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 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. 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 optical 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. Content last modified 6/05/2009. CONFIDENTIAL (FR) SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System October 25, 1968 SUPPLEMENTAL NOTES The Domestic Financial Situation KEY INTEREST RATES 1968 Oct. 7 Oct. 24 Low High 4.54 (1/3) 6.34 (5/15) 5.95 4.82 5.25 5.43 5.00 5.13 5.92 6.13 7.19 6.11 6.13 (5/21) (5/24) (6/4) (5/17) (6/25) 5.26 5.62 5.96 5.50 5.88 6.44 5.63 5.50 5.20 (1/31) 6.00 (7/18) 6.20 (5/31) 5.62 5.75 5.85 6.05 4.98 (1/29) 5.38 (3/7) 5.50 (3/7) 5.25 (2/9) 6.08 (5/21) 6.25 (5/24) 6.25 (7/25) 6.25 (5/24) 5.36 5.75 5.75 5.49 5.42 5.50 (3/7) 6.25 (7/11) 5.62 5.45 (1/31) 6.40 (5/31) 5.80 5.62 6.00 5.05 (8/1) 5.45 (10/24) 2.75 (8/8) 6.03 (5/21) 6.01 (5/31) 3.90 (5/31) 5.24 5.58 5.42 (1/12) 5.16 (8/1) 6.21 (5/21) 5.77 (3/14) 5.54 5.95 (9/5) 6.29 (6/6) 7.10 (6/3) 6.03 6.77 (10/3) 6.77 6.13 6.88 6.13 (8/29) 6.29 (2/2) 6.83 (5/24) 6.99 (6/3) 6.31 6.64 6.50 6.64 4.07 (8/8) 3.80 (8/8) 4.71 (5/24) 4.42 (5/31) 4.36 4.14 4.52 4.21 7.12 (5/6) 7,72 (6/10) 7.23 (9/3) Short-Term Rates Federal funds (weekly average) 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issue Secondary market 6-months Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies CD's (prime NYC) Highest quoted new issue Secondary market 1-year Treasury bills (bid) Federal agencies Prime municipals (1/29) (3/7) (2/2) (2/9) (3/7) 5.25 (2/8) 5.38 2.90 5.84 (10/23) 5.40 6.00 5.88 5.68 5.41 5.45 3.10 Intermediate and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa New Issue Aaa With call protection Without call protection Municipal Bond Buyer Index Moody's Aaa Mortgage--Implicit yield in FNMA weekly auction 1/ I/ 5.39 5.61 5.45 7.20 (10/21) Yield on 6-month forward commitment after allowance for commitment fee and required FNMA stock purchase. Assumes discount on 30-year loan amortized over 15 years. -2- International developments Canadian budget. The Canadian Government's proposed budget for the fiscal year ending March 31, 1970, was presented to Parliament on October 22. Finance Minister Benson said that the main economic problem facing Canada in the near term was the excessive degree of inflation. Hence budget policy was aimed at restraining excess demand and easing the pressures on financial markets that had been caused by large government deficits in the past few years. increases were proposed, including: To this end, tax a new Social Development Tax, at the rate of 2 per cent of personal income up to a maximum tax payment of C$120; a second speedup of corporate tax payments; and several tax reform measures relating to estate and gift taxes and taxation of insurance companies, banks, and other financial institutions. These tax increases were expected to yield C$845 million in 1969-70. Including these new receipts, total budgetary receipts would increase from C$10.1 billion in 1968-69 to C$11.7 billion in 1969-70, while budgetary expenditures were expected to rise from C$10.8 billion to C$11.7 billion. On a national income accounts basis, the budget would swing from a deficit of C$435 million to a surplus of about C$250 million. GNP growth was forecast at 7 to 8 per cent in 1969 (4-1/2 per cent in real terms) compared with 8 per cent (also 4-1/2 per cent real) in 1968. CONFIDENTIAL (FR) SECOND SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System October 28, 1968 SUPPLEMENTAL NOTES The Domestic Economy The BLS wholesale price index in October remained at the September level of 109.1 per cent of the 1957-59 average, according to preliminary estimates (to be released at 11:00 a.m., October 29). The industrial commodity average rose 0.4 per cent further, with autos, lumber, and plywood accounting for nearly half the rise. The proportion of product classes showing increases accelerated further--approaching the levels reached during the period of sharp price advance early this year. At an estimated 109.6, the industrial average has risen nearly 0.7 per cent from August to October, after showing little change from April to August. Meanwhile, wholesale prices