. 1 Business Inventories ........................................................................ 2 Exhibits Real Personal Consumption Expenditures ....................................... 3 Thomson Reuters/University of Michigan Survey of Consumers ... 4 Nonfarm Inventory Investment ........................................................ 5 Federal Government Indicators........................................................ 6 The Domestic Financial Economy ..............................................................

Exhibits Selected Financial Market Quotations ............................................. 7 Commercial Bank Credit ................................................................. 8 The International Economy ........................................................................ Trade in Goods and Services ........................................................... 9 Exhibits U.S. International Trade in Goods and Services ............................ 10 U.S. Exports and Imports of Goods and Services.......................... 11

Supplemental Notes The Domestic Nonfinancial Economy Consumer Spending Total nominal retail sales increased 0.3 percent in February. Sales in the retail control group of stores (which exclude motor vehicle dealers, gasoline stations, and building material and supply stores, and are the component of overall retail sales used by the BEA in constructing the national accounts) jumped 0.9 percent in February following a downward-revised gain of 0.6 percent in January. The gains were spread widely across establishment types and were especially robust at general merchandise stores, food and beverage stores, electronics and appliance stores, auto parts stores, and other retailers. Folding in our forecast for February PCE prices, we estimate that real PCE control moved up 0.8 percent in February. Consumer Attitudes The Thomson Reuters/University of Michigan index of consumer sentiment edged down in early March, as assessments of both current and expected conditions fell back a bit. Overall, measures of consumer sentiment remain relatively downbeat and have improved little, on balance, since their modest rebound last spring. The preliminary survey results for the median expectation for inflation over the next 12 months edged up in March, returning to its January level, while the median expectation for inflation over the next 5 to 10 years was unchanged. At 2.8 and 2.7 percent, respectively, these readings remained at the low end of the narrow range that has prevailed over the past few years. Federal Government Sector The data for defense spending in the Monthly Treasury Statement for February were consistent with real defense purchases remaining roughly flat in the first quarter of 2010. The unified federal budget deficit widened further over the first five months of fiscal 2010. Net receipts were 7 percent lower in the October to February period than they had been a year earlier. Federal outlays in October-February rose 1½ percent relative to the same period a year earlier as a substantial decrease in outlays for the TARP largely offset a 9½ percent increase in other spending.1

In the March Greenbook, we reported that non-TARP outlays in the first four months of fiscal 2010 increased 12 percent relative to the same year-earlier period; that number was incorrect and should have been 7 percent.

‐1‐

-2-

Business Inventories Folding in a modest decline in the book-value of retail inventories excluding motor vehicles and parts, the combined book-value of inventories in the manufacturing and trade sector (excluding motor vehicles and parts) fell at an annual rate of $7 billion in January. This figure is consistent with a further small liquidation of real stocks. The ratio of book-value inventories to sales (excluding motor vehicles and parts) edged down again in January and stood well below the recent peak recorded near the end of 2008.

The Domestic Financial Economy (Exhibits attached.)

-3Real Personal Consumption Expenditures (Percent change from preceding comparable period)

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. Expected inflation (Thomson Reuters/University of Michigan)

Consumer sentiment 1966 = 100 120

1985 = 100 170 150

110

Thomson Reuters/Michigan (right scale)

100

130

110

Median, 5 to 10 years ahead

90 Mar. P 70

70 60

Conference Board (left scale) 50

Feb.

30 10

Percent 6

Mar.

3 2

Median, 12 months ahead 1

40 2002

2004

P Preliminary.

2006

2008

2010

2002

2004

P Preliminary.

2006

2008

2010

-5Nonfarm Inventory Investment (Billions of dollars; seasonally adjusted annual rate) 2009 Measure and sector

-163.1 -48.1 -115.1

-141.4 -4.6 -136.9

Manufacturing and trade ex. wholesale and retail motor vehicles and parts -110.9 Manufacturing -39.8 Wholesale trade ex. motor vehicles & parts -52.5 Retail trade ex. motor vehicles & parts -18.6

Real inventory investment (chained 2005 dollars) Total nonfarm business Motor vehicles Nonfarm ex. motor vehicles

Book-value inventory investment (current dollars) Manufacturing and trade ex. wholesale and retail motor vehicles and parts Manufacturing Wholesale trade ex. motor vehicles & parts Retail trade ex. motor vehicles & parts

-152.6 -66.0 -62.9 -23.7

2010 Nov.

Dec.