of farm products and foods, which had risen in September, dropped back again in October to about the August level--offsetting, in the October total wholesale index, the sharp rise in industrial commodities. The preliminary nonfarm employment estimate for September will be revised down by about 70,000, reducing the September employment pickup to about 75,000. (Confidential until November 6.) estimate was also reduced slightly. The August The bulk of the September adjust- ment occurred in the government estimate (down by 60,000 from the preliminary figure) and in services (down about 40,000). partially offsetting increase for trade. There was a The over-all manufacturing figure was not revised significantly; however, the workweek estimate was raised slightly. The table below presents revised figures for the estimates shown on page II - 21 of the regular Greenbook. -2- REVISED JUNE TO SEPTEMBER NONFARM PAYROLL EMPLOYMENT CHANGES (In thousands, seasonally adjusted) Total * 303* Manufacturing -26 Nonmanufacturing 326* Federal Government -79 Adjusted for reduced strike activity in construction. International developments Balance of payments. changes in the payments balance More nearly complete data on the September (see table on page 7) show a larger unad- justed surplus on the liquidity basis than the earlier estimate used in the Green Book -- $155 million rather than $72 million. lowance for seasonality, With a rough al- and before special transactions, this would correspond to a deficit for the month of roughly $200 million. third quarter, the liquidity deficit before special transactions would be somewhat under a $2-1/2 billion annual rate. that is, For the On the published basis -- including receipts from special transactions -- the third quarter deficit will be even lower than the $170 million registered for the second quarter. The September data for the official settlements balance show an unadjusted surplus of $185 million, about the same as was assumed in the Green Book. quarter -- This yields an estimated annual rate surplus for the seasonally adjusted and before some relatively small special transactions -- of about $1-1/4 billion. Part of the payments strength in Foreign trade. was related to a pickup in the export surplus. September Trade figures for the month show that both exports and imports expanded much more sharply than had been expected, in the Green Book. though the net surplus is near that estimated For the quarter as a whole the export surplus was at an annual rate of $1.2 billion compared with a rate of about $1/4 billion in the first half. -4- Exports Imports Balance e/ 1967 2nd Otr 3rd tr. 4th Qtr. 1st Otr. 1968 2nd Qtr. 3 3rdOtr. Total 1st Qtr. 30.5 27.0 30.6 26.7 30.8 26.4 30.5 26.2 29.9 28.6 31.7 31.3 33.2 33.1 35.4 34.2 3.5 3.9 4.4 4.3 1.3 0.4 0.1 1.2 Adjustment to balance of payments basis estimated. Exports in the third quarter, and especially in September, were raised by shipments anticipating a possible dock strike, of increase is exaggerated. so that the rate For the first nine months as a whole, exports in 1968 were 9.1 per cent ahead of exports in the same period of 1967; the increase in the third quarter over the first annual rate of over 30 per cent. of the strike anticipations, export gain in half 1968 rate was at an It is difficult to measure the effect but on tne whole it appears that most of the the third quarter was related to rising demand abroad rather than to such anticipations. Gains were registered in the quarter in most types of manufactured goods, though in September there were lower deliveries of aircraft and agricultural products. Imports in September als amount, lifting the third quarter rose by an exceptionally large import rate to $34.2 billion. This represented a deceleration from the much greater import increase of the first and second quarters, but the share of imports in GNP continued to rise slightly. Imports of some goods, primarily foodstuffs, were lower in September, but gains were reported for crude materials, Canada in fuels, and machinery. Trade both ways with automobiles and parts rose considerably in Early October data. September. Strictly confidential weekly data for October through the 23rd indicate