Jan.

-11.3 e 20.9 e -32.3 e

... ... ...

-129.3 -55.3 -51.9 -22.1

-15.6 e -5.3e -1.4 e -9.0e

17.3 e -1.9 e 39.6 e -20.3

-54.9 e -19.6 e -42.2 e 6.9e

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

-124.7 -49.8 -50.7 -24.2

25.9 7.5 19.3 -.9

74.0 10.5 74.3 -10.7

-29.6 -10.0 -36.3 16.7

-6.9 9.0 -7.0 -8.9

n.a. Not available. ... Not applicable. e Staff estimate of real inventory investment based on revised book-value data. Source: For real inventory investment, U.S. Dept. of Commerce, Bureau of Economic Analysis; for book-value data, Census Bureau.

ISM Customers’ Inventories: Manufacturing

Inventory Ratios ex. Motor Vehicles Months

1.9 1.8

1.9

Index

1.8

Staff flow-of-goods system

1.7

1.6

Feb. 1.5

1.5

1.4

1.3

Jan.

1.2

40 Feb.

1.2

Census book-value data 1.1

2000 2000 2001 2002 2002 2003 2004 2004 2005 2006 2006 2007 2008 2008 2009 2010 2010 Note: Flow-of-goods system covers total industry ex. motor vehicles and parts, and inventories are relative to consumption. Census data cover manufacturing and trade ex. motor vehicles and parts, and inventories are relative to sales. Source: Census Bureau; staff calculation.

1.1

2000 2000 2001 2002 2002 2003 2004 2004 2005 2006 2006 2007 2008 2008 2009 2010 2010 Note: A number below 50 indicates inventories are "too low." Source: Institute for Supply Management (ISM), Manufacturing ISM Report on Business.

-6-

Federal Government Indicators Total Real Federal Purchases Percent change, annual rate

20 15

Real Defense Spending

Current 4-quarter moving average

Billions of chained (2005) dollars

700 Unified (monthly) NIPA (quarterly)

700

650

600

550

500

-5

450

400

400 2004 2005 2006 2007 2008 2009 2010 Note: Nominal unified defense spending is seasonally adjusted and deflated by BEA prices. NIPA defense purchases exclude consumption of fixed capital. Source: Monthly Treasury Statement; U.S. Department of Commerce, Bureau of Economic Analysis.

10 5

650 Feb.

600

-10

-10 2004 2005 2006 2007 2008 2009 Note: National Income and Product Accounts (NIPA) measure. Source: U.S. Department of Commerce, Bureau of Economic Analysis.

Unified Budget Deficit 4

Federal Debt Held by the Public Billions of dollars

Percent of GDP

Billions of dollars (right scale) Percent of GDP (left scale)

2 0

600 300

-300

-4

-600

-6

-900

-8

Feb.

-10

-1500 2000 2002 2004 2006 2008 2010 Note: Adjusted for payment-timing shifts; cumulative deficit over the previous 12 months. Source: Monthly Treasury Statement.

-1800

2000 2002 2004 2006 Source: Monthly Treasury Statement.

2008

2010

Recent Unified Federal Outlays and Receipts

Percent change from year earlier

-1200

Unified Outlays and Receipts

Feb.

-2

-12

Percent of GDP

Outlays Receipts

Oct. 2009-Feb. 2010 20 15

5 Feb.

-5

-10

-15

-20

-20 2000 2002 2004 2006 2008 2010 Note: Adjusted for payment-timing shifts; based on cumulative outlays or receipts over the previous 12 months. Source: Monthly Treasury Statement.

Function or source

Billions of dollars

Outlays National defense Major transfers1 Other primary spending Net interest

1452 286 858 222 86

1.5 3.3 14.9 -33.3 15.4

Receipts Individual income and payroll taxes Corporate income taxes Other

801 665

-7.0 -9.1

45 90

-14.1 17.9

-652

14.3

Deficit (-)

Percent change*

Note: Adjusted for payment-timing shifts. * Relative to same year-earlier period. Percent change in deficit is calculated on an absolute-value basis. 1. Includes Social Security, Medicare, Medicaid, and income security programs. Source: Monthly Treasury Statement.

-7Selected Financial Market Quotations (One-day quotes in percent except as noted) 2008

2009

Change to Mar. 11 from selected dates (percentage points)

2010

Instrument Sept. 12

Dec. 15

Jan. 26

Mar. 11

2008 Sept. 12

2009 Dec. 15

2010 Jan. 26

2.00

.13

-1.87

.00

1.46 1.80

.05 .17

.07 .14

.16 .22

-1.30 -1.58

.11 .05

.09 .08

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

2.39 2.75

.13 .20

.14 .20

.22 .20

-2.17 -2.55

.09 .00

.08 .00

Large negotiable CDs1 3-month 6-month

2.79 3.09

.22 .31

.20 .29

.22 .32

-2.57 -2.77

.00 .01

.02 .03

Eurodollar deposits3 1-month 3-month

2.60 3.00

.32 .45

.28 .40

-2.32 -2.60

-.04 -.05

.00 .00

Bank prime rate

5.00

3.25

-1.75

.00

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

2.24 2.97 3.93

.87 2.33 3.79

.85 2.38 3.80

.95 2.43 3.87

-1.29 -.54 -.06

.08 .10 .08

.10 .05 .07

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

1.33 1.77

.50 1.42

.38 1.37

.59 1.59

-.74 -.18

.09 .17

.21 .22

Municipal general obligations (Bond Buyer)6

4.54

4.19

4.30

4.33

-.21

.14

.03

4.26 4.36 6.62 7.22 10.66

3.74 4.08 5.04 6.09 9.29

3.72 4.14 5.04 5.74 8.76

3.78 4.20 5.05 5.74 8.66

-.48 -.16 -1.57 -1.48 -2.00

.04 .12 .01 -.35 -.63

.06 .06 .01 .00 -.10

5.78 5.03

4.94 4.34

4.98 4.29

4.95 4.22

-.83 -.81

.01 -.12

-.03 -.07

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

Private instruments 10-year swap 10-year FNMA7 10-year AA8 10-year BBB8 10-year high yield8 Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable

Record high

2009

Change to Mar. 11 from selected dates (percent)

2010

Stock exchange index Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 D.J. Total Stock Index

Level

Date

Dec. 15

Jan. 26

Mar. 11

Record high

2009 Dec. 15

2010 Jan. 26

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

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

10,452 1,108 2,201 606 11,385

10,194 1,092 2,204 612 11,282

10,612 1,150 2,368 677 11,983

-25.08 -26.51 -53.09 -20.86 -24.19

1.53 3.82 7.61 11.70 5.25

4.10 5.32 7.48 10.63 6.22

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: September 12, 2008, is the last business day before Lehman Brothers Holdings filed for bankruptcy. December 15, 2009, is the day before the December 2009 FOMC monetary policy announcement. January 26, 2010, is the day before the most recent FOMC monetary policy announcement. _______________________________________________________________________

-8Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit

Total

Q3 2009

Q4 2009

Jan. 2010

Feb. 2010

Level1 Feb. 2010

2008

2009

H1 2009

4.9

-6.5

-5.5

-7.1

-8.4

-9.2

-12.8

8,925

Loans2 Total Core To businesses Commercial and industrial Commercial real estate

4.4 5.0

-9.6 -7.6

-7.4 -4.8

-12.4 -9.5

-12.3 -12.1

-11.9 -14.5

-14.1 -14.7

6,586 5,839

16.3 6.1

-17.0 -4.3

-14.1 -1.6

-19.8 -5.5

-24.3 -8.8

-22.3 -15.4

-15.4 -7.1

1,301 1,618

To households Residential real estate Revolving home equity Closed-end mortgages Consumer Memo: Originated3 Other