that we are having a repetition of the very large liquidity deficits for this month that occurred in 1966 and 1967, when they averaged nearly $800 million -- before special transactions but not seasonally adjusted. Large private capital transactions in October that affected the balance included the sale of an International Bank bond issue in the U.S. market and the liquidation of a large U.S. direct investment in the United Kingdom, are roughly offsetting. in exports in shipments in but these known transactions There may well have been a sizable drop early October because of the acceleration of September, September deficit, if with the effect of improving the payments for exports are current, at the expense of the October figures. The official settlements balance showed deficits in late September and early October as liquid liabilities to private foreign accounts declined, but then shifted toward surplus in the -6- week ended October 23, as U.S. banks again raised their Euro-dollar borrowings via foreign branches. hard to evaluate, Prospects for this balance are but the supply of Euro-dollars seems likely to come under pressure as economic activity in up, speculation against sterling and the French franc is liquidity in U.S. Europe and Japan picks the German financial market is diminished, reduced somewhat, and companies draw down the proceeds of foreign borrowings to stay within the control guidelines. U.S. BALANCE OF PAYMENTS (In millions of dollars) I II 1 9 6 7 III IV I II 1 9 6 8 IIIP Sept.P Seasonally adjusted 1/ Goods and services,net1,293 Trade balance 2/ 975 Exports 2/ 7,661 Imports 2/ -6,686 Services balance 318 1,269 1,098 7,703 -6,605 171 1,359 1,085 7,626 -6,541 274 848 319 7,478 -7,159 529 356 87 7,924 -7,837 269 492 9 8,302 -8,293 483 Remittances and pensions -262 Govt. grants & capitaLl/-1,176 -392 -1,039 -358 -988 -263 -1,008 -266 -1,164 -280 -1,101 U.S. private capital Direct investments Foreign securities Banking claims Other -975 -653 -259 79 -142 -1,104 -651 -199 -198 -56 -1,788 -902 -476 -435 25 -1,638 -815 -332 95 -586 -646 -374 -385 364 -251 -1,230 -1,034 -81 204 -319 865 382 304 78 70 413 1,202 724 584 140 97 381 766 18 -215 233 117 631 353 150 147 3 30 173 1,365 331 119 212 -92 1,126 2,171 923 160 763 -19 1,267 -250 -458 207 -34 -305 -222 Foreign capital, nonliq. Official foreign accts. Long-term deposits U.S. Govt. liab. Int'l. institutions 4/ Other 5/ Errors and omissions Balances, with and without seasonal adjustment (Liquidity balance, S.A. Seasonal component Balance, N.S.A. Official settlements balance, S.A. Seasonal component Balance, N.S.A. 6/ 2 17 e 3,196 -2,979 deficit) -522 302 -220 -802 -410 -1,212 -1,742 -159 -1,901 -660 411 -249 -170 303 133 -36* -450* -486* n.a. n.a. 1541 -1,764 485 -1,279 -806 101 -705 247 -272 -25 -1,082 -314 -1,396 -535 629 94 1,459 102 1,561 390* -300* 90* n.a. n.a. 1851 -904 -1,362 401 57 137 -22 -267 426 571 74 474 23 Total monetary reserves -1,027 Gold stock -51 Convertible currencies -1,007 31 IMF gold tranche e/ */ e -505 267 -238 Reserve changes, 1/ 2/ 3/ 4/ 5/ 6/ 3 05 8,850 -8,545 419 -15 424 10 N.S.A. 375 -92 462 5 (decrease -) 181 -1,012 1,145 48 207 74 136 -3 Equals "net exports" in the GNP. from Census basis. Balance of payments basis which differs a little Net of scheduled and non-scheduled repayments. Long-term deposits and Agency securities. Includes some foreign official transactions in securities. Differs from liquidity balance by counting as receipts (+) increase in liquid liabilities to commercial banks, private nonbanks, and international institutions (except IMF) and by not counting as receipts (+) increases in certain nonliquid liabilities to foreign official institutions. Adjustment to "balance of payments" basis estimated. Strictly Confidential. 

Federal Reserve (1968, October 28). Greenbook/Tealbook. Greenbooks, Federal Reserve. https://whenthefedspeaks.com/doc/greenbook_19681029_part3

@misc{wtfs_greenbook_19681029_part3,
  author = {Federal Reserve},
  title = {Greenbook/Tealbook},
  year = {1968},
  month = {Oct},
  howpublished = {Greenbooks, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/greenbook_19681029_part3},
  note = {Retrieved via When the Fed Speaks corpus}
}