-3.2 13.0 -8.0 7.1 5.7 .4

-5.3 .5 -7.4 -2.2 -3.6 -22.8

-2.2 6.2 -5.1 -.2 -2.0 -25.3

-7.8 -4.5 -9.1 -3.7 -4.6 -33.6

-9.5 -5.7 -11.0 -4.9 -5.9 -14.0

-5.8 -5.2 -6.1 -22.5 -12.0 9.0

-23.3 -2.8 -31.2 -6.3 -6.0 -9.6

2,108 598 1,511 812 1,207 747

6.7 16.3 -4.3

3.7 7.9 -2.1

.8 2.1 -1.0

9.6 18.0 -2.3

3.6 8.8 -4.0

-1.6 -6.8 6.5

-9.1 -4.7 -15.7

2,339 1,424 915

Securities Total Treasury and agency Other4

Note: Yearly annual rates are Q4 to Q4; quarterly and monthly annual rates use corresponding average levels. Data have been adjusted to remove the effects of mark-to-market accounting rules (FAS 115) and the initial consolidation of certain variable interest entities (FIN 46) and off-balance-sheet vehicles (FAS 166 and 167). Data also account for the effects of nonbank structure activity of $5 billion or more. 1. Billions of dollars. Pro rata averages of weekly (Wednesday) levels. 2. Excludes interbank loans. 3. Includes an estimate of outstanding loans securitized by commercial banks that retained recourse or servicing rights. 4. Includes private mortgage-backed securities; securities of corporations, state and local governments, and foreign governments; and any trading account securities that are not Treasury or agency securities. Source: Federal Reserve Board.

C&I Loan Rate Spread

Return on Assets

Basis points NBER peak

Quarterly

Loan Loss Provisions Percent

240

Percent of total loans 2

Quarterly, s.a.a.r.

NBER peak

Quarterly, s.a.a.r.

220

Top 25* All other banks

200

180

Top 25* All other banks

-1

-2

160 Q4

-3 140 1998

2002

2006

2010

Weighted average for all banks, adjusted for changes in the nonprice loan characteristics.

NBER peak

1986

1992

1998

2004

-4 2010

*Top 25 refers to all commercial banks in the 25 largest bank holding companies.

0 1986

1992

1998

2004

2010

*Top 25 refers to all commercial banks in the 25 largest bank holding companies.

Note: Shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research (NBER). Vertical line represents the last business cycle peak, as defined by the NBER.

-9-

The International Economy Trade in Goods and Services The U.S. international trade deficit narrowed to $37.3 billion in January, as a modest fall in exports was more than offset by a decline in imports.

Trade in Goods and Services 2009 Nominal BOP Exports Imports Real NIPA Exports Imports Nominal BOP Net exports Goods, net Services, net

Annual rate Monthly rate 2009 2009 2010 Q2 Q3 Q4 Nov. Dec. Jan. Percent change

-1.3 -7.2

-.9 -9.9

-.8 -6.7

-4.1 -14.7

-378.6 -517.0 138.4

-324.3 -461.8 137.5

25.4 36.8

.9 2.6

3.4 4.9

-.3 -1.7

17.8 22.4 ... 21.3 15.3 ... Billions of dollars

... ...

-39.9 -51.9 12.0

-37.3 -49.4 12.1

-385.5 -528.4 142.9

29.1 35.3

-435.8 -582.0 146.2

-36.1 -48.4 12.3

BOP Balance of payments. NIPA National income and product accounts. Source: U.S. Dept. of Commerce, Bureau of Economic Analysis; Census Bureau.

In January, the value of exports of goods and services declined 0.3 percent. The decrease was concentrated primarily in capital goods, as aircraft partially reversed very strong December sales and industrial machinery declined. Automotive products also fell sharply driven by a decline in sales outside of North America. Exports of agricultural products, services, fuels, chemicals and consumer goods all posted small increases. The value of imports of goods and services fell 1.7 percent in January, as oil, capital goods, automotive products and consumer goods all registered declines, more than offsetting a rise in industrial goods. The decrease in oil was driven by falling volume, as prices increased moderately. Capital goods fell as computers and telecommunication products partially retraced strong gains at the end of 2009, while automotive products purchases were down across major trading partners. Consumer imports fell on account of large declines in televisions and pharmaceuticals.

-10-

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

3.5 3.0

-100

2.5

-200

2.0 -300

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

550

500

Consumer goods

450

400

400 Capital goods

Capital goods ex. aircraft

350

300

250

250 Industrial supplies

200

Industrial supplies 150 Consumer goods

Oil

Aircraft

2000

2002

2004

150

2006

2008

100

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

2000

2002

2004

2006

2008

-11-

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 2009 2009 2010 Q3 Q4 Dec. Jan. 1571.2 1674.7 1717.8 1712.0 1054.6 1147.7 1189.0 1180.8 14.3 15.3 17.3 18.9 1040.3 1132.4 1171.7 1161.9

Change1 2009 2009 2010 Q3 Q4 Dec. Jan. 86.3 103.5 57.3 -5.8 71.1 2.0 69.1

93.1 1.0 92.1

55.4 5.5 49.9

-8.1 1.6 -9.7

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

381.7 70.2 37.5 38.5 235.5

414.1 76.7 40.9 42.9 253.7

429.8 84.1 41.7 42.3 261.6

417.2 77.8 43.4 43.1 253.0

9.1 -3.0 1.9 3.5 6.7

32.5 6.5 3.4 4.4 18.2

21.3 13.7 .6 -2.4 9.5

-12.5 -6.3 1.7 .7 -8.7

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

86.1 283.1 149.9 99.2 40.3

104.1 303.8 160.2 109.6 40.6

114.0 311.7 159.6 114.9 41.7

107.5 314.1 161.6 116.4 45.0

19.7 33.5 5.8 -1.9 3.0

18.0 20.7 10.3 10.4 .2

10.7 12.1 3.4 .2 16.4

-6.5 2.5 2.0 1.5 3.3

516.6

527.0

528.8

531.1

15.2

10.4

1.8

2.3

1956.7 2110.5 2196.6 2159.4

147.6

153.8

102.7

-37.2

1583.0 1729.7 1811.9 1773.3 275.6 301.8 338.2 327.7 8.8 10.7 10.3 9.9 1298.6 1417.1 1463.4 1435.7

137.7 47.7 .4 89.6

146.7 26.2 2.0 118.5

97.3 44.4 -.9 53.7

-38.6 -10.5 -.4 -27.7

Services exports Imports of goods and services Goods imports Oil Gold Other goods Capital goods Aircraft & parts Computers & accessories Semiconductors Other capital goods

364.4 29.1 95.4 22.2 217.7

400.7 31.2 114.6 23.6 231.3

418.9 33.9 121.7 23.1 240.2

406.3 31.1 113.5 22.9 238.8

18.6 -2.3 10.6 1.8 8.4

36.2 2.1 19.2 1.4 13.6

19.5 4.7 6.2 -.2 8.7

-12.6 -2.8 -8.3 -.2 -1.4

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

177.4 190.0 422.4 80.8 63.6

207.4 214.6 448.9 82.8 62.8

219.5 222.8 453.5 84.7 63.9

201.8 233.2 443.0 86.2 65.1

51.2 11.8 3.5 -.5 5.1

29.9 24.6 26.5 2.0 -.8

19.3 9.8 -.7 3.8 2.0

-17.7 10.5 -10.5 1.5 1.2

373.8

380.8

384.8

386.1

9.9

7.1

5.4

1.4

11.30 66.68

11.41 72.37

12.49 74.13

11.89 75.44

-.26 12.64

.11 5.68

1.60 .27

-.60 1.31

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.

Cite this document

APA

Federal Reserve (2010, March 15). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_20100316_part3

BibTeX

@misc{wtfs_greenbook_20100316_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {2010},
  month = {Mar},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_20100316_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}